A flat fee, also referred to as a flat rate or a linear rate refers to a
pricing structure that charges a single fixed
fee
A fee is the price one pays as remuneration for rights or services. Fees usually allow for overhead, wages, costs, and markup. Traditionally, professionals in the United Kingdom (and previously the Republic of Ireland) receive a fee in cont ...
for a
service, regardless of usage. Less commonly, the term may refer to a rate that does not vary with usage or time of use.
Advantages
* A business can develop a dependable stance in a market, as consumers have a well-rounded price before the service is undertaken. For instance, a technician may charge $150 for his labor.
* Potential costs can be covered. The service may result in inevitable expenses like the parts needed to fix the issue or the items required to complete the order.
* No restricted structure is needed, as the pricing system can be adjusted to suit the business using it. Management can thus work out the pricing that best matches the company's objectives, efforts, costs, etc.
Disadvantages
* The fixed pricing restricts the company's capability to meet the needs of individual consumers, and people search for cheaper alternatives.
* Pricing competition thickens, with other companies in the same industry compete for the lowest pricing, and tough competition occurs.
* Inflation can cause unprecedented losses, and companies must raise the charge to keep up with costs.
Examples
Postage
There are flat rates in the postal service, regarding the delivery of items. Postage companies use different forms of post, boxes or envelopes, to avoid having to weigh items. The on-hand cost lets consumers identify the cost and removes the hassle of estimate the cost for items.
The United States Postal Service offers flat-rate pricing for packages selling different postage options varying in size and shape. That provides consumers with an array of options upfront, creating a sense of ease. When shipped in higher volumes, it saves money but there are issues if both the flat rate and regular delivery systems are used simultaneously.
Advertising
Flat rate also passes into advertising. Purchasing advertisements on websites such as Facebook, Twitter and YouTube is sold a flat rates on the size (with a surcharge for images and posts) and length of the advertisement (video costs extra). Advertising on YouTube pitches at a flat rate of $0.30 per view. When a person runs by the YouTube home page, search page, or wherever the ad is running, the charge is $0.30.
Tradesmen
Tradesmen such as electricians, plumbers, and mechanics, also often charge flat rates to cover their labour for their services. In a survey in 2014 in Australia, the average labour rate for a painter was $39.92 per hour.
Telephony
American
telecommunication
Telecommunication is the transmission of information by various types of technologies over wire, radio, optical, or other electromagnetic systems. It has its origin in the desire of humans for communication over a distance greater than that fe ...
s companies commonly offer a flat rate to residential customers for local
telephone call
A telephone call is a connection over a telephone network between the called party and the calling party.
First telephone call
The first telephone call was made on March 10, 1876, by Alexander Graham Bell. Bell demonstrated his ability to "ta ...
s. However, a regular rate or ''Message Rate'' is advantageous for those who make only a few short calls per month. Flat rates were rare outside the US and Canada until about 2005, but they have since become widespread in Europe for both local and long-distance calls and are now also available for
mobile phone
A mobile phone, cellular phone, cell phone, cellphone, handphone, hand phone or pocket phone, sometimes shortened to simply mobile, cell, or just phone, is a portable telephone that can make and receive calls over a radio frequency link whi ...
services, both for traditional GSM/UMTS voice calls and for
Mobile VoIP
Mobile VoIP or simply mVoIP is an extension of mobility to a voice over IP network. Two types of communication are generally supported: cordless telephones using DECT or PCS protocols for short range or campus communications where all base stati ...
.
Most
VoIP
Voice over Internet Protocol (VoIP), also called IP telephony, is a method and group of technologies for the delivery of voice communications and multimedia sessions over Internet Protocol (IP) networks, such as the Internet. The terms Internet t ...
services are effectively flat-rate telephony services since only the broadband internet fees must be paid for PC-to-PC calls, and the calls themselves are free. Some
PC-to-
telephone
A telephone is a telecommunications device that permits two or more users to conduct a conversation when they are too far apart to be easily heard directly. A telephone converts sound, typically and most efficiently the human voice, into e ...
services, such as
SkypeOut offer flat rates for national calls to landlines.
Television
Premium television
Pay television, also known as subscription television, premium television or, when referring to an individual service, a premium channel, refers to subscription-based television services, usually provided by multichannel television providers, b ...
or Pay TV usually charges a flat monthly fee for a channel or a bundle or "tier" of channels, but some
cable television
Cable television is a system of delivering television programming to consumers via radio frequency (RF) signals transmitted through coaxial cables, or in more recent systems, light pulses through fibre-optic cables. This contrasts with bro ...
companies also offer
Pay per view
Pay-per-view (PPV) is a type of pay television or webcast service that enables a viewer to pay to watch individual events via private telecast.
Events can be purchased through a multichannel television platform using their electronic program guid ...
pricing.
Internet
For
Internet service provider
An Internet service provider (ISP) is an organization that provides services for accessing, using, or participating in the Internet. ISPs can be organized in various forms, such as commercial, community-owned, non-profit, or otherwise privat ...
s, flat rate is
access to the Internet at all hours and days of the year (linear rate) and for all
customers of the
telco operator (universal) at a fixed and cheap
tariff
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and pol ...
.
Flat rate is common in
broadband
In telecommunications, broadband is wide bandwidth data transmission which transports multiple signals at a wide range of frequencies and Internet traffic types, that enables messages to be sent simultaneously, used in fast internet connections. ...
access to the Internet in the US and many other countries.
A charge tariff is a class of linear rate, different from the flat rate, where the user is charged by the
upload
Uploading refers to ''transmitting'' data from one computer system to another through means of a network. Common methods of uploading include: uploading via web browsers, FTP clients], and computer terminal, terminals ( SCP/ SFTP). Uploadin ...
s and
download
In computer networks, download means to ''receive'' data from a remote system, typically a server such as a web server, an FTP server, an email server, or other similar system. This contrasts with uploading, where data is ''sent to'' a remote ...
s (
data transfer
Data transmission and data reception or, more broadly, data communication or digital communications is the transfer and reception of data in the form of a digital bitstream or a digitized analog signal transmitted over a point-to-point or ...
s). Some
GPRS / data
UMTS
The Universal Mobile Telecommunications System (UMTS) is a third generation mobile cellular system for networks based on the GSM standard. Developed and maintained by the 3GPP (3rd Generation Partnership Project), UMTS is a component of the In ...
access to the Internet in some countries of
Europe
Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a subcontinent of Eurasia and it is located entirel ...
has no flat rate pricing, following the traditional "metered mentality". Because of this, users prefer using fixed lines (with narrow or broadband access) to connect to the Internet.
A wavy rate is not a linear rate, because the Internet surfer pays the monthly fixed price to use the connection only during a certain range of hours of the day (i.e. only in the morning or, more typically, only at night).
Street lighting
Cities and towns normally arrange a flat fee for the power used by
street lights. This is because the lights come on and turn off at predictable times, generally off-peak, and the total draw for the entire town can be accurately calculated in advance. This allows the lamps to be placed on existing poles and wired directly into the electrical wiring without a separate meter.
Electricity
A "flat rate" (more accurately known as fixed rate) for
electricity
Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as describ ...
is a fixed price per unit (
kWh), not a fixed price per month, and thus different from that for other services. An
electric utility
An electric utility is a company in the electric power industry (often a public utility) that engages in electricity generation and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major pr ...
that charges a flat rate for electricity does not charge different rates based upon the demand that the customer places on the system. A customer pays the same amount whether they use the electricity in bursts during mid-day, when demand and the utility's costs are highest, or if they spread it out over the entire day. However, if the customer uses a different amount of electricity, they are charged a higher or lower amount. Residential customers and small businesses are usually charged a flat rate, though not the same rate per
kilowatt-hour. A special type of
electricity meter, a time of use meter, is required to charge a non-flat rate. Time of use meters can lower a customer's electricity bill, if they use electricity mostly during off-peak hours. Some utilities will allow a customer to change to a time of use meter, but they charge for the cost of the meter and installation.
Real estate
In real estate, "flat rate" is an alternative, nontraditional full service listing where compensation to the listing agent is not based on a percentage of the selling price but instead is a fixed dollar amount that is typically paid at closing. The rate is generally less than a gross 6% commission, resulting in a lowered cost of selling real estate. "Flat rate" is different from "flat fee" in several ways: i) it is generally substantially more than a "flat fee" rate; ii) it generally represents a full service listing as opposed to a "flat fee" limited service listing; and iii) it is usually paid at closing, as opposed to a "flat fee", which is usually paid when the listing agreement is executed.
Transport
In most parts of the world regular users of
public transport
Public transport (also known as public transportation, public transit, mass transit, or simply transit) is a system of transport for passengers by group travel systems available for use by the general public unlike private transport, typi ...
, especially
commuters, make use of weekly, monthly or yearly ''
season tickets'' that allow unlimited travel for a fixed fee. In some countries year passes are available for the entire national railway network (e.g. the
Bahncard100 in Germany for about €3000 and the ''Oesterreich Card'' offered by the
Austrian Federal Railways
Austrian may refer to:
* Austrians, someone from Austria or of Austrian descent
** Someone who is considered an Austrian citizen, see Austrian nationality law
* Austrian German dialect
* Something associated with the country Austria, for example: ...
).
Some, such as the
Eurail
The Eurail Pass, introduced in 1959 and formerly known as Europass or Eurorail Pass, is a rail pass which permits travel through 33 European countries on nearly all railroads and several shipping lines. The Eurail Group, based in Utrecht, is re ...
Pass, are intended for foreigners, in order to encourage tourism.
Road users are normally charged a combination of fixed and variable fees, in the form of
vehicle duty and
fuel duty. Motorway
tolls in some countries (Switzerland, Austria, Czech Republic, Slovenia) are paid by purchasing weekly, monthly or annual stickers attached to the windscreen.
At some stage, the concept of the flat rate was even introduced into passenger air traffic in the form of
American Airlines' AAirpass.
Parcel/document delivery
In dealing with the shipping of parcels and documents, a "flat rate for international deliveries of packet size #1" would mean that the same shipping charge (for example US$15.00) would be applicable to all packets of this size, regardless of their designated destination (country of recipient), and regardless of the quantity of their contents, i.e. whether they contained one sheet of paper or were filled to the maximum.
Labor
Flat rate is a pricing scheme whereby the customer pays a fixed price for a service regardless of how long the worker takes to carry out the service. Flat rate manuals are based on timed studies of the typical time taken for each type of service. Flat rate helps provide a uniform pricing menu for service work and helps establish the worth of performing a particular job. In recent times some automotive companies have begun using computer algorithms to calculate labor times with a high degree of accuracy.
The benefit to the customer is that if a worker takes longer than this, the cost does not rise.
The downfall to the customer is that this can lead to overpaying in some cases.
The benefit to the worker is that it promotes incentive to learn how to do the work more efficiently.
This system can also cost the worker if they do not perform a job within the allotted time such as in the case of an inexperienced worker or on a job where there is something preventing the service from being performed that the labor manual can't take into account. In automotive shops this is common due to rusted, seized, or stripped bolts or aftermarket installations. In some circumstances automotive technicians can get paid 0 hours for working a 12-hour day.
It can be difficult to compare prices between hourly-paid and flat-rate services, and this sometimes causes rejection of flat rate shops over hourly ones.
Medical
One of the newest areas where flat rate pricing is just beginning to make inroads is the
medical industry
The healthcare industry (also called the medical industry or health economy) is an aggregation and integration of sectors within the economic system that provides goods and services to treat patients with curative, preventive, rehabilitative, a ...
. The concept has held a particular interest because of the high and rising costs of health care delivery despite legislative attempts to address them, such the
Affordable Care Act
The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act and colloquially known as Obamacare, is a landmark U.S. federal statute enacted by the 111th United States Congress and signed into law by Pres ...
(Obamacare). While there have been
pilot program
A pilot study, pilot project, pilot test, or pilot experiment is a small-scale preliminary study conducted to evaluate feasibility, duration, cost, adverse events, and improve upon the study design prior to performance of a full-scale research pr ...
s launched by major
insurance carriers such as
UnitedHealthcare
UnitedHealth Group Incorporated is an American multinational managed healthcare and insurance company based in Minnetonka, Minnesota. It offers health care products and insurance services. UnitedHealth Group is the world's seventh largest c ...
to control costs in the most costly medical conditions like
cancer
Cancer is a group of diseases involving abnormal cell growth with the potential to invade or spread to other parts of the body. These contrast with benign tumors, which do not spread. Possible signs and symptoms include a lump, abnormal b ...
, for now the primary application of flat-rate pricing has been in
medical imaging, such as
x-ray
An X-ray, or, much less commonly, X-radiation, is a penetrating form of high-energy electromagnetic radiation. Most X-rays have a wavelength ranging from 10 picometers to 10 nanometers, corresponding to frequencies in the range 30&nb ...
s,
MRI
Magnetic resonance imaging (MRI) is a medical imaging technique used in radiology to form pictures of the anatomy and the physiological processes of the body. MRI scanners use strong magnetic fields, magnetic field gradients, and radio waves ...
s,
mammograms
Mammography (also called mastography) is the process of using low-energy X-rays (usually around 30 kVp) to examine the human breast for diagnosis and screening. The goal of mammography is the early detection of breast cancer, typically through d ...
, and
ultrasound
Ultrasound is sound waves with frequencies higher than the upper audible limit of human hearing. Ultrasound is not different from "normal" (audible) sound in its physical properties, except that humans cannot hear it. This limit varies ...
s. Regional companies such as Med Health Services Inc. in the
Pittsburgh
Pittsburgh ( ) is a city in the Commonwealth of Pennsylvania, United States, and the county seat of Allegheny County. It is the most populous city in both Allegheny County and Western Pennsylvania, the second-most populous city in Pennsylva ...
area and Northwest Radiology Network of
Indianapolis have been among the first in the nation to implement the practice on a trial basis.
See also
*
Flat fee MLS
Flat-fee MLS refers to the practice in the real estate industry of a seller entering into an "à la carte service agreement" with a real estate broker who accepts a flat fee rather than a percentage of the sale price for the listing side of the ...
*
Flat rate (finance)
Flat interest rate mortgages and loans calculate interest based on the amount of money a borrower receives at the beginning of a loan. However, if repayment is scheduled to occur at regular intervals throughout the term, the average amount to whi ...
*
Flat tax
*
Rural Internet
*
Too cheap to meter
Too cheap to meter refers to a commodity so inexpensive that it is cheaper and less bureaucratic to simply provide it for a flat fee or even free and make a profit from associated services. Originally applied to nuclear power, the phrase is also ...
References
{{DEFAULTSORT:Flat Rate
Pricing
Internet access
Mobile web