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A Layman's Guide To Bandwidth Pricing

Posted by timothy on from the don't-grant-local-monopolies dept.

narramissic links to IT World's A Layman's Guide to Bandwidth Pricing, writing "Time Warner Cable has, for now, abandoned the tiered pricing trials that raised the ire of Congressman Eric Massa, among others. And, as some nice data points in a New York Times article reveal, it's good for us that they did. For instance, Comcast says it costs them $6.85 per home to double the internet capacity of a neighborhood. But the bit of the Times article that we should commit to memory is this: 'If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company's costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.'"

14 of 203 comments (clear)

  1. NYT quote is a bit unfair ... by xmas2003 · · Score: 5, Informative
    While it is true that most costs are fixed and therefore the costs are no different if every customers takes an Internet break one day, one has to plan to for peak capacity ... or something like a 95% threshold. No different than other utilities such as electricity, plumbing, etc.

    So the reverse is also true - if every customer decided to say, watch grass grow one day, the costs are also the same!

    This is exactly why Tony Werner, Comcast chief technical officer said they engineer for the peak hour. Having said that, it would be nice to get 160mbps for $60/month (as in Japan) ... although I always find it disappointing that almost all of these stories focus on the download speeds and ignore the upload speeds which are at least of interest to folks such as /. readers.

    --
    Hulk SMASH Celiac Disease
    1. Re:NYT quote is a bit unfair ... by DomNF15 · · Score: 5, Informative

      It is actually different from other utilities - the electric company doesn't cap how much electricity you use, neither does the water company, you can use as much as you want, or rather, as much as can flow through given the physical limitations of your electric wires/breakers and plumbing pipes. Your bandwidth, on the other hand, is capped, and is well below the theoretical limits of the coax or fiber optic medium it travels through. When Time Warner etc. design their systems, they do so with these caps in mind. So they only reason they would need to add capacity (spend money) would be to add more users (make more money).

    2. Re:NYT quote is a bit unfair ... by phantomfive · · Score: 2, Informative
      Here is the quote that gets me:

      Cable systems in the United States use the same technology and have roughly the same costs. Comcast told investors that the hardware to provide 50-megabits-per-second service costs less than it had been paying for the equipment for 6 megabits per second.

      They are wining that they aren't making enough, even though upgrading the equipment is cheaper? Something's not right here....

      Oh, yeah. Here it is:

      By contrast, JCom, the largest cable company in Japan, sells service as fast as 160 megabits per second for $60 a month, only $5 a month more than its slower service. Why so cheap? JCom faces more competition from other Internet providers than companies in the United States do.

      Competition. They have a monopoly, so if they can push it, why not? I can see dollar signs in their hair. I'm not going to say lots of regulation is the key here, but how about forcing them to let competitors use their networks? Competition is good for the consumer.

      --
      Qxe4
    3. Re:NYT quote is a bit unfair ... by SatanicPuppy · · Score: 4, Informative

      I don't think there is anything wrong with the idea on principle, however TWC was clearly trying to restructure their internet market to protect their cable tv business. A dollar a gig is laughable.

      Any sort of tiered pricing would have to accurately reflect cost and network usage...Being charged the same for peak and non-peak is ridiculous, as we've already established that all their costs are about meeting the peak.

      Geeks being geeks, off peak usage is where the bulk of our traffic will already end up...Mom and pop will be in bed at 9:00 when the raids and the massive porn downloads begin.

      --
      ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
    4. Re:NYT quote is a bit unfair ... by mcrbids · · Score: 5, Informative

      Except that power companies charge by the unit. So do water companies. This is fine, because it costs money to create a KwH, and the price of delivering more KwHs rises as more KwHs are delivered, as it costs real energy and money to pump water.

      Internet is flat-rate, and should be, IMHO because it represents nothing real. Although it costs something to provide infrastructure for more demand, once that infrastructure is created, the cost of delivery is very near zero.

      Here's an experiment, in case this isn't absolutely clear:

      1) Buy/borrow a 2 Kilowatt gas generator. Start it up, and run it for 1 hour with no load. Note how much gasoline it burns. This represents the energy used to overcome internal friction. Then run it for 1 hour with a 1,500 watt blow-dryer running continuously. Note how much gasoline it burns. You'll be surprised at the difference in fuel consumption!

      2) Get a Gb switching hub, 2 computers, and an amp-meter. Plug the computers into the wall, plug the switch into the amp meter. Note the power usage of the switch with no load. Then set up a load where you are using 1 Mbps of traffic between the two computers, and note the Amp load. Then try 10 Mbsp, 100 Mbps, and 1000 Mbps. You'll notice that the amperage (for most switching hubs) climbs very little as you do so, and that the total power consumption is insignificant.

      * * *

      So bandwidth usage represents nothing "real". There isn't a significant energy or material consumption per bandwidth unit. After the cost of infrastructure, and a small fixed cost for powering the equipment, the cost of delivering 1000 Mbps is only marginally higher than the near-zero cost of 1 Mbps. There *is* an infrastructure cost that needs to be amortized over the life of the connection, and this represents the vast majority of the true cost of bandwidth.

      It's just idiotic that the Nation responsible for building the Internets in the first place is so far behind other industrialized nations for using it!

      --
      I have no problem with your religion until you decide it's reason to deprive others of the truth.
    5. Re:NYT quote is a bit unfair ... by Araxen · · Score: 5, Informative

      Wrong...Karl Benz from Germany invented the Automobile.

      http://en.wikipedia.org/wiki/Automobile

      "Although several other German engineers (including Gottlieb Daimler, Wilhelm Maybach, and Siegfried Marcus) were working on the problem at about the same time, Karl Benz generally is acknowledged as the inventor of the modern automobile."

    6. Re:NYT quote is a bit unfair ... by mcrbids · · Score: 2, Informative

      That's great, you've created an intranet and demonstrated it's pricing. Now, of course, try to get a peering agreement with a tier-1 ISP so that your bits can travel to and from the internet at large. Try one month at 10 Mbps and another at 1000 Mbps and see if your bill changes.

      I already do this, in effect. My company has a private hosting farm. We pay a flat rate for our redundant Internet connection at a top-notch hosting facility. It doesn't matter to us how much we use it, because the price is the same either way - the bill doesn't change.

      Do I get a cookie now?

      --
      I have no problem with your religion until you decide it's reason to deprive others of the truth.
    7. Re:NYT quote is a bit unfair ... by Estanislao+Mart�nez · · Score: 2, Informative

      Here's my question in all this-- if I can buy webserver bandwidth for $0.10 per GB, why does TW/Comcast/Whoever want to charge me a whole dollar for each GB I use over my monthly plan limit?

      It's cheaper to provision for extra bandwidth in a colocation center than at a residence or neighborhood. Whether it's $0.90 cheaper is another question, but you certainly shouldn't judge the cost of residential bandwidth by the cost of colo bandwidth.

      --

      Are you adequate?

    8. Re:NYT quote is a bit unfair ... by sonicmerlin · · Score: 2, Informative

      Their costs have been going down you brainless ninny. Did you even RTFA? Just look at their latest financial reports. Their profits *increased* from last year, despite the economic downturn, to over $4 billion. They only invest $200 million in infrastructure. You don't think there's something wrong with that? In a normal free market some companies succeed while others fail. That's how the market derives the best and fairest services possible. Yet all these ISPs are profiting like oil companies. The public is getting gouged for services that cost many times more than it does in other countries. The "market" exists for the betterment of society. Most people here believe a "free market" or something similar to one is best for us. Otherwise we'd all be communists. As for the internet backbone, peak usage and average usage have gone down for the last 2 years in a row, and costs of maintenance are getting cheaper.

  2. I look forward to my new $13.7 by Dan667 · · Score: 4, Informative

    In the mean time, support Massa get his bill passed. If we wait, TWC will just come up with something else equally bad and US taxpayers paid for $200 billion in infrastructure so there should be limits on what Time Warner can do.
    http://blog.wired.com/business/2009/04/congressman-to.html
    Write your congressman to support this bill
    https://writerep.house.gov/writerep/welcome.shtml
    Get it passed.

  3. Could there be another reason? by FurryOne · · Score: 4, Informative

    TW announced that it was going to test market tiered broadband in Rochester and a few other cities, but just announced that they were shelving those plans. Most publications pointed to protests by TW customers as the reason. Was it? While it's true that there were protests, I think another "influence" caused them to take a second look at their plans. Here's what I think... TW right now works hard to bundle their Broadband service with their VoIP and TV services. Sure, they can hide the cost in the bundle, but they can't hide the bandwidth. Right now, they pump at 1.2MB/s, or about 10Mb/s. that sounds pretty good until you realize that some 3rd world nations provide 8 times that much for only the equivalent of $10/month! - but that's another story. So what could get TW's panties in a bunch? Let's see... Right now, my "old" iPhone is on the Edge network, which is, I think, around 750Kb/s. Not very fast, but slow & steady. The data plan for it is $20/month. No competition there for TW! How about the "newer" iPhone?... it uses 3G (HSPA) for it's data. Right now, 3G from AT&T goes at 3.6Mb/s and costs $30/month. Still no big competition, but for lots of users, it would suffice in place of TW if AT&T would allow "Tethering" - using the phone as the network connection. (Which they don't right now) What worries TW is what is coming next. AT&T and others are currently upgrading their HSPA networks to the next "bump" in speed, to 7.2Mb/s, and that's where they become direct competitors to TW's Broadband. What's even worse is that "NetBooks" from Dell, LG, and Acer are due to start shipping in the near future, and they have built-in HSPA & WiFi support. Who needs TW's cable when you can be connected almost anywhere, anytime - wirelessly. But it doesn't stop there. HSPA can be tweaked up to 14.4Kb/s, but the next phase - "HSPA+" is already proven. It requires more hardware changes though. AT&T's goal is to rollout HSPA+ by 2011, and that's 21Mb/s!! Yup, that's twice what TW is allowing right now over cable, and you'll be able to get that over the air. That's what's got TW scared shitless. The idea that you won't need a cable to get your phone, internet, or even TV shows. That makes their whole monopolistic infrastructure about worthless!! AT&T and Verizon will rollout plans for access not just for phones, but for loads of electronic goodies, from computers to cameras to game sets. The netbook idea has been tried before, but it always required a cable. What got this new paradigm started was the introduction of the iPhone - not just as another "phone", but as a "portable computer," or an extension of your office. More and more people are finding themselves using the mail, the browser, and other applications on a daily basis, and becoming dependent on a constant internet connection. Why do we need to sit at home in a room when we can be at the beach, or in a hammock, or even at a bar, and extend ourselves into the rest of the world?

  4. Re:no transit/upstream? by jcm · · Score: 2, Informative

    Does this just mean that Time Warner is big enough to only have settlement-free peering instead of paying anyone else for connectivity, or does it mean that their connectivity is priced by pipe size rather than data transfer?

    No, they purchase transit from Level 3.

  5. Ha ha ha ha by cdrguru · · Score: 3, Informative

    If you believe that you can get 3.6Mb/sec on a 3G phone continuously, you are in for a rude surprise. You can get this in short bursts but you can't get anywhere near that for longer period of time. How many phones are competing for the same bandwidth? 100? More like 500. Do you really believe any cell site has a 1.5Tb/sec connection?

    No, you get your 3.6Mb/sec for about a second and they you wait for everyone else's phone. Fortunately, you get most things done in under a second and you aren't looking for a continuous high bandwidth connection. Because if you were, you'd be disappointed.

  6. Light at the end of the fiber tunnel? by DJRumpy · · Score: 2, Informative

    Excellent article. The end is the best part of all. The bits at the end are my favorite:

    "Cable systems in the United States use the same technology and have roughly the same costs. Comcast told investors that the hardware to provide 50-megabits-per-second service costs less than it had been paying for the equipment for 6 megabits per second.

    Questions about the speed, availability and affordability of Internet service in the United States will be central to the study Congress has required from the Federal Communications Commission next year. And cable and phone executives are worried that the commission may call for more regulation of Internet service, which currently is free from any government price controls."

    This industry is screaming for more regulation and competition. They have had a stranglehold on the market for well over 10 years and it shows in the exploding cable and internet costs. Burn the MOFO down!