We're Not An 'Enemy' Of Usage-Based Billing We just haven't seen any reasonable, creative proposals yet Tuesday Dec 14 2010 09:09 EDT Tipped by andyb  Several users have directed our attention to a post by Todd Spangler at Multichannel News, who insists that alongside the Washington Post, we're somehow an "enemy" of usage based broadband pricing because of our tendency to call the industry out for its repeated attempts to portray its desired shift away from flat rate -- to high per gig overages -- as somehow inevitable, necessary or even altruistic. At the core of Spangler's assumptions is his incorrect belief that U.S. flat-rate pricing (already among the most expensive by OECD standards) isn't profitable enough to sustain even modest network upgrades. Flat rate is perfectly profitable, as clearly evident by ISP earnings. Still, says Spangler: quote:
"BroadbandReports.com’s Karl Bode, an articulate critic of usage-based pricing, claims that metered broadband models "aren't based on real economics, given the continually dropping cost of terrestrial bandwidth and hardware." Really? Where is the evidence that the costs to upgrade Internet networks to handle double-digit yearly increases in bandwidth utilization into the next decade can be covered without raising rates in some way?"
Nobody is arguing that ISPs won't have to raise rates in some fashion over the next decade, and ISPs certainly have no shortage of other creative methods of milking additional revenue from subscribers. That's a red herring, and obviously entirely different from the observation that low cap/high overage pricing is, in every trial implementation we've seen, punitive and fails to offer consumers real value. Where's the evidence that flat-rate pricing is sustainable? The entire history of the Internet and every ISP earnings report we've ever seen. Where's the evidence that flat-rate pricing isn't profitable enough to adequately fund network upgrades? It doesn't exist. Spangler continues: quote:
Arguing that ISPs have managed to accommodate increased usage without resorting to consumption-based pricing so far misses the point: The wave of video-driven Internet usage hasn’t fully crashed on the shore yet. Common sense dictates that adding hundreds of Gbps of capacity is a significant cost. (Even if Level 3, with respect to its feud with Comcast over interconnection fees, wishes otherwise.) As I’ve said before, paying based on what you use is the fairest and most reasonable approach for operating broadband networks in the era of Internet TV..
Likening video evolution to a tidal wave drifts into Exaflood territory, a scare-mongering argument that's been debunked repeatedly by data showing that Internet traffic growth (video included) is manageable with only modest network infrastructure improvements. While it may require a few sleepless nights for network engineers and intelligent network hardware vendors, it doesn't require an entirely new pricing model, and it's "common sense" for those suggesting otherwise to clearly prove why. Also we'll repeat (and it's not clear how much this needs to be repeated, but it's apparently daily) -- but what's being proposed is not "pay for what you use" -- it's flat rate with low caps and ridiculously high per gig overages. Simply wanting real value in pricing tiers does not make one an "enemy" of usage-based pricing. It would be fantastic to see an ISP come up with an innovative new usage-based pricing model that offers value. But that's likely not going to happen (at least among the sector's incumbents), because: 1. we lack organic competition in U.S. markets to keep these prices in check; 2. while ISPs like to talk a lot about the utility pricing model, they don't want to be regulated like utilities; and 3. real usage-based pricing would mean the vast majority of their users would pay $10-$20 a month (to offset support and other costs) -- instead of $40-$60 a month -- costing the sector billions. True "fairness" in pricing is the last thing driving this push. If I'm "an enemy" of anything, it's not usage-based pricing or even reasonable caps. I'm "an enemy" of already perfectly-profitable ISPs imposing unreasonable and confusing new pricing models on consumers for turf protection reasons, then dressing the move up as an inevitable tidal wave of generosity. Part of the problem is that every pricing proposal we've seen thus far has involved unreasonable high per gig pricing aimed squarely at uncompetitive markets, and ISPs insulting consumers' intelligence by pretending their current flat-rate pricing isn't profitable. They've also consistently involved the industry telling consumers what kind of pricing they should want, but never asking them. |
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Evidence of network upgrades being cost effectiveKarl, the evidence is simply that the current model has supported network upgrades for the entire history of the Internet. The very technology that makes new bandwidth consuming products possible is the same technology that makes cost effective network upgrades possible. The cost of bandwidth will continue to go down at the network level - period. | |
| moonpuppy (banned)
join:2000-08-21
Glen Burnie, MD |
moonpuppy (banned)
Member
2010-Dec-14 9:19 am
That was a nice piece of fluff from ToddLots of innuendo and little on facts.
What you (Karl) are proposing is a usage based model based on what utilities charge. Cold winter? You will use more gas/and or electricity. Same goes with a hot summer. You do pay a small fee (delivery charge around here) to be connected to the pole or pipe. Long story short, you pay for what you use.
What ISPs want is more of a high connection fee (like what they already charge) and a small cap. If someone goes over, they the real charges begin. In this model, the amount of revenue can't go down since they are still charging the same as before but overages now cost money. So if everyone stays under their usage caps, the ISPs lose no money except if people cancel. | |
|  |  Noah VailOh God please no.
Premium Member
join:2004-12-10
SouthAmerica |
Noah Vail
Premium Member
2010-Dec-14 12:09 pm
Re: That was a nice piece of fluff from Toddsaid by moonpuppy:What you (Karl) are proposing is a usage based model based on what utilities charge. Cold winter? You will use more gas/and or electricity. Same goes with a hot summer. You do pay a small fee (delivery charge around here) to be connected to the pole or pipe. Long story short, you pay for what you use. A mostly accurate metaphor. Taking electricity as an example: I know a number of people who hyper-conserve their power usage and pay about 15% of an average residential power bill ($45/mo vs. $300/mo). Who thinks ISP's are going to standardize the ability to buy low usage internet access at 15% of the average rate? The only rate that can accurately be classified as bill-per-byte, is one where zero usage results in zero cost. Regarding that highway metaphor:Everybody already pays higher usage fees for increased highway use. - It's called a Gas Tax. A road toll is a second charge on the same usage. Maybe that's why that particular metaphor works for Todd Spangler. And then there's Todd's unanswerable question. quote:
Where is the evidence that the costs to upgrade Internet networks to handle double-digit yearly increases in bandwidth utilization into the next decade can be covered without raising rates in some way?
He seems to have forgotten how that whole burden of proof thing works. The reasonable version of that question would be: quote:
Where is the evidence that the costs to upgrade Internet networks to handle actual yearly increases in bandwidth utilization into the next decade will require raising rates enough to justify a redundant bill-per-byte scheme, in addition to base access charges?
Reasonable that is, if accuracy is considered a critical component of the debate. NV | |
| | |  RARPSL
join:1999-12-08
Suffern, NY
1 recommendation |
RARPSL
Member
2010-Dec-14 12:37 pm
Re: That was a nice piece of fluff from Toddsaid by Noah Vail:The only rate that can accurately be classified as bill-per-byte, is one where zero usage results in zero cost.
Wrong. There has to be a fixed delivery fee that is paid independent of usage. A pure bill-per-byte system has zero additional charges for zero usage. Your system has no provision for recovering this fixed cost. This is a case of a Fixed and Variable cost system. There is a fixed cost for being able to do something and a variable cost (based on how much of it you do) for doing it. In this case the Fixed Cost is the cost of the connection and the billing process. The Variable cost is paying for your usage (ie: the per-byte fee). | |
| | | | Noah VailOh God please no.
Premium Member
join:2004-12-10
SouthAmerica |
Re: That was a nice piece of fluff from Toddsaid by RARPSL:There has to be a fixed delivery fee that is paid independent of usage. I suspect both the universe and ISPs everywhere would continue their existence without that particular method of double billing. If we apply that 'has-to-be' business model to a gas station, you'd go and pay an additional 'fixed-delivery-fee' on top of your gas purchase. How do they stay in business without one? The include it in the cost of the product. A purchase of 0.00333 gal of gasoline can be had for .01. Consumers pay in exact proportion to their usage. A core issue of this debate is the honesty and accuracy of the information disseminated by the ISPs. The most honest information they could provide would be that segmenting their product in this manner isn't about profitability, but measurably larger profitability. NV | |
| | | | | TheWiseGuyDog And Butterfly
MVM
join:2002-07-04
East Stroudsburg, PA |
Re: That was a nice piece of fluff from Toddsaid by Noah Vail:said by RARPSL:There has to be a fixed delivery fee that is paid independent of usage. I suspect both the universe and ISPs everywhere would continue their existence without that particular method of double billing. It is not double billing it is a way to fairly allocate costs to providing service. said by Noah Vail:If we apply that 'has-to-be' business model to a gas station, you'd go and pay an additional 'fixed-delivery-fee' on top of your gas purchase.
How do they stay in business without one? The include it in the cost of the product. A purchase of 0.00333 gal of gasoline can be had for .01.
Consumers pay in exact proportion to their usage.
A core issue of this debate is the honesty and accuracy of the information disseminated by the ISPs.
The most honest information they could provide would be that segmenting their product in this manner isn't about profitability, but measurably larger profitability.
NV
There are a lot of Gas Stations, by far their largest cost is the gallon of gas put in the tank. There are not a lot of ISPs. One of the primary reasons is that there is a very high fixed cost of infrastructure building and equipment needed for cable/utilities. The cost of the bandwidth supplied is not that high of a percent of the cost of providing service. Also the costs of tech support and customer service, S&GA and other costs do not vary simply depending on your use. In fact their is a reasonable argument that high bandwidth users tend to be more technical and will not require as much support. I think the point is that there are costs for an ISP that tend to be there no matter how much bandwidth that user consumes and a base fee would be the best means of allocating the costs. | |
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to Noah Vail
said by Noah Vail:If we apply that 'has-to-be' business model to a gas station, you'd go and pay an additional 'fixed-delivery-fee' on top of your gas purchase.
If the fuel company ran a pipe to your home so you could consume fuel on demand, then yes there should be a monthly service/connection/account fee which covers the cost of maintaining that pipe, recording your usage and sending you a monthly bill. The fillun station analogy is flawed because the station only orders as much fuel as they'll sell. Everyone comes and picks up what they need, when they need it. The cost of the tanker transport, pumps, EPA compliance, etc. is baked into the price of a gallon of gas. When someone whose only use for gasoline is a gallon at a time (for his lawnmower) the costs of that delivery overhead isn't shifted to others like it would be if he maintained an account, received a monthly bill and had a fuel line run to his house just so he could open the spigot once a month. The one-gallon guy might shift costs to other customers by using a debit card to buy a gallon. The station may incur a transaction fee which is less costly (per gallon) when a customer buys 40 gallons in a single transaction. Some stations have begun offering discounts for paying in cash, or using the station's own pre-paid debit card. I think that's a valid allocation of costs to more costlier customers. In line with the monthly connection charge imposed by utilities. | |
| | | | | RARPSL
join:1999-12-08
Suffern, NY |
to Noah Vail
said by Noah Vail:said by RARPSL:There has to be a fixed delivery fee that is paid independent of usage. I suspect both the universe and ISPs everywhere would continue their existence without that particular method of double billing. You are responding to my statement out of context. I was responding to a claim that the cost of the internet usage should be pure pay-by-the-byte (no usage - no charge). My quote was responding to this to say that there must be a fixed fee for the ability to use the internet (ie: The physical connection). This fee needs to be paid even when you do not have any usage. This is not double billing but just paying for the cost of billing (and delivering the connection). This is the same thing as having the type of phone service with a dial-tone fee for the phone connection as well as a charge for ALL outgoing calls (the dial-tone fee covers billing and the cost/ability to receive calls). | |
| | | | | |  S_engineer
Premium Member
join:2007-05-16
Chicago, IL |
Re: That was a nice piece of fluff from ToddThis seems to be the approach that the ISP is trying to take. The problem with that is it becomes a clear admission of overbilling, and for a very long time. Low end users have been bilked out of an approximate average of $50 a month for years, and yet the ISP continues (with the investor weilding a knife to its back)to push for additional revenues with proportionately little upgrades over the same period of time. All of this being done with little or no regulatory oversight.That has to change.
First of all, services must be decoupled from the quarterly report, with standardization of tiered services. How the ISP chooses to meet that standard would be a point of debate, however with recent history as a veiwpoint (Verizon dumping a neglected network onto a bunch of idiots), ISPs should be held accountable for failing to meet those standards. Plus with the Fairpoint debacle in mind, engineers should make decisions in a regulatory body, not politicians.
You can then regulate the entire industry as a utility. Furthermore, define any cap as a price, that would have to be justified through a psuedo-PUC. The Puc could be local, or state in order for it to work. Have that PUC set up with engineers, and project managers, and other qualified individuals that would lend credibility to an oversight body. And if the ISP insist on being content providers, then all advertisements must cease to prevent the consumer from paying per-byte for dancing silhouettes and Volkswagon commercials! | |
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Re: That was a nice piece of fluff from Toddsaid by S_engineer:all advertisements must cease to prevent the consumer from paying per-byte for dancing silhouettes and Volkswagon commercials!
Metered billing would change the dynamics in an interesting way. For example, Google recently implemented an "instant preview" feature. If you don't click precisely a link in the search results, you get a preview which remains on when you hover over any search result. Suddenly a billion people are getting more content than they bargained for, just because Google thinks it's cool (and doesn't bear the full cost). I think that's why the "no caps" people oppose metered billing. They want everyone to acclimate to bloated content like the example above. If content providers can just consume increased bandwidth, leading to demand for more bandwidth, that's what the "no caps' people want. If they had to pay the freight (instead of average users just consuming more bloat as Google decides for them) they'd stand out as the outliers they are. In that sense I agree with Todd. DSLR editorial slant is toward that dynamic. | |
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Re: That was a nice piece of fluff from Todd1.Google pays for their infrastructure, all the way up to peering points where ISPs take traffic from them. The closest peering points to here between Comcast and Google are Chicago and Dallas, but dark fiber is cheap enough that Google could put a PoP in Denver if it made financial sense to do so. Yahoo actually does this... 2. If no-caps people really want bloated content, and DSLReports is a key player in this, then why is DSLReports more bandwidth-efficient than any other forum that I go to regularly? Why do its pages take less time/bandwidth to load than, say, the front page of Engadget? Yes, bloated websites work better when you aren't running on a 100MB cap, but just because your internet connection doesn't have a cap doesn't mean that you want a website that is slow to load and heavy on superfluous bandwidth usage. Heck, I'm redesigning » oredigger.net over my winter break to hopefully be 100% CSS-style based for its template, rather than using CSS to pull in images and the like to style the page. The result is that the page will load in a split-second (with article images being pulled down later) and will still look great, while taking only a few dozen kilobytes, if that, to transfer. | |
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to Noah Vail
said by Noah Vail:Taking electricity as an example:
I'd love to see internet treated like electricity, water, sewer, etc. $10 per month connection, billing, service, etc. fee. And, some rate for every kilomeg or (thousand gallons of bits used). But, I don't think that's going to happen because the internet isn't under public-utility oversight like those other things. Without competition, providers have little reason to maximize efficiency nor bill fairly (overcharging outliers at both ends). IMO, that lack of competition is a good reason to treat them like public utilities. Especially when they reached their monopolistic status through the use of public resources (airwaves and rights of way, each alleviating the business from "free market" requirements to negotiate property rights with each property owner along the way.). I think that's the root of the problem. Nothing's going to improve until the broadband provider's rates, profits, capital expenditures, billing methods, etc., are subject to local community approval. | |
| | | | Noah VailOh God please no.
Premium Member
join:2004-12-10
SouthAmerica |
Re: That was a nice piece of fluff from Toddsaid by amigo_boy:said by Noah Vail:Taking electricity as an example:
I'd love to see internet treated like electricity, water, sewer, etc. As above, I'd like to see internet sold like gasoline, proportionally paying for what we actually use. NV | |
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nukscull
Anon
2010-Dec-15 12:42 am
Re: That was a nice piece of fluff from Toddsaid by Noah Vail:As above, I'd like to see internet sold like gasoline, proportionally paying for what we actually use.
NV
Then you could also proportionally pay for the percentage of the 100gig/10gig/OC48 ports you use to get through to the Internet as well. And the percentage of the employees used to support this infrastructure. Bandwidth isn't the only thing that ISP's have to pay for. They need a fixed cost in there to cover their own fixed costs. They don't order bandwidth and equipment on-demand as a gas station would order gas on demand. And gas stations almost never have to upgrade their equipment, only maintain. Trying to compare it to buying gasoline is pretty flawed. Any big ISP would have to be adding several 10 gig ports across its footprint quarterly just to keep up with growth and bandwidth increases because of new services on the Internet. And regardless of what people think these big ISP's do or don't do, they definitely are adding ports because of increased bandwidth this quickly. Gas stations are not adding pumps to support more customers. A gas station can support a fixed number of customers for its entire existence and probably only needs to "modernize" pumps once. An ISP cannot operate on the same routers it started on day one. ISP's go through $1million per router upgrades every 5 years at a minimum. And at least every year, they are adding at least one $150k linecard to each router to add port capacity. And I'm being conservative. I've seen a network going from having a minimum of OC12 links and only as big as OC48 backbone over 16 DWDM channels 6 years ago, to having only 10gige backbone connections over 32 and 40 channel DWDM today, and seriously needing 100gige DWDM if it was cheap enough and available. Sure, the 10gig technology is cheaper today than it would have been 6 years ago, but that doesn't mean it is cheap. | |
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to Noah Vail
Good points. FWIW I split an electric bill three ways with roommates in a tiny-ish apartment. We used to get bills of (electric + gas) $75 (such a high bill!) and now we're closer to $50. Why? Because 350 kWh and 25 therms of gas aren't much. Maybe Xcel Energy is losing money on us, maybe they aren't. But we don't even have to hyper-conserve to get to bills like those.
Going back to the internet model, if we're talking about a $15 access fee plus 50 cents per GB, bring it on! It'd save me $7.50 per month, maybe more. Of course, realistically ISPs would rather do $40 for 40GB plus $1 per GB, which is not okay and doesn't even align with their costs.
Then again, charging $10/GB for LTE overages isn't exactly sane either. Even if you're feeding the tower with $300/Mbit T1s your marginal cost for bandwidth is one-tenth that. Which by the way is never the case because LTE on Verizon gets fed with fiber and/or microwave, not T1s. | |
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to Noah Vail
Toll roads are generally instated to pay for a road before they were able to afford it with gas taxes collected, so that they can have a new road for increased traffic sooner, than later. Especially when it won't matter later.
Also, toll roads are sometimes used to collect money on drivers that are not buying gas in the state, county, or city where they are driving. Toll roads usually hit commuters, since that is when roads are busiest and commuters are more likely to take them. With commuters coming from other areas, they are usually not paying the local gas tax.
And now, cars are getting more fuel efficient, yet there are not really less cars on the road. So gas tax collections will go down, except roads still need the same repairs, upgrades, and additions. And tolls will probably be a way to cover that as more hybrids and all electric cars are on the road that pay significantly less or no gas tax at all. | |
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| KearnstdSpace Elf
Premium Member
join:2002-01-22
Mullica Hill, NJ |
to moonpuppy
Actually his toll road analogy is also flawed, if I use the NJTP more than my neighbor I am paying more for my usage of that road as I get charged every time I go down said road. | |
| | | moonpuppy (banned)
join:2000-08-21
Glen Burnie, MD |
moonpuppy (banned)
Member
2010-Dec-14 12:46 pm
Re: That was a nice piece of fluff from Toddsaid by Kearnstd:Actually his toll road analogy is also flawed, if I use the NJTP more than my neighbor I am paying more for my usage of that road as I get charged every time I go down said road.
I left the toll road analogy alone for a reason. I used the utilities analogy for a reason. In fact, one year when a tropical storm came through my area, the power went out and our local electricity provider was taking calls on the local AM news station and they were getting hammered because it was taking a LONG time to get power restored and they were crying because they can't charge for electrical usage if the power was out. | |
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Re: That was a nice piece of fluff from ToddTo which the logical response is, "Turn the electricity on and people will start paying you for it!" | |
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 Matt3All noise, no signal.
Premium Member
join:2003-07-20
Jamestown, NC |
Matt3
Premium Member
2010-Dec-14 9:19 am
Think of GrandmaOh come on Karl, won't you think of Grandma? She's going to save boatloads of money when UBB is rolled out right?  | |
|  Koil
Premium Member
join:2002-09-10
Irmo, SC |
Koil
Premium Member
2010-Dec-14 9:23 am
Oh Snap!!Oh hell no he di'unt! | |
| |  ExodusYour Daddy
Premium Member
join:2001-11-26
Earth |
Exodus
Premium Member
2010-Dec-15 7:55 am
Re: Oh Snap!!Kick his ass, Karl! | |
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tjhenn
join:2005-07-09
Osseo, MN
1 edit |
tjhenn
Member
2010-Dec-14 9:26 am
Usage based model?Don't know if this makes sense since the the cost to create bytes is virtually zero, however the infrastructure to deliver those bytes to your device does cost money to build/maintain/upgrade.
So would this work and be acceptable?
Charge a flat connection fee ($15-20/mo) and charge per GB consumed ($0.20 for example). So if a consumer used 100GB one month their bill would be $40. If they used 200GB another month, the bill is $60.
A problem would be how ISPs would come up reasonable per GB prices, especially with limited or no competition in most markets. Would there need to be a broadband utility board? And consumers may balk at the month-to-month variability in their bill. I also don't think the ISPs would go for this because most uses are using less than 20GB/mo right now so their revenue would go down on a per user basis from the flat-fee with caps they now use. | |
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Re: Usage based model?I understand exactly what Karl is asking for and believe it would be acceptable. The problem is the ISP's will never do it.
Comcast won't charge the $10 connection fee and $.20 per gig. They want to charge $50 for connection and $5 per gig. They will NEVER adopt a model where they have any chance of people getting away cheaper than their current bill. | |
| | criggs
join:2000-07-14
New York, NY |
to tjhenn
said by tjhenn:Charge a flat connection fee ($15-20/mo) and charge per GB consumed ($0.20 for example)...I also don't think the ISPs would go for this because most uses are using less than 20GB/mo right now so their revenue would go down on a per user basis That could probably be easily massaged. I have no idea how much WISPs are making on average per month from the average consumer. But let's assume there IS such an average figure. As you quite accurately and very importantly point out, the average customer uses less than 20 gigs a month (the Cisco study concluded that figure was 14.9 gigs). So, let's assume that the average customer is paying an average of $50 a month to WISPs. How would one massage per GB usage to equal that? One way of going would be to charge a higher connection fee than you propose. Let's assume a flat connection fee of $40. At that point, assuming the .20 per GB rate and assuming the Cisco study's 14.9 downloaded gigs a month, the average monthly consumer payment would be $42.98, a clear loss for the ISP. So how about a higher connection fee of $50? At that point the ISP would have recouped COMPLETELY its loss from the low per GB rate. Of course, an American public used to flat rate plans would probably balk at such a high connection fee, so now let's look at a lower connection fee but a higher per GB rate. Let's go back to your proposed $20 connection fee. We now need to massage the per GB rate so that 14.9 gigs will equal $30. That translates to $2.01 per gig. Let's round that off to $2 per gig. Now we can start getting rough ballpark figures based on this model. Joe Blow downloads 10 gigs a month. So he would pay $40 a month. Jane Blaine downloads 20 gigs a month, so she would pay $60 a month. Steve Reeve downloads 35 gigs a month so he would pay $90 a month. Vera Vere downloads 50 gigs a month so she would pay $120 a month. Bart Hart downloads 100 gigs a month and would therefore pay $220 a month. And, finally, Nancy Dancy downloads 200 gigs a month and would therefore pay $420 a month. What do we think of the above model? Personally I think it climbs into the stratosphere a bit too quickly after the 35 gig point. So perhaps we need to tweak the connection fee back up a bit. So how about this? We start out with a $30 connection fee. To make it to the $50 mark with 14.9 gig usage, that works out to $1.34 per gig. Let's round that up to $1.35 per gig. So let's see where that takes us with Joe, Jane, Steve, Vera, Hart and Dancy. Joe would pay $43.50 a month for his 10 gigs, Jane would pay $57 for 20 gigs, Steve would pay $77.25 for 35 gigs, Vera would pay $97.50 for 50 gigs, Bart would pay $165 for 100 gigs and Nancy would pay $300 for 200 gigs. Personally I think the above structure is working its way toward consumer acceptability, though I still think it's a bit on the high side when you get past 50 gigs. So perhaps we need to do another tweak on the connection fee side. How about a $40 connection fee? If we go with that, then how much per gig do you need to charge so that 14.9 gigs gets you the $50 figure? Well, literally that would be .67 a gig, so let's round that up to .70 a gig. So now Joe would pay $47 for 10 gigs, Jane $54 for 20 gigs, Steve $64.50 for 35 gigs, Vera $75 for 50 gigs, Bart $110 for 100 gigs and Nancy $165 for 200 gigs. Now personally, I think we're really getting somewhere here. The above structure strikes me as relatively reasonable for most consumers and offers the provider an extra bang for his buck from the heavier users. What do we think? | |
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Re: Usage based model?said by criggs: So perhaps we need to do another tweak on the connection fee side. How about a $40 connection fee? If we go with that, then how much per gig do you need to charge so that 14.9 gigs gets you the $50 figure? Well, literally that would be .67 a gig, so let's round that up to .70 a gig.
So now Joe would pay $47 for 10 gigs, Jane $54 for 20 gigs, Steve $64.50 for 35 gigs, Vera $75 for 50 gigs, Bart $110 for 100 gigs and Nancy $165 for 200 gigs.
Now personally, I think we're really getting somewhere here. The above structure strikes me as relatively reasonable for most consumers and offers the provider an extra bang for his buck from the heavier users.
What do we think?
I think you have the solution perfectly figured out. The only adjustment will be the fact that both the connection fee and usage fee will vary depending on geographic location. Some areas have very easy terrain and high population density to support a lower connection fee, while some terrains and densities will require a higher connection fee. In the same sense, it costs much less to transport bandwidth across said connections in a metro area, so the usage fees will be lower, while in a rural area, the usage fees will be higher. This analogy/comparison works perfectly in line with many electric utilities where the cost to deliver service and the cost of the service itself varies depending on a variety of factors. | |
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TheWiseGuyDog And Butterfly
MVM
join:2002-07-04
East Stroudsburg, PA |
The costs on the low endsaid by Karl Bode :2. real usage-based pricing would mean the vast majority of their users would pay virtually nothing -- costing the sector billions. True "fairness" is the last thing driving this push. Well here is the only real flaw I have seen in your argument. While it is true that the marginal cost of a bit is very low, there are many other costs which tend to be per user or fixed that would need to be allocated to the low end user. You tend to ignore these and exaggerate what the actual cost would/should be to the low end user. I do agree that a fair plan would lower the cost for many users, likely lower overall revenue for the ISPs since the profit margin is fairly high on the low end users at this point. I tend to agree that the motivations for most usage based pricing at this time to simply add revenue. I do believe that given the competitive landscape usage based pricing would likely be a negative for all users, but at least IMO you lose credibility when you exaggerate the effects of a usage based plan on the low end just as the ISPs lose credibility when they claim the sky is falling and they need low caps and high fees. | |
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Re: The costs on the low endI agree and I've reworded that sentence somewhat.
Yes, clearly they wouldn't just pay $2 if they used $2 worth of bandwidth, and you'd need a base levy to counter support costs.
But you'd still be talking a $15-$20 bill for people who are currently paying $40-$60 for service they use infrequently. ISPs don't want people really paying for what they use.
What I think you'd find given the lack of competition is that base flat-rate price would never actually fall very far -- so the only point is that it's disingenuous to frame this as a "only pay for what you use." | |
| | | TheWiseGuyDog And Butterfly
MVM
join:2002-07-04
East Stroudsburg, PA |
Re: The costs on the low endsaid by Karl Bode:But you'd still be talking a $15-$20 bill for people who are currently paying $40-$60 for service they use infrequently. ISPs don't want people really paying for what they use.
A much more realistic approach. As I said my main problem was my impression that you tend to say low end users would pay next to nothing, instead of significantly lower prices, otherwise I tend to agree with your take on motivation and your analysis that usage based pricing as conceived is not intended to be fairer and that the competitive environment is not conducive to a fairly based system. | |
| | |  FFH5
Premium Member
join:2002-03-03
Tavistock NJ |
to Karl Bode
said by Karl Bode:But you'd still be talking a $15-$20 bill for people who are currently paying $40-$60 for service they use infrequently. ISPs don't want people really paying for what they use.
And I think they will, when they project out the bandwidth consumption coming soon from users switching from broadcast video channels to on demand video over the Internet connection. For every granny paying $20/mo whose internet fee drops from $50/mo, they will get 2 family households whose Internet fee goes from $50 to $100/mo due to greatly increased usage. And I suspect most of those users won 't be dropping their TV packages either. Some will, but most won't. And if I can see that happening, I am sure they have marketing analysts that can see this as well. | |
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Re: The costs on the low endWell one, there's no competition in many markets so the "granny tier" is never going to be particularly affordable. In a fantasy land where there is competition they could make up for these "granny subscribers" downgrading on the high end through whole-home per byte video income. But again...no competition means absurdly high base tiers and costly overages. And logically, investor pressure to jack them up ever higher will be constant.
This is a door once opened has the potential to get ugly very quickly. I'd be less concerned about the end result if we had real competition. | |
| | | | | 56403739 (banned)Less than 5 months left
join:2006-03-08
Naples, FL |
56403739 (banned)
Member
2010-Dec-14 4:45 pm
Re: The costs on the low endActually, you don't have to go back far to see where this is coming from. What ISPs really want is a pricing regime reminiscent of the old long distance machinery of the 1950's-1980's where a one or two minute LD call several times a month nets you a $20 bill, while your teenage daughter yapping at her vacationing friend without watching the clock gets you hit with a $200 bill. You won't let the latter happen very often but it will happen, and doesn't cost the company much more than those 2 minute calls do.
Ironically, this will also result in people looking at those $200 bills and re-evaluating their need for the service at all. ISPs should have learned a thing or two about their markets by now (we had usage-based Internet delivery when this all started, remember?) and this will blow up in their faces just as the old AT&T LD model did. If you are older than about 40 years you won't remember being severely scolded for that phone bill and banned from using the phone, but I predict that we'll see the same parental lecture about running "Internet TV" 12 hours a day if this ever comes about. | |
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| | | kaila
join:2000-10-11
Lincolnshire, IL |
to FFH5
So if you let them turn bandwidth into a profit center, where's your line (how much are you willing to pay)? Considering it will replace CATV services and expenses, and like every other household, your usage will be trending up. | |
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to TheWiseGuy
TWG, those fixed costs are currently covered by the user. And you're right, if true usage based billing were implemented the vast majority of subscribers would see their bill drop. "UBB" in the home broadband market means adding a cap to your existing subscription and adding overage charges, not the electric company model.
I don't buy the argument that the cost to produce and store content bits is so low that network technology can't keep up. It's not as low as you imply. Take the online streaming video industry. 10 years ago the cost to process movies into 1080p, store them with sufficient retrieval performance and have the infrastructure to stream them to a wide audience would have been unimaginable. The content industry and the network providers are backed by the same technology base which is why they have been scaling together for years now. Nothing has happened that fundamentally changes this. However, the home broadband providers want to do two things: 1) increase their revenue 2) build once and stop investing in infrastructure.
Unfortunately for them, they chose a business where maintaining their infrastructure is what they've been hired to do by the consumer...
[edits: too many sorry!] | |
| | | TheWiseGuyDog And Butterfly
MVM
join:2002-07-04
East Stroudsburg, PA |
Re: The costs on the low endsaid by nothing00:TWG, those fixed costs are currently covered by the user. And you're right, if true usage based billing were implemented the vast majority of subscribers would see their bill drop. "UBB" in the home broadband market makes adding a cap to your existing subscription, not reducing the price and adding overage charges. Agreed said by nothing00:I don't buy the argument that the cost to produce and store content bits is so low that network technology can't keep up. It's not as low as you imply. I guess you misunderstood me, I was not talking about the cost to content providers/bit I was talking about the cost to ISPs/bit being low. I agree technology can easily keep up. One thing not discussed though is that there are fixed cost and per user costs now allocated to Video customers and as the number of Video customers decline that fixed and per user cost will need to be shifted to the broadband customer, this could be done in 2 ways, usage based, charging those who are using the Internet for Video the additional costs or allocating them to all users including the low end user. In theory it probably is fairer to shift them via a usage based plan, but I don't believe the competitive environment would result in a fair plan to the consumer. | |
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| KearnstdSpace Elf
Premium Member
join:2002-01-22
Mullica Hill, NJ |
to TheWiseGuy
the real problem will be the move to make ads more media rich and aggressive. right now they are just a pain and power users get Adblock. but with usage billing more people will seek to block ads as they are told those video ads are stealing their money.
the flaw is the net has lots of unwanted usage. when I turn on my stove the gas lights and I cook and then I am done and I turn it off and at the end of the month I get billed for what ive used. but on the Net its like to turn on the front burner you have to run the oven for a minute first unless you alter the device yourself(ie installing adblock) causing undesired usage. | |
| | RARPSL
join:1999-12-08
Suffern, NY |
to TheWiseGuy
said by TheWiseGuy:Well here is the only real flaw I have seen in your argument. While it is true that the marginal cost of a bit is very low, there are many other costs which tend to be per user or fixed that would need to be allocated to the low end user.
As I have suggested in the past, that fixed cost can be computed using the ISP's own figures based on bundling discounts. IOW: If I get both Cable and Internet, I am giving a $5-10 discount from the sum of the single service fees (since these fixed costs are paid for by the first service's fee). Thus with a pay-for-what-you-use Utility method the cost to get Internet connectivity would be $5-10 and you would then pay $0.20/GB for what you use. Note: I am NOT saying that the actual cost per user for the connection and delivery infrastructure is this $5-10 fee but only that this is what the ISPs are using as the cost when they offer bundle discounts. The $0.20 fee is similarly an approximation since I have not seen how it is computed (is it an actual cost, the average based on a total cost, or the cost of an additional GB?). In any case, that figure needs to either be a fixed fee or based on some tiering structure that is based on the actual impact the user has on the network. | |
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 pnh102Reptiles Are Cuddly And Pretty
Premium Member
join:2002-05-02
Mount Airy, MD |
pnh102
Premium Member
2010-Dec-14 9:35 am
Huh?Why is it wrong to be considered an enemy of something? Did it all of a sudden become vogue to abandon one's principles? | |
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Does Todd have rocks in his head!  How uninformed Todd is about the evolution of the Dial-Up Internet. All Todd has to do is review the history of Dial-Up Internet Service. I will do it for him. First there was AOL which was developed before the generic internet, where customers paid a subscription fee and an additional fee for connect time after their allotment was used up. Second many Dial-Up ISP's began competing both on price and speed. ISP's had to upgrade the speed capability of their modem pools at no charge to their customers or loose their customer base. Third most Dial-Up ISP's were not able to develop the technology to accurately charge customers for usage or found the backroom operation for usage sensitive pricing was to costly to implement. Rather than raising prices, they were forced to lower prices in order to remain competitive. Fourth those ISP's that were charging for usage went to flat rate pricing because of competition. AOL was the last hold out to change to flat rate pricing as many customers bailed out in favor of generic flat rate Dial-Up. Unfortunately Todd Spangler wants to go back to the good old days when Dial-Up ISP's charged a monthly fee plus an additional fee for usage over the monthly allotment. If it were not for the monopolistic nature of Broadband Service Todd would be speaking out of the other side of his mouth, complaining of to much competition and discussing how to attract customers through novel features or services. Todd wants to go full speed in reverse. | |
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Well said Karl...a very nice retort to both an uninformed writer and what is probably a mouthpiece for the ISPs. | |
| |  PhoenixDownFIOS is Awesome
Premium Member
join:2003-06-08
Fresh Meadows, NY |
Re: Well said Karl...Go Karl Go!!!!! | |
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to AlfredNewman6
said by AlfredNewman6:a very nice retort to both an uninformed writer and what is probably a mouthpiece for the ISPs.
At the same time, unless Karl decides to take a few years and run his own ISP, he is also uninformed to some extent. I strongly disagree with both extreme sides of this argument. SOME of the ISP's are going way overboard with their caps or usage base prices. But Karl is also (or at least has been) way overboard on the criticism of usage based pricing. I'm glad to hear Karl come a bit more to the middle and admit that usage based pricing isn't the problem, and that it is more the extremes that certain ISP's have put out there. Yes, with the exponential growth of the internet, the current "unlimited" model WILL BE OUTGROWN... It's hard to say exactly when, but it will be sooner than later. I expect this to really be taking off in the next 12 to 24 months, but there's really no hard data to say when it WILL happen vs when it HAS to happen. | |
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amungus
Premium Member
join:2004-11-26
America |
amungus
Premium Member
2010-Dec-14 9:45 am
bring itGood. Somebody has to show these chumps the truth.
It's plainly obvious that the current model works fine. How have ISPs been upgrading speeds all this time?
Either way, there is another option that rarely gets discussed - they could leave their speed upgrades right where they are. Most cable internet doesn't NEED to be 'faster' to be worthwhile; it's already faster than DSL in most cases, for one. Two, capping is unnecessary, especially if they leave the speed increases alone for a little longer.
Most people barely use the 'speed' (or know what a megabit is) and would rather not worry about hitting some arbitrary cap on usage.
Third - there are already cheap plans! Both cable and DSL have plans that are far cheaper than the "standard" ones. Given inflation, it's also a miracle that some are as expensive or CHEAPER than DIALUP was a few years back.
If all that isn't proof enough that they're making BANK off of selling internet service, I don't know what is.
There are probably more enemies of this "UBB" than friends unless they start talking some 1) very cheap numbers, and 2) realistic and fair numbers that won't equal a bill ending up being twice the regular price just for watching a few Netflix movies per day...
If they really cared about making "friends" they'd be talking bills that are cheaper, for usage in the 400GB/mo range, otherwise this is posturing and deceit, and is pretty easy to smell a mile away. | |
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•••••• | Grafton
join:2006-08-26
Morgantown, WV |
I'm not looking forward to usage baised billingI'm willing to bet my bill would jump, according to Comcasts' usage meter I use well over 100gb a month, and I don't consider myself a heavy user... | |
| | criggs
join:2000-07-14
New York, NY |
criggs
Member
2010-Dec-14 1:11 pm
Re: I'm not looking forward to usage baised billingsaid by Grafton:I use well over 100gb a month, and I don't consider myself a heavy user... If you see this message twice my regrets. The first time I posted this message it never showed up, for some reason. Anyway, here goes. I'm honestly not trying to start a flame war but the recent Cisco study at » www.cisco.com/en/US/solu ··· _WP.html established that the average user downloads 14.9 gigs a month. Now I realize that there may be perfectly legitimate subdivisions of Internet users within one of which your use could fairly be termed average. But, in general, at 100 gigs a month, you would be considered a heavy user. | |
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 n2jtx
join:2001-01-13
Glen Head, NY |
n2jtx
Member
2010-Dec-14 9:49 am
Canada ModelMy biggest fear of the future internet model is the U.S. adopting the Canadian ISP model of low caps and high overages along with an ever dropping high end tier. Rogers has done a wonderful job of reducing the cap on their high-end service in the name of "value". Luckily I am in Optimum Online territory and so far Cablevision has been pushing the all you can eat model wanting customer to use the product. | |
| |  MM
@shawcable.net |
MM
Anon
2010-Dec-14 4:02 pm
Re: Canada ModelYep Canada is going to hell and shaw is now taking west canada in the same direction. Unless teksavvy can grow bigger then bell/rogers or any of the 4 then we will not have progressive internet in canada. Saddly the whole UBB came from bhell's puppet the crtc to cripple teksavvy's unlimited services and charge them dollars on the penny just like us. » www.crtc.gc.ca/eng/archi ··· -802.htmCRTC: Continually reducing telecom competition | |
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Mr Anon
Anon
2010-Dec-14 9:54 am
Why should I pay two ways?Why should I pay for a certain speed connection and how much I use? Usually the connections that work that way come with an SLA, 99% update, local call centers when I need help and they should call me when there is an issue. Also give me a fair price!
I think what is being debated by Karl Bode and I fully agree, is that ISPs are raking in the money hand over fist and not putting it away for upgrades. I think they all have the 56k mentality where it was enough and there were possibly no upgrades without multiple lines anywhere on the horizon, Much akin to putting away money into savings when paid not many people do. It seems ISP as a business are more focused on the costs of today and how to lower them to make more profit and the costs of tomorrow will be handled another day and by then we will have raised the subscriber base and the rates they pay.
On a more personal rant I am very upset and tired of providers complaining anytime someone wants to use the service they pay for. Yes, have this speed use as you like! Oh you'd like to use Netflix... sure, hey Netflix pay us, Youtube YouToo while we are at it. Also lets completely destroy the notion of online backup | |
| kaila
join:2000-10-11
Lincolnshire, IL |
kaila
Member
2010-Dec-14 10:16 am
Spot on Karl.....There is absolutely no evidence that the usage-based models that have been tested are anything more than money grabs that conveniently provide a hard disincentive to use high bandwidth services (video), with no guarantee it will result in more spent on upgrades or provide any benefit to the consumer at all.
And just how much are providers bungling their businesses if they can't make a go of it with the profits they're getting now. Comcast alone is getting 60% gross profit margins. They'd be getting their lunch eaten if they ever had to compete with Europe's terrestrial providers. | |
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Re: Spot on Karl.....said by kaila:There is absolutely no evidence that the usage-based models that have been tested are anything more than money grabs that conveniently provide a hard disincentive to use high bandwidth services (video), with no guarantee it will result in more spent on upgrades or provide any benefit to the consumer at all. I virtually guarantee you that if you maxed out your connection 24x7 it would cost the ISP more than you pay, especially if you and a dozen of your neighbors do it at the same time. | |
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jus10
join:2009-08-04
Gainesville, VA |
jus10
Member
2010-Dec-14 10:18 am
Well if we go down this roadI expect it to be regulated like any other public utility. Metered professionally and charged accorded to strictly limited rates which have an actual basis in reality; not the overpriced garbage rates thrown around today. Oh wait, Karl covered that in #2 above.
Beyond that, I'm not sure why you're giving this "journalist" the time of day. | |
| |  cdruGo Colts
MVM
join:2003-05-14
Fort Wayne, IN |
cdru
MVM
2010-Dec-14 12:26 pm
Re: Well if we go down this roadsaid by jus10:I expect it to be regulated like any other public utility. Metered professionally and charged accorded to strictly limited rates which have an actual basis in reality; Oh come on. You can TRUST the ISPs. I'm sure they will be honest with your usage billing. | |
| | | KearnstdSpace Elf
Premium Member
join:2002-01-22
Mullica Hill, NJ |
Kearnstd
Premium Member
2010-Dec-14 12:36 pm
Re: Well if we go down this roadsaid by cdru:said by jus10:I expect it to be regulated like any other public utility. Metered professionally and charged accorded to strictly limited rates which have an actual basis in reality; Oh come on. You can TRUST the ISPs. I'm sure they will be honest with your usage billing. yep those meters will be extremely accurate, they will even offer a realtime meter that accesses their server and lets you know. for an extra fee of course. | |
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Todd Spangler is an enemy of the people.How do you like that, Todd (what a name!). I've generalized about you, just like you did. Isn't that special! | |
| MM
@shawcable.net |
MM
Anon
2010-Dec-14 10:56 am
UBB is nothing more then anti cable cutter tacticsClearly UBB is being put into place to keep ISPs other business models safer. Why license content when you can just charge insane prices for delivering your rivals content.... | |
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Re: UBB is nothing more then anti cable cutter tacticsBingo! Therein lies the problem when those who run the pipes also just so happen to have an invested interested in what is traveling down the pipes. | |
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Megar3
Anon
2010-Dec-14 11:03 am
Why would anyone be for it?I mean really its not UBB if it only works one way. Look at the bhell/rogers mess in east Canada. Its nothing more then collusion by the duopoly's with the blessing of the regulatory commission that only work in their interests. Gotta love paying twice as much for 50% of what other countries get. | |
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Re: Why would anyone be for it?Keep in mind that the regulatory commission (CRTC) has been instructed by the sitting government to "let the free market ride", and keep intervention on the minimal side. The problem is that "Free Market" principles don't exactly apply when competition is strictly regulated, thus resulting in uncompetitive nightmare that is the internet in Canada.
The CRTC in itself does not have much power to change things, unless it is backed by the government. | |
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."Here’s a thought experiment: A two-lane toll highway suddenly becomes highly congested during peak times — because a growing number of people are now spending, say, 10 times as much time on the road."
Yeah, Todd, I'd take ANY OTHER ROAD OUT THERE. Just like many of us have already dumped our capped provider and found one that don't cap and charge overages or cut their clients off like Charter.
The thing is internet has been unlimited for years. These same providers have been building and expanding their networks just fine while still generating substantial profits. Just ask AT & T. Just ask Comcast who made enough money to consider buying NBC/Universal.
Trust me, when the providers profit enough to consider buying a multi billion dollar corporation they don't need to charge us even more for the same basic service. And yes, we pay some of the highest prices IN THE ENTIRE WORLD already because these providers damn well know this has nothing to do with network congestion - it has everything to do with fattening their wallet before wireless technology improves enough to make the wired lines of the cable and telco companies a moot point. | |
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One thing...There better be no ADs with my usage based billing...
having to pay to download ads I don't want... come on now... and with commercials in online video the amount of data they consume keeps creeping up. | |
| |  TechyDad
Premium Member
join:2001-07-13
USA |
TechyDad
Premium Member
2010-Dec-14 1:36 pm
Re: One thing...Not to mention spam when you check your e-mail. Suddenly that Nigerian prince is costing you money whether you reply to him or just delete his plea for assistance. | |
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How uninformed Todd is about the evolution of the Dial-Up Internet. All Todd has to do is review the history of Dial-Up Internet Service. I will do it for him.
