Dynamic pricing for online service? (Broadband)

Mrtvac

Hi,

Recently I've found out that Virgin Media has dynamic pricing for their broadband service (not sure for other services) based on your post code.

So for example, if you live in London you'll be paying more for your broadband than the people who live outside London.

I'm not sure if this is only Virgin Media doing or others as well but for me it doesn't make much sense. And not sure if that's even legal to do?

I get about the dynamic physical product pricing (selling in stores) because your input costs will be different (for example, in London your staff costs, business rates etc will probably be higher) but I don't get this dynamic pricing for online services where input costs are the same?

For me this is like getting a mobile tariff and then you pay more if your address is in London. Or I dunno, getting Sky TV or something like that. Doesn't make sense.

Am I only finding about this now or is this normal practice even for online services?

Cheers.

Andy_L

Wouldn't that be regional pricing rather than dynamic pricing?

"but I don't get this dynamic pricing for online services where input costs are the same?"

are they or does laying/maintaining their cables cost more in London?

DullGreyGuy

It's not an online service, there are physical cables and if someone accidentally cuts one in London they dont send someone down from Scotland to fix it but use an engineer based in the South East with a salary commensurate to the region

Mrtvac

DullGreyGuy said:

It's not an online service, there are physical cables and if someone accidentally cuts one in London they dont send someone down from Scotland to fix it but use an engineer based in the South East with a salary commensurate to the region

But wouldn't that be the same for mobile/tv services? If a mobile tower goes offline in London, they won't send someone from Scotland to fix it. And I didn't notice that mobile operators have regional prices.

And I'm not talking about Scotland vs South East, I'm talking about 35 miles distance - London/Sevenaoks for example.

Mrtvac

Andy_L said:

Wouldn't that be regional pricing rather than dynamic pricing?

"but I don't get this dynamic pricing for online services where input costs are the same?"

are they or does laying/maintaining their cables cost more in London?

Dunno, as mentioned, wouldn't that be the same for mobile and TV operators and I didn't notice they have regional pricing?

Marvel1

Not broadband, but when you compare the energy standing charges in London to others, they are the cheapest: https://www.ofgem.gov.uk/get-energy-price-cap-standing-charges-and-unit-rates-region-0   but do have the highest unit rate.

eddddy

I expect there are lots of commercial factors that influence their pricing. For example,

• Amount of unused capacity - if they have lots of spare capacity in a region, they'll price lower to attract more customers

• Level of competition - if there are more fibre companies operating in a region, that might push down prices

• What people are prepared to pay - i.e. if they can put up prices and still get the same number of customers, then they'll put up prices

• Costs of providing the service (e.g. higher wages in some areas, etc)
  
  

FWIW, maybe petrol stations are a similar example. A motorway services petrol station near me is charging 31p per litre more than another petrol station 4.5 miles away.

The leasing costs are probably higher for the motorway service station - but I suspect that 'lack of competition' and 'what people are prepared to pay' are also significant factors.

Mrtvac

eddddy said:

I expect there are lots of commercial factors that influence their pricing. For example,

• Amount of unused capacity - if they have lots of spare capacity in a region, they'll price lower to attract more customers

• Level of competition - if there are more fibre companies operating in a region, that might push down prices

• What people are prepared to pay - i.e. if they can put up prices and still get the same number of customers, then they'll put up prices

• Costs of providing the service (e.g. higher wages in some areas, etc)
  
  

FWIW, maybe petrol stations are a similar example. A motorway services petrol station near me is charging 31p per litre more than another petrol station 4.5 miles away.

The leasing costs are probably higher for the motorway service station - but I suspect that 'lack of competition' and 'what people are prepared to pay' are also significant factors.

Yeah, I get it for petrol stations and other "physical" products which you sell in the shops due to, as I've said before, probably different input costs (staff, leasing, business rates, energy costs etc) but I never realised that companies are doing this for these kind of services as well. 

And it seems only Virgin Media is doing this at the moment. I've checked with Hyperoptic who are offering fibre in and outside London and would always get same prices (at least for the postcodes I was checking).

Wondering if other companies of this type will start with this "regional pricing" model.