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Posts Tagged ‘congestion pricing’

495-logoSlate has an article that asks an intriguing question: Who Really Benefits From “Big Data”? (Dec 27). That’s clearly something of a loaded question. Big Data is currently everyone’s favorite answer for everything. The ability to leverage vast amounts of data for new insights and improved decisions holds a lot of promise. There are also many success stories of firms creating new markets or improving profitability or providing great value to customers to back up claims and bolster expectations. Big Data has remade baseball with an emphasis on new statistical measures and has allowed Netflix to suggest the perfect next movie to watch.

Those examples sound great. Of course, consumers may be less enthusiastic about one of the longer standing examples of Big Data, airline revenue management systems. While these have been around for a couple of decades,they bear the hallmarks of Big Data applications. They are built on careful data analysis to forecast how systems will evolve and seek to replace intuition with frequent, reasoned decisions. These decisions may not necessarily be optimal but they clearly balance costs and benefits and can be improved over time. I’m not sure that customers love revenue management systems the way they love Netflix recommendations. Although revenue management systems are just as responsible for some sweet deals as they are over for extravagantly priced tickets, people tend to focus on the latter. Consequently, if you ask who benefits from Big Data and lead with revenue management systems as an example, I would venture that many customers would be leery of embracing Big Data.

So what example does the Slate article go with in thinking about Big Data? Lexus Lanes on the DC Beltway!

Advances in real-time data acquisition, processing, and display technologies means that it is possible to design a toll road that can continually change prices to control how many cars are on the road and how fast they are going. These “hot lanes“ have just been opened along a part of the Washington, D.C., Beltway, the 10-lane, traffic-infested artery that to normal humans is a metaphorical boundary between the real, outside-the-Beltway world and the weird, political one on the inside. (For those of us who live around Washington and must drive on it, however, the Beltway is very concrete indeed, a daily flirtation with delay and frustration, homicidal instincts, and death itself.)

At a cost of $2 billion, a private sector partnership (which gets to keep the tolls) has built a 14-mile-long, four-laned section of highway, parallel to the main lanes of the toll-free Beltway, and has guaranteed to the state of Virginia that it will always keep traffic moving at no less that 45 mph along its length. They do this by continuously monitoring the number of cars (which must be equipped with EZ-Pass transponders) and their speed, and by raising toll prices as necessary to keep the number of cars on the road at a level that will allow the speed to stay at or above the guaranteed minimum. The dynamic toll prices are displayed on huge signs near the entrances to the smart-highway lanes, so drivers get to decide at the last minute whether they want to spend the money to go faster or not. As the traffic on the toll-free Beltway lanes gets worse, some drivers will be willing to spend more to go faster. The worse the traffic is, the more they’ll have to spend. (In the early days of this new technology, numerous accidents were caused by drivers trying to decide how much they were willing to pay, but no doubt this initial problem will sort itself out as people get used to driving-while-economically-rational.

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I once long ago interviewed at a prominent Midwestern university (not my current employer) and had an associate dean opine “We are the only prominent business school at which parking is not a problem.” My immediate thought (which went unuttered) was “I’m not sure that is anything to brag about.”

In any event, university parking presents an interesting capacity management problem. There are multiple classes of users who have varying needs and varying abilities to pay. But land and thus parking spots (or at least convenient parking spots) are always limited. Northwestern deals with this in part by assigning lots to faculty vs. students, charging different prices, and having different rules depending on the time of day. Indeed, if you live too close to campus you may not be allowed to buy a parking pass.

The one thing that NU doesn’t do is run an auction. That gets us Chapman University which does in fact auction parking permits. In this video (from reason.tv), David Porter, an econ professor from Chapman who helped design the auction, talks about their experience with this mechanism. It is an interesting discussion of both demand management as well as managing expectations in a service environment.

That last phrase is, of course, a way of saying they pissed off faculty.

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We have not posted on bandwidth hogs in a long time, but this month has seen some interesting developments in how network providers price their services and manage their traffic. One comes from Verizon Wireless, which finally got the iPhone and now threatens to throttle heavy users (Verizon Wireless to Throttle Data Speeds for Mobile Bandwidth Hogs, Feb 3, PC Magazine).

Customers who use “an extraordinary amount of data” and fall within the top 5 percent of Verizon data users might be subject to reduced data throughput speeds. The throttling will occur periodically during the current and next billing cycle at peak times and in locations with high demand, Verizon said in a statement.

First, I don’t know who coined the term “throttling” for giving crappy service to a handful of customers (I first heard it in reference to Netflix slowing down how fast heavy users got new DVDs) but he or she is to be congratulated. It’s a great expression. Now one might wonder why Verizon would want to mistreat some of its customers. As they see it, their intentions are pure and for the collective good.

“Our proactive management of the Verizon Wireless network is designed to ensure that the remaining 95 percent of data customers aren’t negatively affected by the inordinate data consumption of just a few users,” Verizon said.

The second development comes from north of the border. A regulatory change in Canada has effectively killed unlimited Internet plans. (more…)

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Lot’s of things happening this week related to queue management. You don’t get to say that too often! They range from priorities at the patent office to Chuck Schumer having a wacky proposal for call centers to, of course, AT&T monkeying with its data plans pricing.

Let’s start with the last one. Beginning Monday, AT&T will no longer treat data plans as an all you can eat buffet.  Instead, they will sell tiered plans that limit how much bandwidth customers can use before incurring additional charges. Or as the Chicago Tribune so eloquently put it, There’s a Cap for That (June 2). Here is what the Trib says AT&T hopes to accomplish.

AT&T hopes to ease congestion on its network, which has drawn complaints, particularly in big cities. But the approach could confuse customers unfamiliar with how much data it takes to watch a YouTube video or fire up a favorite app.

To put this in perspective, consider this stylin’ diagram from the Globe and Mail (The wireless data crunch, Jun 2):

Smart phone and tablet computers induce people to use data-intensive services. But most of those uses can fit under AT&T’s data caps. Their plans are for 200MB and 2 gigabytes. So those who are fairly average users may well be able to get by with the lower cap and actually spend less money with AT&T than they do now. Of course, not everyone is average. The Globe and Mail also has a posting on the biggest data users with Canada’s Wind Mobile (You think you use a lot of smart phone data? Jun 3).  Wind Mobile was the first provider with unlimited data access in the Canadian market.  Here are the top ten:

  1. 118.56
  2. 95.12
  3. 55.32
  4. 51.70
  5. 44.51
  6. 39.21
  7. 33.72
  8. 33.59
  9. 28.94
  10. 26.85

Those numbers are in gigabytes — GIGABYTES!! — per month.  How do you get north of 100 gigabytes? (more…)

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As I posted earlier, some iPhone users are real bandwith hogs.  Now Farhad Manjoo at Slate has proposed solution that does not necessarily require (or more accurately, doesn’t rely on) AT&T building out a lot more capacity.  His simple solution is to introduce tiered pricing (The iPhone Is Not an All-You-Can-Eat Buffet).  As he notes, adding more capacity may only exacerbate the problem:

Right now there’s only one thing stopping me from using my iPhone more—the network’s too slow. If I get a big e-mail attachment when I’m away from a Wi-Fi network, I normally don’t download it, because it would take several minutes to come through.  … But if the network worked perfectly all over San Francisco, I’d probably change my behavior radically—I’d download every attachment, browse the Web like mad, and start streaming music every time I left the house. A lot of other iPhone owners would do so, too—and people who’ve held back on getting the iPhone because of network problems would sign up. And just like that, the network would crawl to a halt.

In some circles this is known as Braess’s paradox.  Tiered pricing based on usage doesn’t suffer from this problem because, like congestion pricing on roads,  it gives people an incentive to reduce usage. (more…)

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