Engineering Value
Yesterday some of us visited Miles Johnson and Kim Marshall at Utah State University. One of the more fascinating discussions that we had was the discussion of how they limit usage on their mostly free campus dialup service. Any service that is free or unlimited seems to cause people to use more of the service or to leave it on when they are not using it. I see this in many different situations. Most medical plans seem biased to consumption in this manner. If I have the coverage, why not see the doctor, or take the antibiotic that probably will not make my virus infection go away any sooner.
Most dialup ISP’s are familiar with this problem. Customers want unlimited plans, just in case. When they have unlimited plans they will do thing like leave their computer on for extended periods when they are not using it. Most of the fixes to this situation are annoying. When you listen to the internet radio station at vh1.com, every 15 minutes or so, you need to walk by your computer and click to show that you are still listening.
The solution that Miles and Kim and probably some other people came up with is very interesting. The dialup service has the following costs. From 8 a.m. until 6 p.m. it cost $ .10 per hour. From 6 p.m. until Midnight it costs $ .25 per hour. Midnight until 8 a.m. is free. Each user is given $4.00 per week to spend as they want. If they want to use more they can pay real money. They can bank about $4.00 or so. If somebody really wants to use prime time hours, they can for a minimal cost.
USU has a dialup service that serves about 7,000 users with about 250 modems. They never have had a busy signal due to congestion. It has been a while since I have been involved in dialup ratios and such, but if I remember correctly people would need to have 10 or 15 to 1 ratios in order to claim that their service was hardly ever busy. The USU ratio is about 28 to 1. These allotments of “fake” money are viewed by the users as something valuable.
A system that seems to be based on the same principle is the way that Singapore does their heath and retirement coverage. They have a system where the employee and employer contribute to an individual account. The account is invested and I believe self managed to some extent. The interesting part is how the money is spent. When people are young they have few medical needs. During this period, the money that is in the account grows. When they get older, they have greater medical needs and they can use the money they have saved. Any money not spent on medical care can be spent on retirement. I talked to people in Singapore that were contemplating surgery. One of the factors in their mind was the cost. In Singapore, there are no lists of things that the insurance company will pay for and other things that they won’t pay for. No list of drugs that are in the formulary and ones that are not. No requirements to use generic drug. Since people are paying with something that is perceived to have value, they only buy things that are worth it to them.
It seems that some systems for matching people and resources work better than others. The USU dialup system works really well.
3:05:02 PM 
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