The Cost Allocation Problem
The idea of monetizing or prorating a device’s monthly access charge based on the percentage of a voice or data pool it consumes is certainly not a revolutionary concept but it is also not widely implemented because of the challenge of efficiently calculating results on a consistent and fair basis.
Consider the case of a user consuming more than 200GBs a month on a shared 2GB data card plan costing $30 a month. Other users in the company are bearing the cost of this user’s excessive consumption. The reverse scenario is where an unfortunate user in a pool is randomly assigned a $300 recurring charge by the carrier as the keeper of the all GBs for that shared data pool group. The other lucky users in this pool group only have to pay a nominal access charge to benefit from all those ‘free’ GBs being funded by a coworker in an adjacent department.
Whether your company is allocating wireless charges at the local level or they wish to shine a bright light on excessive usage, establishing rules for fairly assigning charges to pool participants on a monthly basis is a highly beneficial practice to consider.
Allocating Pool Adjusted Charges
At MobilSense the process of prorating a user’s charges based on the portion of the pool they consume is called ‘Pool Adjusting’. This process only applies to participants in a pool, not to devices on individual rate plans. Through the process of Pool Adjusting, voice access fees and any airtime charges are distributed to all pooled voice devices based on the percentage of minutes those devices consumed from the pool that month. Any charges incurred individually such as equipment, international charges, features, downloads, and other charges and credits are not redistributed and are added on top of a device’s prorated pool amount to yield a new Pool Adjusted total charge.
In the case of data pools, the data access fee or the add-on data plan for smartphone devices is redistributed along with any domestic data overage charges to participants in the data pool based on their percentage of total data used. As with voice devices, these data devices retain all individual charges which are added on top of their prorated data charge to produce their new total Pool Adjusted charge.
Within MobilSentry™, the chosen formulas are automated to run with each monthly invoice process. The Pool Adjusted totals are maintained separately from the actual carrier invoice totals in the database, permitting administrators to easily toggle between actual and Pool Adjusted views.
Pool Adjusting has three primary advantages.
Eliminate inequities – where an employee is either substantially overpaying or underpaying for their actual usage, the charges are distributed based on usage.
Enhance visibility to employee over use – management is likely to respond more proactively to an excessive employee charge than they are to an employee running up large usage accompanied by an arbitrarily low charge. Adding a monetary component to usage is a much more effective manner of policing employees’ over use or abuse.
Maximize pool flexibility – the best way to manage pool buffers is to eliminate any choice constraints that might attempt to manually size a device’s usage to what they pay for their actual carrier rate plan. Trying to enforce cost equity for a wireless invoice through matching an individual’s usage to their plan represents an imprudent restriction. Sizing pools monthly is challenging enough without unnatural limitations in the selection process of rate plans.
Defining Pooling Models
There are four general pooling models offered by carriers today and each represents its own challenges for fairly assigning individual device charges.
Classic Voice Pools – spanning more than a decade, these pools have the longest history. Examples include AT&T’ ‘Business Pooled Nation’ plans or Verizon’s ‘Nationwide Business Share’ plans. In the Classic model, every participant in the pool shares in the minutes and typically contributes to the available minutes in modest quantities of 450, 900, 1350, 2000 minutes or more. The one exception where no minutes are contributed are ‘Add-on’ plans where the pool participant pays a smaller access charge than other minute-contributing plans. The total available number of minutes in the pool is literally built by aggregating all the minutes from all the devices in the pool. We refer to these types of pools, where everyone contributes to the total, as ‘Aggregate’ pools. In attempts to match cost to usage, some companies have overly constrained the pool maintenance process by attempting to line up a user’s rate plan to the minutes they consume as a back-door approach to proration. This characteristically leads to higher than necessary pool costs.
Bulk Voice Pools – on a more limited basis there are pools where the minutes are contributed in a large bulk amount. Examples include T-Mobile and older Cingular plans from AT&T. Typically, the full charge and quantity of minutes are assigned at an account level. It is not unusual to see quantifies of 10k, 15k, 25k, or 50k minutes all in one lump sum with a correspondingly large charge. In the absence of charge proration capabilities, companies may choose to assign the account charge to a corporate account as a way of minimizing inequities to cost centers. An even more burdensome approach is to establish multiple pools by putting arbitrary boundaries to eliminate sharing of pools between cost centers.
Group Share Puddles – relatively new on the scene, these plans provide unlimited voice and texting where data is the attribute being metered. Examples of these types of pools include the AT&T Mobil Share plans and the Verizon Share Everything or More Everything plans. Since these types of pools include limitations on the number of devices that can share data, we refer to them as ‘Puddles’ rather than pools. Group Share plans are purchased in bulk data amounts typically 50GB, 75GB, 100GB, 150GB, 200GB and larger quantities. The charge comes in a lump sum amount and may be assigned to a device randomly or the charge for data may occur at the account level. Every participant in the pool pays an ‘entry’ price based on their device type including tablets, smartphones, data cards, or basic phones. Spreading the bulk data charge evenly across all participating devices is one way to address fairness but this number will vary month to month based on the count of devices in the shared puddle.
DataPlus Pools – this pooling capability has only recently emerged as a variation to the Group Share approach. Examples include Verizon’s Flex Share and Sprint’s Business Fusion plans. Like Group Share, these plans include unlimited voice and text capability and also meter data usage. This pool model addresses the shortcoming of Group Share puddles by eliminating device count ceilings. The method of building GBs in the pool is done in an aggregate fashion with each device contributing a modest amount to the pool in 1GB, 2GB, 5GB or 10GB quantities. This makes for much more granular tuning of the pool. While this pooling model doesn’t face the Group Share challenge of equitably dispersing a large bulk data charge, it still has the inherently inequitable proposition of a user paying a minimum for their aggregate GB contribution while consuming large amounts of other users’ data.
Defining Your Formula
Hopefully you are benefitting from some level of mobile expense management automation and can avoid the challenge of manually calculating your equitable allocation charges each month. Through our solution MobilSentry™, rules for Pool Adjusting are coded into the system to enable a monthly process that delivers equitable charge back amounts for cost centers and departments in an entirely automated fashion.
Evenly Shared Approach – a simple path to resolving large voice or data bulk charges is to spread the costs evenly across all devices in a pool or puddle. The formula simply totals the access amounts and any overage then divided by the number of devices in the pool. Everyone in a pool gets the same fee each month but it will fluctuate month to month as the device count and usage varies.
Prorated Approach – while the evenly shared approach is simple and distributes bulk charges to avoid penalizing one user or department, it does nothing to address the problem of heavy users not paying their fair share. The prorated formula results in a charge that best matches the percent of units consumed in the pool for each device. With the Prorated Approach, there are two additional considerations:
1) Minimum Floor – without minimums, users with no usage will receive an allocation of $0 despite the device’s recurring carrier charge. The use of a minimum floor effectively moderates the range of allocated charges. Without a floor, an excessive user with 200GBs of usage would likely result in a device charge well over $1,000. By establishing a floor for every device in the pool it reduces the total variable cost available for distribution. A $25 floor across all users will reduce the allocated charge for this same 200GB user to several hundred dollars. This level of charge can still draw attention to that employee without the accompanying sticker shock. With a floor, everyone starts at that floor and the remaining variable expense based on percent usage becomes an additional charge to the floor.
2) Class of Minutes – voice plans come with categories of minutes to consider, including total minutes, peak minutes or the formula most carriers use in determining pool consumption, peak minus mobile-to-mobile minutes. Each company will need to determine which level of minutes represents the most equitable basis for distributing cost.
Without the ability to equitably assign charges for budgeting and tracking purposes companies are frequently over paying on their carrier rate plans by maintaining more capacity in their pools than needed, while leaving over use and abuse lurking below the radar. The problem is easily solved through automation but is cumbersome and time-consuming through manual intervention.
To better understand our approach to Pool Adjusting cost allocation charges, please visit us at email email@example.com or call 888-870-4250.