Tell me more x
, there is a new speed test available. Give it a try, leave feedback!
dslreports logo
story category
There's Still No Evidence That Metered Billing Is Necessary
Growth is manageable, companies are profitable, what's the problem?
by Karl Bode 12:25PM Thursday Nov 19 2009
Yesterday we issued a report exploring how Verizon was again hinting at how they believed metered billing is inevitable. We also discussed how yet again, you had an ISP suggesting that a shift to metered billing was financially necessary (not true) and that the ISP desire to shift to metered billing was dictated by some kind of altruism (also not true). Apparently, this position upset Todd Spangler over at Multichannel News, who somewhere in between taking pot shots at "edgy bloggers" and "clueless" flat-rate pricing proponents arrives at his central thesis: that consumption-based billing is inevitable:
Anyway, my point is that consumption-based billing models are inevitable mainly because Internet demand is shooting through the roof. Today's broadband networks - not even FiOS - are not constructed to deliver peak theoretical demand and adding more capacity to the home or farther upstream will require investment.
Again, the inference that the flat-rate pricing model mysteriously doesn't offer the money needed to fund investment is simply not true, should you care to look at any major ISP balance sheet or 10-K. Internet usage data (at least the data not coming from DC lobbyists pushing the "Exaflood") indicates that future capacity demand can be met with only modest capacity upgrades. New data from the University of Minnesota this week indicates that growth continues to slow. So if by "shooting through the roof," Spangler means "completely manageable with only modest investment and smart engineering," he's right. Otherwise, not so much.

Spangler's second major point is that consumption-based billing is inevitable because bandwidth caps won't work. To prove his point, Spangler turns to a guy that sells network throttling hardware for a living. "Bandwidth caps don't do anything for you," agrees Sandvine CEO David Caputo, who obviously would rather ISPs pay his company to install network management hardware that can detect and manage network congestion in real time. Comcast's Sandvine deployment does just that, detecting heavy users on congested nodes and throttling them back temporarily -- without the majority of network users even noticing.

But Spangler derails his own point here. Comcast's using a combination of investment in DOCSIS 3.0, smart engineering, intelligent network management hardware and a 250GB cap to handle demand on peak and off. All of that is funded, with plenty of money to spare, by flat-rate pricing. The 1% of users who are still a problem can be bumped to more expensive business-class tiers. The capacity demands are being taken care of now and in the future, customers understand the pricing and limits, Comcast's network is healthy, most of their costs are fixed or decreasing, and their business is hugely profitable. Yet Spangler says:
If you want to pretend that all-you-can-eat plans are sustainable at today’s price tiers, you’d be kind of clueless.
Now as Spangler himself says he's "the man" and we're just "edgy blogger types" (edgy is apparently a polite euphemism for asking questions when presented with industry talking points) but again: where's the evidence that a shift to consumption-based billing is necessary? Repeating that metered billing is necessary and inevitable doesn't magically make it so.

100 comments .. click to read

Recommended comments

Brazilian Soccer Ownz Joo

Glen Allen, VA

2 edits

2 recommendations

reply to AnonDOG

Re: In one sentence.

said by AnonDOG :

The only people who fear metered billing are people who believe their bill will go up with metered billing.
Or people who understand where this is going in the future even if their bills do not change under metered billing.

I'm not a heavy user by any means but I do understand that once metered billing is implemented in the name of penalizing the "hogs", the next step will be to tweak it for maximum profit by constantly redefining the meaning of "hog".

One only needs to look that the pricing scheme of text messaging to realize how bad it could get.