Consumption Based Billing

What is consumption-based billing?

Usage Billing and Consumption Based Pricing

Over the past few years, companies have shifted from one-off sales to subscription-based models (i.e., movie streaming, food delivery, and beauty products). These companies offer a recurring, flat fee for their product or services.

However, these basic subscriber models might not work if customers want to pay only for what they use or consume.

Usage-Based Pricing Models

Metered usage is a billing technique where customers are charged based on their product or service usage. This billing model is typically used in telecommunications for calling plans and for Internet usage.

A consumption-based pricing model is a service and payment arrangement in which customers pay according to the resources they use or consume. For example, your customers would be charged for all the calls they made or data they downloaded using their phones.

Consumption-based billing has become more important, especially with telecom services where usage-based products are the norm.

What Is Usage in Telecom?

Telecom usage can include phone calls, data, text messages, or faxes a customer uses over a particular period. In the case of voice data, CDRs contain detailed information about individual calls, including the caller and recipient's numbers, call duration, timestamps, call type (incoming/outgoing), call quality metrics, and more. CDRs form the basis for generating accurate billing information.

Rating and Charging for Usage

Usage billing↗️ meters how much each customer "uses" your products or services to create a dynamic invoice for each customer. The usage rating process involves converting a customer's usage data into a monetary-equivalent value.

In telecom, providers often offer different rate plans for various destinations or usage types. Rate tables outline the costs associated with making calls to specific countries or regions. These tables are used to calculate charges for each call based on the destination and duration.

Usage Billing System

A usage-based billing system gathers service usage and rating, applies taxes, and generates the customer invoice. The billing process also includes transmitting the invoices and recording customer payments and adjustments (refer to our billing process flow chart).

An Example of Consumption Billing

Let's say a customer has a mobile phone plan with a telecom provider. The plan includes:

  • Voice Calls: You're charged a certain rate per minute for voice calls. If you make a 10-minute phone call, you'll be billed for 10 minutes of usage.
  • Text Messages: You're charged a certain rate per text message. If you send 50 text messages, you'll be billed for 50 messages.
  • Data Usage: You're charged based on the amount of data you use. If you use 2 gigabytes (GB) of data in a month, you'll be billed for that 2 GB of data.
  • Additional Services: You might have additional services like international calling or premium content subscriptions. The charges for these services would be added to your bill based on your usage.

Here's an example of the monthly invoice calculations made by the billing system:

Voice Calls: 200 * $.10/min. $20
SMS: 300 * $.05/msg. $15
Data Usage: 3.5 * $10/GB $35
Other Services:   $5

In this example, the monthly bill would be $75, reflecting the customers' consumption of voice calls, text messages, data, and additional services.

More About TimelyBill

TimelyBill's CRM software helps providers with usage rating, charging, and the entire billing process. Learn how we help you monetize your services, your network, and your subscribers. 

Visit our website↗️ or contact our sales team at (954) 889-6699 to schedule a personalized demo and discover how TimelyBill can transform your billing experience. Your usage, your terms – with TimelyBill, it's just that simple.

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Telecom Billing Process Flow Chart