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Cogeco Drops Metered Billing On Users
Unveils caps ranging from 10GB to 100GB
by Karl Bode 10:02AM Thursday Apr 02 2009 Tipped by fatness See Profile
On the heels of Time Warner Cable's announcement yesterday that they'd be expanding metered billing trials in the States, Canadian cable ISP Cogego has dropped the news on customers in our forums that they'll be imposing metered billing on users. Bravely taking the brunt of the user complaints directly, Cogeco network engineer Krispy is fielding questions from users about the new shift. According to Cogeco, the new caps will be as follows:
quote:
Lite – 10GB/mo bitcap - $2.50 per GB over to a maximum of $30
Lite Plus – 20GB/mo bitcap - $2.00 per GB over to a maximum of $30
Standard – 60GB/mo bitcap - $1.50 per GB over to a maximum of $30
Pro – 100GB/mo bitcap - $1.00 per GB over to a maximum of $50
Users will start seeing usage charges on their bills in April and May but will not be charged officially until June -- as part of an apparent plan to get users used to the amount of bandwidth they use and the extra charges they'll incur. Everything counts toward your cap except Cogeco VoIP traffic, and users will be notified via e-mail when they get close to the cap. According to Cogeco, they'll be offering a new meter on their portal page.

The shift to metered billing started in Canada roughly a year ago, when Canadian carrier Rogers began imposing caps ranging from 2-95GB, with users on the lowest tier incurring overage charges of up to $5 per gigabyte.

For its part, Cogeco insists the shift to metered billing was necessary because the "reality is that 'bandwidth' is not free," according to Krispy. "While transit may appear cheap, the reality is a network like this takes continual maintenance and upgrades to get the transit to and from you," she says, adding that this is "just a natural evolution of the technology" and "not a money grab."

Charging per gigabyte is more forced migration than natural evolution -- the impetus originates with investors and executives who fear the impact Internet video will have on TV revenues. Imposing such low caps in the age of HD video -- and charging users $1-$5 per gigabyte for bandwidth that costs a carrier pennies -- is a money grab, and it's only made possible by a lack of sustained, viable competition and napping regulators.

While carriers correctly note there are obviously other costs beyond bandwidth that go into providing service -- those costs are more than covered by advertising, alternative revenue and the monthly charges customers are currently paying. Meanwhile, evidence suggests heavy users can be handled without resorting to metered billing by imposing a very high cap (like Comcast's 250GB cap in the States), and by nudging those users -- which carriers freely admit only make up a small fraction of their userbase -- onto a business-class of service.

As with Time Warner Cable yesterday, the argument that carriers don't make enough money under the existing flat-rate system to operate or support infrastructure upgrades is something simply not supported by the healthy profits clearly illustrated in earnings reports. Anybody bothered by the metered billing trend should be demanding hard numbers from any carrier boldly claiming that flat-rate pricing isn't a completely viable business model.


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espaeth
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reply to Karl Bode

Re: Cable TV subsidizes cable internet

said by Karl Bode:

Another distortion, given companies are perfectly profitable under flat rate pricing, and there are plenty of mechanisms (listed above) to help handle the most extreme users, which carriers admit comprise about 1% of their userbase. This move has nothing to do with handling a tiny portion of troublesome users, that's easily accomplished in other ways. It has nothing to do with fairness, or grandmothers and Luddites who use 70MB a month would be paying $2.00 a month for broadband under a truly metered billing model.
The low-use customers would be paying $2/mo for usage... on top of the access fees. There is a fixed component to the service that is required to just deliver the access before the first bit is ever clocked across the interface, and that cost is the overwhelming majority of your monthly broadband charge.

You like to constantly publish that carrier-level bandwidth is pennies per GB, even though that's not a realistic representation of cost. Yes, you can get to that price by saying 1mbps fully utilized over a 30 day month is 324GB, and at $10/mbps that means your cost per GB is $0.03.... While the math works out here, it's not an accurate model for the environment. The first problem is that bandwidth isn't used uniformly across the month, there is daily peak usage and then periods of low/idle time off hours. The net result is that you never ever see 324GB out of 1mbps of traffic because of the variation between peak/non-peak usage so your per-GB costs are actually higher. The other problem is that you fail to account for the fact that multiple megabit worth of bandwidth must be purchased to meet peak demand even for low usage.. basically high and low usage subscribers have overlapping requirements for demand in evening peak hours. So for a 250GB monthly cap you're not buying 768kbps of bandwidth, you need to have at least x mbps that lines up with the minimum tier of service you are offering, and you need to have sufficient excess capacity on top of that so you can deliver maximum rate during peak to a reasonable number of people.

The problem with flat rate pricing is that increasing utilization drives expansion, and the blocks of expansion are large and expensive. Say I need an Ethernet switch for home, so I go to Best Buy and purchase a $50 8-port switch. Even though that technically has a cost per-port of $6.25, when I need that 9th port I need to spend more than just another $6.25 to add it. It's a similar deal in the DOCSIS world .. to gain capacity you can only add it in 38mbps blocks, either through DOCSIS 3.0 to add multiple downstream channels or through node splits. Node splits require additional fiber ports on the CMTS, which drives the addition of new cards (one-time capital expense), but those cards also require maintenance contracts (recurring expense), plus the cost of trenching the fiber, re-engineering the node / amplifier design, etc. It's not quite like it is on the head-end where you can just work with your carrier to bump your commit up from 500 to 600mbps on a gige link and change no physical infrastructure in the process.

The other assertion you make is that 40GB or 100GB is a number that screws the average consumer. You love to publish articles about how countries like Japan are kicking USA's ass in providing high speed broadband access. So let's take the numbers from Japan:

»www.caida.org/workshops/wide/080···ffic.pdf

In a study conducted of all of the major ISPs in Japan the average traffic utilization was only about 26GB/mo.

So now you're saying that here in the US, where we supposedly have crap broadband compared to Japan, our average utilization numbers are higher?


Karl Bode
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reply to FFH

But that doesn't change the fact that if more and more people drop the Cable TV portion to go internet only that the costs to provide internet access will have to rise.
So raise prices when that happens (which won't be for many years yet), assuming VoIP, behavioral ad and other creative revenue builders don't help offset those losses. You don't really make much sense.
The only thing open to discussion is how to do that fairly. I propose that billing by bandwidth used is the fairest way.
Says you, somebody solely interested in fattening your investment portfolio and who, though you'll protest with the utmost fervor (and several hey mods about how your honor is insulted), absolutely couldn't care less about the fate of consumers.
Flat rate unlimited byte plans only benefit the bandwidth hogs
Another distortion, given companies are perfectly profitable under flat rate pricing, and there are plenty of mechanisms (listed above) to help handle the most extreme users, which carriers admit comprise about 1% of their userbase. This move has nothing to do with handling a tiny portion of troublesome users, that's easily accomplished in other ways. It has nothing to do with fairness, or grandmothers and Luddites who use 70MB a month would be paying $2.00 a month for broadband under a truly metered billing model.

The new low cap and overage model is simply more profitable than the flat rate model. It's simple.

If people who are greedy simply stepped up to the plate and admitted they were being greedy, I'd probably have an easier time of it. But when these efforts always have to be dressed up as philanthropic in nature by people who couldn't care less about anything other than money -- I tend to get annoyed.