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What Kind of Alternate Business Models Could ISPs Use?
esocid writes "After reading multiple stories over the past few months about the practices of ISPs within and outside of the US I have started to actually contemplate the benefits of the pay-per-use broadband service. Monopolistic practices have strangled broadband to the throttled money-draining cesspool that it is today. Would a pay-per-use option, or some other strategy, be better than the flat fee offered by companies today? When you think about it you are paying for an XMbps connection, when in actuality you get an 65-85%XMbps connection that you may or may not use all of the time. In addition to that, speaking as a Comcast customer, you get a throttled connection that limits your usage of certain protocols. Essentially you pay about $60-70 for a connection that you only squeeze maybe $35-45 worth of usage out of it. If a pay-per-usage option were implemented, how do you think the best way to charge for it would be? Is there some other scheme that would deliver customers the kind of QOS and value they seek?"
I think that even in a pay-as-you-go type solution, a certain base threshold of traffic would have to be free, and the customer would pay on top of that. Otherwise, the user is penalized for visiting a site that rams heavy multimedia ads down their throats or for downloading spam to be filtered.
Another idea may be a price ramp: if I usually only use 5% of my connection, the cost for a spike in my usage should be low. Similarly, if I'm a heavy user than my spikes (higher, more frequent) would carry a heftier price tag. In other words, occasional spikes should be discounted while habitually heavy users would have to pay more to accommodate their persistent digital lifestyles.
Finally, I would only consider such a scheme if my account were discounted for every second of downtime during each billing cycle, whether it affected me directly or not. If have to pay for what I use, they have to pay for what they don't deliver.
These stories are free but worth money.
Be careful what you wish for. What about people like me who run remote web servers? What makes you think the ISP's won't charge us an arm and a leg for the extra bandwidth that we use under this new pricing scheme?
A flat rate may be the more economic solution for some of us.
This question is not nearly as theoretical as the question suggests: there are many countries where various forms of metered or tiered access are the norm. You just have to look at what these countries offer (and how consumers react) to get an idea of what works and what doesn't.
Here's an example: Videotron cable internet (Montreal, Canada)*. They have packages that run from $30/month to $80/month, depending what you want. They all have usage limits (2 GB/month to 100 GB/month), and charge a fee per additional GB beyond this basic usage.**
Does it "work"? Of course. Customers buy the package they want. If they are routinely going over their monthly limit, they either cut back on usage or upgrade their package. Yes, it is slightly more complicated for the customer than just having a single "unlimited!" package, but then again it's also more honest. In fact the unlimited packages have hidden terms and limits, which makes them more complicated... or at least more annoying.
I'm a heavy internet user (as most Slashdotters probably are). I don't mind paying a premium to get the speeds and usage limits I need: as long as that service level is actually delivered! This isn't rocket science: just provide a variety of packages and let the customers pick. Importantly, price the packages so that you won't go out of business if a sizeable percent of your customers actually use the service you sold them.
[*] Note that I was a Videotron customer when I lived in Montreal. I'm not endorsing their service; merely using them as an example.
[**] Note also that if you really want unlimited usage, you can upgrade to business class service. Again, you pay a premium if you want that level of service, which is fine.
Have a two level plan. Users would pay for however many gigabytes of high speed service at the wanted, which would be ultra-fast, 10Mbit at least, preferably higher.
They'd also have access to a baseline service in unlimited amount, but highly throttled...512Kbit say. Plenty useable for basic stuff, even MMOs and the like, but not for mass pirating. The user could toggle between the modes so as not to waste high-speed bandwidth checking e-mail or whatever.
TODO: Something witty here...
I prefer flat rate. Considering that the cell phone companies are now offering flat rate pricing like the old wired telcos did, I think I'm in the majority here.
I want to know how much my bill is going to be, and I don't want to have to meter myself. I don't want to have to ask "can I afford to log into slashdot today? Can I afford to download that new distro today?"
And I don't see how "pay per view" is going to stop the ISPs from throttling; if their pipes get full they're going to turn your data flow down to keep someone else from getting completely locked out; perhaps someone else that's even more lucrative than you.
mcgrew's razor: Never attribute to stupidity that which can be explained by greedy self-interest
The issue is primarily one of convenience and plant cost. To get you 10Mb/s is mostly capital costs, so you pay a fixed rate. Overselling is done because average users don't saturate their channels. Businesses, otoh, do and they pay for the luxury. Pay per bit service would be difficult to structure without a fixed cost. Once you cover billing, tech support, and plant, you're up to nearly what everyone is already paying. Adding per-bit charges will only make it more expensive. Sure, you can pay more for a guarantee but the value of that guarantee is far less to the consumer than to the operator. And if you put your guaranteeds on the same line as your basic oversold, you're going to have to actively sort them out.
BTW - how much data does $35 buy you? Maybe you're getting $100 worth of data for the $70 you pay Comcast, and you just don't realize it. I would venture to guess that if you divided the entire data stream by the revenue, most slashdotters are getting more bits per dollar than the overall system average. Even if you just camp on the throttled ports, you may still be getting more bits than a dollar of Comcast plant depreciation.
Is it just my observation, or are there way too many stupid people in the world?
My ISP does partly that right now (I'm not in the US though). I pay something like 35$ a month, I get 20 gigs at 7mb, with an explicit warning that since its a shared cable, during peek hour I may go down. When it is not peek hour, I cap out my 7mb if the place I'm connected to can output it (which obviously makes sense), during peek hour the worse I've seen (from a reliable server... let say downloading something from java.sun.com) its like 350kbyte/s. If I go over my 20 gig, like 1 cents per megabyte.).
If thats not good enough, they have other plans that go as high as 100 gigs per month or more speed as high as 50 megabit/s (the upload speed is shit on that one though!).
If I think my current speed isn't fast enough, I can up my service to the next step up in speed for 48 hours for 3 to 5$, depending on the difference between the services (to up my 7mb to a 10mb its 3$ for 48 hours).
Its definately not perfect, and that ISP has its own problems with throttling and such, but its still a start in term of flexibility, and its much easier for the ISP to deliver this than something rediculous like "UNLIMITED DOWNLOAD AT 20MB speeds, all the time!". Its definately more honest, at least, and considering the reliability of my connection, they obviously CAN deliver.
Here's a truly alternate business model: screw the incumbent telecom carriers. Nationalize the grid that was built out with the help of public funds, and where the public has seen close to no returns. Turn everyone into a CLEC. Everyone plugs into an existing grid that is officially tax-payer funded with zero restrictions on what passes through. All the intelligence - traffic shaping, filtering, content - will be at the edges. Carriers compete based on service, what kind of pipe they can put into the home/condo/dorm and how much traffic they can exchange with the national grid.
Far-fetched? Not really. It's similar to what's going on with the electric grid already. Considering how much the economy is impacted if/when major trunks or local exchange points go down, the internet is also a similarly critical infrastructure. I don't see why lessons learned from the electric grid can't be applied to solving the mess that is the telecom industry.
Those who can, do. Those who can't, sue.
I was going to ask what the hell they were thinking to ask that question. Flat rate is the only way to make the Internet usable. If you go back to the $2/min charging scheme, the use of the Internet will drop to nothing again. The things that makes the Internet useful are:
1 - cheap pc hardware
2 - flat rate ISP charging
3 - net neutrality
If you change the balance of any of these, usage will drop followed shortly by usefulness of the Internet. If say you want to try tiered pricing, ok, take today's bandwidth usage for heavy users, call that standard rate. Add usage weighted tiers to that. Reasoning is this: ISPs are NOT going to downgrade or upgrade infrastructure just to add pricing games. The tier would have to be based on aggregate usage, so you pay current rates up to a standard max. throughput cap, after which you are charged a per/GByte tax. If the tier kicks in too quickly, people will stop using it. Metering must be verifiable, and in the end, no matter what you do it will turn out to be the same mess for billing and sales that wireless phones are now.
If you want to throttle people down on bandwidth and charge them less, go ahead. Some won't care, and will take it quickly. If you want to charge more for bandwidth that you have already sold at a given price... well, good luck with that.
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Why screw around with all the 'consumer' level stuff and the headaches that go with it?
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
All I want from any ISP is the honest truth of 1) what the maximum throughput from my house to the first hop is and 2) what the minimum guaranteed rate is when things get congested locally. In effect I want to know how shitty things will be when everyone in the neighborhood is on and how great they'll be when people aren't. Don't nickle and dime us because we're using more bandwidth, just make sure we know how much it'll be throttled when your pipes can't handle it.
Hey. What most private customers dont seem to realise is that bandwidth is very expensive. Some expects DEDICATED bandwidth from your ISP. That's entirely unrealistic. Maybe it's time to start charging private customers by the 95th percentile? if they want dedicated.. Private internet connection is not dedicated and will never be if customers expects prices to go down. It would increase tenfold if you were to pay the actual prices isp's pay for peering , transit et al.
In general, it seems like the point of "package deals" is to screw the customer. If I buy X amount of bandwidth or cell phone minutes per month and don't use them all, I wasted money. If I use any more than that, they charge me a hefty premium.
On the other hand, consumers should see "unlimited" as a good thing only if they expect to use more than the average person, whose usage the price reflects. If I think I will eat $15 worth of food and the buffet costs $10, it's a good deal for me.
In short: "pay for what you use" is obviously fair. Package deals are an attempt to screw the customer; "unlimited" deals are an attempt to screw the provider. (Who, of course, has already calculated the average use and determined that the house will win.)
Parent speaketh the truth here.
I pay Verizon $99/month for a 20/5 MBit FiOS business connection with essentially no limits. Sure it's about double what I might pay for a residential account with limits and dynamic addressing, but it's still an incredibly good deal compared to other business ISP services. I have a client with a T1 from AT&T; it costs about four times what Verizon's charging me and has about one-fourth the upstream bandwidth.
Here's one from a socialist: the cables in the ground are owned by the municipality. Any service provider can tunnel their service over those cables for a fee. They bill however they want. No monopolies. No barrier to entry. The pipes are neutral.
I like how ye use the term "only" when talking about over $1000 a year for a net connection.
Although I am well-paid I still prefer the $15 a month service.
Of course that service doesn't do much good if Comcast decides to block Bittorrent or Itunes.com, and therefore I think Comcast should be disallowed from doing that. If Comcast feels their pipes are full, let them add a higher tier, collect more money, and use that money to invest in more bandwidth. (That may mean every house has two cables running into it; oh well.)
The government is not your daddy. Its purpose is not to raid middle-class neighbors' wallets and give it to you.
The premise of the question is wrong. There doesn't HAVE to be a business model at all for ISP:s. Currently, no matter what connection you have, what you pay for is NOT for your big fat pipe, it is for the ISP to run the billing. It costs ISP:s a lot more to employ accountants, collect user data, keep customer databases, marketing and send bills than it costs them to deliver traffic. A tiered internet, or a pay-per-megabit system would just add to the overhead as ISP:s would need to employ more accountants and implement more monitoring systems to track exactly how many megabits their users transfer.
Kind of similar to how Nike shoes doesn't cost many Euros to produce using the Chinese child labour they employ, but are marked up hundredfold. But the case with ISP:s is even more egregious because they are all 100% government sponsored institutions. Governments either built all the infrastructure or heavily subsidized telecom companies to do it. The net is public property and companies really have no moral rights to charge money for it.
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Since Comcast is finding it necessary to throttle connections, that indicates they are running out of bandwidth. i.e. They need to lay more cables but lack the money to do so. Therefore:
Rather than throttle P2P, youtube.com, or itunes.com, Comcast should identify their customers who download tons of information, impose a limit on those people, and then tell them, "If you go over 100 gigabytes, you will need to pay $100 a month to gain unlimited downloads." i.e. a Tier system:
$15 == 20 gig
$30 == 50 gig
$45 == 100 gig
$100 == unlimted
The more you desire to download, the more you will have to pay. Vice-versa, the less you download (me), the less you have to pay. That is entirely fair to charge customers based upon actual usage.
The government is not your daddy. Its purpose is not to raid middle-class neighbors' wallets and give it to you.
It doesn't have to be that way. We don't need tiers with caps and overage fees. Drop all that and charge based on connection speed instead. But tie it to bandwidth used like this: every byte you transfer lowers your max speed a tiny amount. When your connection gets too slow, you have a button which you can press at any time (not necessarily monthly) to raise the speed and charge your account.
There are no explicit tiers; you choose exactly how fast you want your connection to be. There is *never* an overage charge; instead your connection will just become slow. There's not even an automatic monthly fee; you choose when to press the button and get charged. The speed drop is a visible indication of how much bandwidth you're using, which takes the mystery out of it; this could be further improved by a gauge on your modem or in your computer's system tray. People wouldn't be reluctant to use their connections, because they would be in full control. They would never be charged unless they pressed the button themselves, and they would never be abruptly cut off from the Internet either.
main(c,r){for(r=32;r;) printf(++c>31?c=!r--,"\n":c<r?" ":~c&r?" `":" #");}
What about a car that has a speedometer which goes up to 75 mph, but really alternates between 120 mph for 2 minutes and 30 mph for 8 minutes throughout your trip, so that the effective MAX speed is 48 mph?
Highway travel (analogous with video streaming/downloading) would be downright impossible because the minimum speed would be insufficient for that route.
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ISPs went long way from leasing lines from the "common carriers" and utilizing publicly available infrasturture in order to build the Internet to the point in time today, where they themselves are part of the public infrastructure, and they themselves are in many cases owners of the physical links that connect places. In the same time they went from lucrative business models to minimal margin (or even below margin in certain cases), while offering ever greater bandwith and for lower price. Now, that multitude of options, combind with the shere geograpy gives historically quite diverse ZOO of ISPs with different business models, different technologies, different business practices. But what's the result of all of it? Clearly, result is that only the strongest will survive. ALL business models have already been tried by at least some ISPs, and if the survived, the model survived. If they failed, model failed with the ISP. It's that simple. And today we can only see that only the biggest companies can offer a lot of bandwith, for acceptable price, with poor or bad customer service. But then again, the same can be said for almost any utility company. In essence, I just proved that "offering Internet" today has glamour of "offering Electricity" or "offering gas". And while we can understand "pay per use" with gas and electricity I would warn anyone against favoring "pay per use" in Internet. Internet became popular JUST BECAUSE it had different pricing model, where one could surf the content next door or accross the globe for the same price. Where one could just use it moderately, or heavily, and still pay the same (if it's the same speed). Internet is a reality. It can be crushed only if it's taken over by (geographic-wise) monopolies. Only then they could choose whatever business model, pump the price and get away with it. And we had that in times of old TELCO's. Never forget that TELCOs were the last to start their own IP routers.
"The more you desire to download, the more you will have to pay." That's fair so long as they advertise that fact. But no, they'll lose business when everyone else is offering "unlimited".
If ISPs started to meter total usage, then Ad-blockers, Flash-blockers, and anti-ad Host files would become standard installations in every user's browser.
-Users would think twice before clicking on those "marginally interesting news links".
-They would stop using YouTube to watch those bandwidth-hogging "cat on the ceiling fan" videos.
-They would stop editing files remotely on Google docs and start to edit files locally again (in word?).
-They would stop clicking on Google ads since it would be an unnecessary waste of costly bandwidth.
-Google, and all advertisers, would be "fenced off" from the "internet eyeballs" and would start to die off as ad revenues plummeted. (You can't click on an ad you don't see.)
-Millions of news & information websites (that depend on advertising) would also start to suffocate - the smaller ones closing shop first.
-Also, the quality of authored pages would take a severe hit as web site owners cut back on those 'costly' writers (similar to what's happening to newspapers now).
-The whole ecosystem would start to suffer greatly as people held back on internet usage in general (similar to the recession now as people hold back on spending, or driving less due to the high price of gas).
It would be a downward spiral that would be extremely hard to pull out of. Even if ISPs saw the error of their ways and restored flat-rate pricing, users by then would be so used to all their great ad/flash/host blockers that they would have no (individual) incentive to remove them from their browsers. Think about it, if you had the ability to remove commercials from tv, would you ever turn commercials back on again? The record industry has already crossed the line of pushing up p2p usage to the point where those users will never return as customers.
The whole net currently depends on people seeing ads. Most people today have no incentive to install ad blockers since their 'flat' internet-fee covers all the additional bandwidth. The free flow of information and the quality of the net we enjoy today is fueled by this advertising; which, in turn is fueled by users' ability to freely travel the net without an odometer counting each byte transferred.
Metered usage would be the end of the net as we know it today.