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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'm sure there are several alternate business models that ISps could employ that would result in fairer, more even-handed access and pricing.
However, this is not in the ISPs best interests. The ISPs interests are best served by the current business model...the promise-you-x-amount-of-bandwidth-but-give-you-only-0.4x business model.
Don't expect change anytime soon.
____
~ |rip/\/\aster /\/\onkey
I want to know where the April Fools articles are. So far, everything is boringly normal. Give me some funny shit! Microsoft debugs Vista, "Best Windows yet!" crows Richard Stallman. Bush finds exit strategy for Iraq. Catholic priest shoves fingers up own ass for a change.
Where's the A material? Even Poniez is looking good at this point.
Kwisatz Haderach
Sell the spice to CHOAM
This Mahdi took Shaddam's Throne
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.
in terms of $ per megabyte broadband is the best deal going. taking into account the throttling and limited upstream pipes...it's still a screaming deal. go price T1's, or try to live with satellite broadband, dialup, or 3G. all these alternatives have profound limitations.
honestly, internet access is very nearly a commodity, why not bill it as such?
Assuming all my ports are equal, and I can xfer upstream and down at whatever the physical rate of the device is:
bill me by the megabit-hour. Just like txu bills me by the kWatt-hour. I can use whatever I want, but pay accordingly.
Alternately, bill me at the end of the month for gigs xferred, which is already done for hosting in some cases.
In Soviet Russia jokes are formulaic and decidedly non-humorous.
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.
If you're getting charged because you're using more, you're exactly the kind of person that is overusing current resources. Switch ISPs, go to a hosting company, or find another way. You're making the experience less for the rest of us that only moderately use our connection and raising our rates. The low-use users are subsidizing you.
I know I'm risking what little karma I have as a new poster but this question seems bizarre. Throttled connection speed is primarily a US problem and has a lot to do with the telecoms not keeping their promise to Congress to create a fiber optic network across the nation. Now they're reaping what they've sown and are trying to create an excuse to pass the buck to their customers rather than fulfilling their obligations.
I could see a tiered system for connection speed that billed based on KB transfered being reasonable if the telecoms were doing everything in their power to meet increasing capacity demands but they're not.
How about they give you what they promise, set their price against what they actually think it costs and let competition work its magic. Promising what they don't deliver fscks up Adam Smith's invisible hand.
Shh.
Well I think ISPs should use the "Turn them upside down, shake them, and keep whatever falls out of their pockets" business model. Because I don't wear pants.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
No, the low-use users are simply not using all that they paid for, and Comcast takes advantage of that fact.
There's your business model.
I'm dead serious. Telecoms is a "natural monopoly". (http://en.wikipedia.org/wiki/Natural_monopoly) A monopoly is not something you build a business around, it's something you regulate. Thus, it is best funded by a regulatory regime AKA, a government.
And, for the practical example. I'm in Taiwan where the telecom is state owned. I am using the state owned telecom DSL service at 8M/640K for about thirty bucks a month although we just got a slight reduction in fees this month. Yeah, imagine that, a reduction. We have no throttling and the service, which I've had for about five years at that level is excellent.
Sure, there's a monthly fee for use, but the service is provided by a government monopoly which is obviously derivative of taxes.
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?
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.
'And that, of course, is why most Slashdotters don't want pay-as-you go pricing: They'd be at the top of the usage list and so would pay accordingly.'
You make it sound as if it is some sort of crime to actually use the connection we pay for. We already pay a fair rate for the bandwidth we use. If you don't want to pay the price of your connection because you fail to fully utilize it you should downgrade.
I am myself in favor of a "you only get charged for what you actually get".
High-end commercial bandwidth is sold on a 95th percentile basis. The way it works is this: every 5 minutes they measure how many bits you sent and received in the preceeding 5 minutes. At the end of the month they throw the top 5% of the samples away. The next highest sample is your 95th percentile usage.
Are you still in favor of that payment model if I tell you that commercial bandwidth today costs between $20/megabit and $300/megabit with the average price around $100/megabit? In other words, you can have your 15-meg FiOS line, but if you nail it at 15 megs for more than 36 hours in a month, you'd pay $1500.
Still sound like such a good deal?
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
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.........
"No, the low-use users are simply not permitted to use all that they paid for, and Comcast takes advantage of that fact."
Fixed that for you.
It's exactly this kind of thinking that the ISPs use to justify filtering p2p and whatnot, and it's completely wrong. You pay for a speed of X, then X is the amount of bandwidth you should be allowed to use. If you're not, that's fine, but doesn't change the fact that those that do are perfectly within their rights to do so. If your ISP doesn't want you to use the bandwidth, they shouldn't be selling it to you. What you use it *for* is irrelevant, they shouldn't even *know* what you do on the interwebs, that's your problem, the RI/MPAA's, and the law enforcement's if it comes to that. Not theirs.
Nobody expects the British Columbia Human Rights Tribunal.
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.
Unfortunately, I can't seem to come up with a good car analogy for this.. Hrm..
At any rate, my point is this. If you're going to advertise the connection as 3 Mbps, or 10 Mbps, or even "Up to" XX Mbps, then I should be allowed to use it. I am, after all, paying for it.
That said, let's look at the pay for play model. Once upon a time, the industry decides to move to a pay for play model. So, the masses move to this new model and continue using the Internet as they always have. The "normal" users are happy to see their $60-70 per month bill drop to $45-50. The "barely use it" crew drops down to $20 per month, the base fee that covers the first few gigs of transfer per month. And then there's the hard-core crowd. The jump from $60-70 per month to well over $100 a month. And, after realizing it's costing them an arm and a leg, they either find a new provider, or curb their habits.
The problem is, the ISP suddenly realizes, to their horror, that profits have gone down! Well then, time to increase the rates we charge customers. And over the course of the next few months, or even the next year or two, the normal crowd returns to $60-70 per month and the hardcore crowd gets totally screwed and starts to diminish. The only ones really saving here are the "barely use it" crowd that really doesn't need the connection in the first place. And, the normal users end up getting royally shafted when they suddenly get infected, or have to download SP12 for Vista..
So be careful what you ask for. Per-bps payments are great... For the ISP.
XenoPhage
Technological Musings
If they throttle you, and CLEARLY tell you so before you buy, then that's fine. I wouldn't buy a service from them if I had a choice, but it's fine. What I have a problem with is selling you bandwidth and not delivering. And resorting to the "you're degrading other people's service" bullshit. You use what you pay for, it's that simple, and if it hurts others then it's the bloody ISP's fault for making promises they can't keep. Not yours.
Nobody expects the British Columbia Human Rights Tribunal.
If you wanted a car analogy, I bet there's one in people complaining that their car doesn't complete trips in the least possible time given the distance (55mph should do 550 miles in ten hours exactly, never mind red lights, gas stops, bathroom breaks, etc.).
Stasis is death. Embrace change.
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.
Come on, what is wrong with a lot of you?!? Sure, at this point in time a minority of users might be using the majority of the pipes. "Tax the heavy downloaders!" you say. Have you forgotten that Microsoft (X-BOX Live and Marketplace), Sony, Apple (HD movies), Joost, Tivo, Netflix, Amazon, etc. etc., all want to push more and more bandwidth intensive apps and uses?? Sure, Joe average may only use 5GB now with occasional YouTube videos. Maybe $15/mo would be good for him. But if the big players have their way, and they will, Joe will be watching, buying, and streaming HD video and games in the near future. 5GB ain't gonna cut it. The ISP's would love to knock everyone up to a "high tier" service that's $100/mo, but that sucks if that's the entry point just because the ISPs have milked this cash cow as long as they could.
ISPs creating tiered service levels is only them trying to prevent the inevitable - that they are being pushed into only providing an on-ramp to the Internet, and that's all. We're in the middle of a revolution in how content will be delivered, this crazy notion of tiered service levels is only going to mess that up. Of course, it will be steamrolled by innovation in the field.
It's like a small town experiencing a population growth, and wanting to turn Main St. into a toll road to discourage new citizens. Tiered pricing isn't designed to make things more fair; it's designed to discourage those at the top end and make those at the bottom end feel like they're getting a good deal.
We're already seeing mobile phone service becoming a commodity, with carriers offering true unlimited service after years of nickel and diming you for each partial minute you use. Are the cell carriers going to start complaining that everyone is actually talking constantly 24/7 and using up their lines? No, they'll build out more infrastructure to meet the demand. Why would the ISPs go the opposite route??
It's not a problem of cables, it's all about pricing.
Go out and find out how much it costs to buy, say, 100 megabits of real, honest, unlimitted, *guaranteed* bandwidth. Divide that by 17, and look at just how much you would have to charge users taking up a full 6 megabits just to break even. Then factor in the cost of your network and maintaining it.
Whether their business practices are honest or not (often, they're not, as they don't tell you what they're going to do) is irrelevant. People who think that it's their right to max out a multi-megabit connection for the cost of a couple of lunches need to wake up and join reality.
If broadband companies don't limit user's use, then there are only three eventualities: Either service will suck for everyone, everyone's prices will rise greatly, or prices will rise for those who use the most. There's no other way for the company to stay in business without something subsidizing them. When you look at countries with ultra-cheap broadband prices, they're subsidized.
Oh, you're not stuck, you're just unable to let go of the onion rings.