How to charge for network services - flat-rate or usage-based?

Currently, the Internet service provider market offers two different types of pricing plans. In the USA, the predominant pricing plan is a hat-rate pl an. In Europe and Asia, the predominant one is a per-minute pricing plan. E nrolled in such a pricing plan, users have to pay for the connect time to t he Internet. Although Internet Service Providers (ISPs) have competed heavi ly for users in these last few years, they only have focused on trying to o ffer the lowest price within such pricing plans. A potentially more profita ble and sustainable method of doing business would be for ISPs to different iate themselves by offering more customized pricing plans for certain user groups. An important question then is whether a pricing plan exists that is attractive to users, but also allows ISPs to build a sustainable business. Based on empirical results of the INternet Demand EXperiment (INDEX) proje ct, we discuss a pricing plan for Internet access that appears to be apprec iated by Internet users as well as by ISPs, This pricing plan combines the advantages of flat-rate pricing and usage-based pricing. Users will benefit by receiving unlimited access to a basic service with the choice of higher quality of service (QoS) whenever they demand. From the ISPs' perspective, such a pricing plan will help any ISP to focus on certain user' groups and to reduce peak network load, (C) 2001 Elsevier Science B.V. All rights res erved.