Utilizing Moving Average May Be Good Enough

In last week’s tip we suggested that some data overage charges can actually be a good practice.  This week we introduce a low effort approach for setting your data pooling levels.  This approach can deliver results that are effective yet don’t require sophisticated forecasting methodologies.  It is not uncommon to find some data pooling environments where you have no latitude to moderate your pool buffers – where your average pool usage falls well below the minimum attainable pool levels. Unfortunately in those cases you will always be paying for data you don’t need or use.  Many, however, are going to find a mix of 2 and 5 GB level devices where your average usage fluctuates in a range yielding options for adjusting pool levels to lower costs by minimizing overage charges and payments for unused data.  While MobilSense employs some sophisticated forecasting methods for both voice and data pools, when it comes to data pooling, using a simple moving average approach to setting pool levels may be good enough and is often better than setting your pool at a flat level year round based on the highest month’s peak usage.

Last week’s tip described a minimum effort approach of setting a flat pool level based on the expectation of incurring some month’s overage. Since data usage can be unpredictable, setting a flat level can lead to growing data overage charges particularly when overall data usage is rising over time and not just experiencing cyclical peaks and valleys.  This week’s tip of using moving averages to set monthly pool levels introduces a low effort but more responsive approach to setting data pool levels.

This chart shows a situation where the average data usage per device is fluctuating between 2.4 GBs and 2.8 GBs.  The perfect fit (green line) represents a result you will never achieve but reflects the absolute best you could ever do, matching your usage exactly.  This chart represents a data pool of close to 1000 devices.  The perfect fit cost for this pool would average $34,900/month.  By contrast, the Moving Average (red line) results in an average monthly cost only slightly higher at $35,900/month.  Through a simple monthly calculation, in this case moving average, this scenario comes within $1k/month of the theoretical minimum monthly cost.

Clearly defining a moving average formula is most easily done when you have a history of usage to draw upon.  The pattern charted above reflects a quarterly rise and fall thus lending itself to a 3 month moving average, which is what was employed in this case.  The number of months used in your averaging calculation should attempt to match the period of the peaks and valleys.  For the chart above, the average usage for the period May through July determines the pool level that will be set for the August billing cycle, and then June through August determines September and the pattern continues.  For the example above, a simple monthly calculation was used to set the subsequent month’s pool level while keeping the cost close to the theoretical minimum.

Planned Overage Yields Lower Costs

In last week’s tip we introduced the concept of using data devices such as tablets with their lower 2 GB plans to bring your overall pool cost down.  We build on that topic this week with the theme that there is no reason to pay your carrier for unused and unneeded data, particularly when the penalty of overshooting is not particularly painful.  The cost/GB of data plans can range from $8.00/GB (10 GB plan) to $15.00/GB (2 GB plan).  In contrast to voice overage rates that can be 5 times the cost/minute of your voice plan, the cost of exceeding your planned data levels is no more painful than the cost of buying the original 2 GB plan at $15.00/GB.  Because of the low differential between planned data and unplanned overage rates, you have a situation with data pooling where it doesn’t benefit you to maintain a buffer, it actually costs you more.

While the most effective method of managing a data pool is to make monthly adjustments based on historical trends and recent growth rates, a low maintenance flat pool approach can be quite successful given the modest overage rates for data.  Most data usage average values fall well below the common 5 GB plan level for data cards.  When incorporating a growing volume of smartphones as well as tablets that offer 2 GB plan options, you may finally be at a point where the amount of data purchased in the pool can actually come close or even fall under your average usage rate.  You will need to have a data pool made up predominantly of smartphones and/or tablets with only a small minority of data cards to generate a pool environment where you can actually carry fewer GBs in the pool than you might use in peak months.

The scenario demonstrated above represents around 1000 data capable devices with over 75% of these devices being smartphones and tablets and only 25% traditional data cards. Common wisdom in setting pool buffers is to find a peak usage month and then to build in a small buffer on top of that to avoid incurring overage charges.  Many companies don’t have the means to make continual adjustments to their pools so they will utilize a methodology of investing in a flat pool amount that provides some protection against overage in the peak months.  The downside of data pooling is that it can show higher levels of variability than a typical voice pool on a month to month basis.  The upside to the data pooling rate structure is that you no longer need to approach the exercise of setting your pool levels based on an overage avoidance strategy.  In fact, if you carry too much safety buffer, you are going to be paying the carrier even more in down usage months and you never get money back for unused data.

This example contrasts a traditional buffer strategy set at 2900 GB/month by applying a 4% safety buffer over the highest usage peak versus taking that same 4% buffer over the average usage for this period.  By definition with fluctuating usage, the average pool level line is going to incur periodic overage rates for peak months but since the cost of those overage months is slight, you will still come out ahead because you make a significant reduction in the amount of data paid for but unused.  The scenario above for 1000 data devices generates a 4% annual savings or $13,400 despite 3 months of overage.

Benefitting from 2 GB Tablet Share Plans

Companies are finding an increasing need for wireless-enabled tablets to empower their mobile employees.  Unlike Data Cards that have a 5 GB plan option floor, Tablets typically provide plan options as low as 2 GBs.  An increasing ratio of Tablets to Data Cards can generate beneficial savings considerations by utilizing the appropriate quantity of 2 GB Shared plan options with a pool of Data Cards. The lower cost point of the 2 GB Tablet plan will result in an overall reduction in your monthly data charges.

If you are not currently using data pooling please see our Tip published April 9^th. If you are taking advantage of data pooling for Data Cards, the vast majority of you are noticing that your average usage rate leaves a sizeable gap of unused GBs that you are nonetheless paying for each month.  This is due to the lack of plans beneath the 5 GB floor for Data Cards.  Average data usage can vary dramatically by company but our experience has shown that Tablets will typically run at lower data usage rates than Data Cards.  While the average Tablet usage may be as much as 1.0 GB lower than Data Cards, the Tablets offer a plan option that is 3 GB lower and $20 less than Data Cards.  Herein lays the opportunity to reduce your monthly data pool buffers resulting in bottom-line monthly savings.

The graph above represents the average usage and buffers for a Data Card only pool and then an expanded pool including Tablets. By increasing the ratio of 2 GB Tablet plans to 5 GB Data plans the pool average drops 1 GB.  Some companies might have reached the point of supporting a higher count of Tablets than Data Cards. The higher the ratio of Tablets in a pool, the more flexibility one has in sizing pool buffers. The 2 GB Data Share plan introduces the opportunity to close the data buffer gap significantly.

This example of 800 data devices in the graph above represents a higher than normal average usage. Your actual average usage may be lower.  The Data Card only pool shown in red produced an average of 1.0 GB of unused but paid for data.  In green is the new blended pool made up of 67% Data Cards and 33% Tablets which reduces the buffer from 1.0 down to 0.5 GBs. By using a blend of 2 GB and 5 GB plans, the amount of paid-for but unused data is reduced significantly. A reduction in the total amount of data purchased and available to the pool in the blended example is where savings are derived.

Your actual savings will depend upon the plan prices previously used for the Tablets before combining them in the blended pool.  Non-Pooled Tablets are typically a mix of 3 GB and 5 GB plans ranging from $40 to $50 list.  The 2 GB Share plans are priced at $30 list.  Our experience is that most pools will have an adequate buffer even with all Tablets on 2 GB Share plans.  The example illustrated above generates over $3500/month in savings in the blended pool example.