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A Layman's Guide To Bandwidth Pricing
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.'"
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
I prefer the government installs the fiber and leases it to companies that provide billing, maintenance, and tech support services. Let competition in those areas bring prices down. Internet access is a public good and greases the wheels of the commerce. It's not something to be taxed and exploited by large monopolistic corporations.
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.
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.
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?
They don't want to do anything new, but they want more money, because business these days is about finding new ways to charge more while doing the same or less. I believe this is another cause of our current economic woes that is not getting enough attention, because we aren't creating any new value but the economy somehow continues to grow.
Disappointed in the "research" that went into the original article. Most definitely if everyone didn't use any bandwidth for a day or two, then a cable company would likely pay less that month for the their transit bandwidth. In Time Warner Cable's case, they get their transit bandwidth from Level 3.
I'd guess Time Warner Cable is paying about $10/mbps (or less) on the 95th percentile. So if the top 5% five-minute averages of traffic to Level is thrown out, then the top average left is what they pay for. I would bet there are a few samples each night that are in that top 5% of samples, if everyone did NOT use the Internet one night during peak, the sample that is left at the 95th percentile would likely be less and they'd pay less that month for transit charges.
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?
However all those customers would suffer lack of bandwidth.
TW uses an oversell model, meaning they sell the same bandwidth they buy to many people over and over and over. If all of them use it, it won't cost TW more, but the bandwidth won't be there for all those users.
E
At the consumer level power is generally sold by the Kilowatt. Phone converstaions used to be by the minute, still are for cell. Water is sold in cubic feet.
I think we have finally reached a point where bandwith should be sold by the Gigabyte.
Ultimately I think cable companies and straight ISPs should sell the fastest cable connection possible. Maybe charge a flat fee at first if the new
speed requires a new modem and that sort of thing. We are fast approaching speeds of 50mpbs which if we actually could obtain from
servers out there would be pretty close. Once we hit 100mbps we are good with speeds above only needed for special circumastance. Most content
won't be streamed live, but rather pre-cached almost as DVRs do it now.
Just like the other type of resources we can give breaks for per unit the more you purchase. So 1-20 gig is 50 cents a gig. 20-40 is 30 cents and so on.
Users who want to stream HD movies can instead of buying the HD channel package on their cable bill.
I wish it was possible to distinguish between the guy downloading a linux .iso and someone downloading a pirated movie, but we can't.
Either way both are using more than the grandma checking her email, but somehow pay the same amount.
This might not be popular, but I think deep down most of us know it's the compromise we need. If you want to drop you cable bill and
go with Hulu...fine. Just realize you have to pay. This idea that we can get everything we always had for 20-40 dollars a month just
because the magic internet came along is bs.
What really irks me about cable companies is they want to put caps, but provide absolutlely no way to contest it. My bill
does not have a usage number on it, but if I go over it they'll let me know. You can go look at your power meter, call your phone company, or look at
your water meter. Put in usage monitoring first then we can talk. You could even put out a bill with IP, number of packets, and amount of data.
'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.'
Wait! Are you trying to say that the cost of transmitting a bunch of zeros is no different than transmitting a mix of zeros and ones?
When our name is on the back of your car, we're behind you all the way!
A business should be free to price it's products as it chooses.
The market will naturally determine the price the public is willing to pay for such products. The only time a problem arises is with a monopoly (or price fixing - but anti-trust law should take care of that).
The only issue with cable providers is the lack of alternatives. Technically there is DSL, FIOS, and some slower alternatives, but the customer is locked into only one cable provider. In certain geographical area's (and high density buildings) these alternative choices are not be available, this creates a pseudo-monopoly.
I hope this problem can be solved with private sector alternatives and not with legislation. Government intervention in the free market tends to have negative consequences.
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.
And if no tweenies show up to tonight's Miley Cyrus concert, the cost of putting it on will be pretty much the same. Does that mean that Miley should go to a flat rate, come-as-often-as-like model?
All retail businesses are based on assumptions about normal behavior. Hypotheticals that posit unlikely behavior aren't arguments. If they were, then we could suppose that every TW customer might decide to visit YouTube at precisely the same moment, and that TW should build out its network to support that and charge accordingly. Are you ready for $1,000 a month for DSL?
Let me anticipate the same lame point that gets made every time we have this discussion: Even if TW ripped off the government by pocketing the money they were supposed to use for expanding their infrastructure, we still have a "no free lunch" scenario. Even thieves need a sustainable business model.
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.
No, but if each uploaded the equivalent bandwidth of a YouTube video to a non Time Warner customer, the company's cost would be quite different. The internet is fundamentally a sender-pays system at every tier -- you can only justify peering with a large provider if you can take from him roughly as much traffic as you load onto him. You can get your peering agreement terminated pretty quickly if you dump lots on the other guy but don't take any back (see, e.g. http://tech.slashdot.org/tech/08/11/03/0143239.shtml?tid=230.
One day probably wouldn't be enough, but if everyone on the TW network started using their full upstream allotment 24/7, TW's peers would eventually demand renegotiation.
Bandwidth cost money... real money. Unless your upstream provider is stupid and or sucks, you pay a fixed rate per megabit every month for a fixed amount and a per megabit for bursting over. If you think you can do it better, come up with a better model and kick their asses. And for god sakes quit whining about your CHEAP connection. Want to see expensive go to a 3rd world country. As a former ISP, and as less and less mom and pop ISPs are out there, if it could be done someone would already be doing it. Japan and other densely populated countries have a significant advantage... They don't have to run thousands of miles of fiber to reach thousands of customers... The can run a couple of miles and reach a 100,000+ customers. AND they don't have every tom, dick and harry complaining and stopping them from cutting up streets to get it there. They just do it because the government lets them. I know I used to live there.
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.
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!
If it is really $6.85 to double the bandwidth of everyhome then, let's add a 6.85$ charge to everyone's bill every month and if we start with a 10GB cap the first month, we'll be at 41 TB in a year.... Oh, yeah this was actually about greed and not bandwidth wasn't it...
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.'"
Of course, those customers would be glued to blank screens since TWC lacks the capacity to have every customer watching youtube at once. Their network would grind to a halt. And the network expansion necessary to handle all of them watching youtube all day would have a considerable additional cost.
Comcast says it costs them $6.85 per home to double the internet capacity of a neighborhood.
Comcast also says that their users like their service and don't leave it the instant Verizon installs FiOS in the neighborhood. You shouldn't put much faith in what Comcast says.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
That's a $6.85 ONE-TIME fee. They're making money hand over fist... it's simply the fact that broadband ISP's are completely unregulated and unabashed monopolies that is preventing us from getting better value for our dollar.
My blog. Good stuff (when I remember to update it). Read it.
You bring up a good point. Do cable providers use compression techniques? Could the cable modems be used to compress and decompress items as they come in and go out? I realize that anything leaving their networks would have to be decompressed but could they use an internal scheme to compress data once it's on their network?
Someone please double my internet bandwidth!
Price per MB is 1/40th what it is here.
Max bandwidth is also 1/40th what it is here.
I smell price fixing and corporate collusion ...
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In 2009, you correctly note the transit bandwidth charges but these are not likely to be a significant cost to somebody like Comcast. Their bulk of their cost is *fixed* since it's the physical maintenance of their own network.
But those are the SAME COST -- physical maintenance of their own network allows them to carry other ISPs traffic and get favorable peering agreements. You can either pay transit fees OR maintain your network but either way you pay per bandwidth.
The infrastructure cost has been amortized and is a fixed cost.
Electricity to power the infrastructure although variable is essentially a fixed cost as it will not change once a precedent has been made.
After breaking even on overhead costs the contribution margin becomes nearly 100%.
The best analogy is when phone and cable companies used to charge per outlet. My grandfather went before the supreme court of Canada to argue that once the service has reached your house it is your business how you want to use it, or split it. (R. v. Fulop, [1990] 3 S.C.R. 695) As it doesn't COST the companies anything extra.
If you're going to give us some B.S. about "building OC3's and I know personally these cost $xxxx/month and if you take the cost of that, and when you use your 20mb/s connection, you're costing the equivalent of $$$$ per month so it's a bargain..." you're merely showing your knowledge of how the internet worked in 1994.
Screw OC3s, more like lots of OC192s. No OC768s though, overpriced especially on T640s. Afraid in 1994 I was on the Enterprise side of networking, not on the Service Provider side; so my '94 knowledge is more about Ethernet switching and Novell NOSes. Only moved to Service Provider Architecture in the last 3 years, so generally my knowledge is hopefully up to date, but maybe not.
In 2009, you correctly note the transit bandwidth charges but these are not likely to be a significant cost to somebody like Comcast. Their bulk of their cost is *fixed* since it's the physical maintenance of their own network. The charges to connect to the backbone? Almost nothing compared with the fixed costs.
They do have lots of Capital Expenditures to purchase all that gear on the edge and their metro networks. And if they're paying about 4-5% (for Cisco/Scientific Atlanta) of their actual costs after discounts for hardware/software/support maintenance (OpEx) on all that equipment, then that is a really large number. However, generally those numbers aren't too variable. They only have to upgrade when the peak averages increase. If the peaks just last longer each day but the absolute maxes do not increase, they're not spending more CapEx and thus no more OpEx. So the Transit BW costs are a pretty big part of what is costing them OIBDA dollars, and to top it off, their customers control whether they have to pay more one more month or not.
Besides, if you look at TW's annual report, you'll see their cost for bandwidth is going down, despite bandwidth use going up from their subscribers.
What does that tell you?
That Level 3 is charging them less per Mbps now? Maybe $8? It can never be free. Maybe they get to Cogent pricing at $5/Mbps, but it will always cost money to run backbone networks for people who need transit. TWC (and other eyeball networks) will always pay for their transit. No one else is getting Settlement Free Peering.
I know what it tells me. It says that if TW keeps at it, NYS should do their best to heavily tax TW's "bandwidth overage charges" so that there is no financial advantage for TW to charge people for additional bandwidth. It goes against my laisse-faire instincts of many decades, but these guys are crooks who lie with a straight face.
No wonder people hate cable companies.
I do not disagree that they are milking this. However I also believe that their highest profits come from the Cable TV side of the house. They don't have to upgrade capacity for that side of the house. Most folks just watch those broadcast channels and pay massive amounts for the pay subscription movie channels, again no real incremental costs, nearly pure profit once they have the infrastructure built out. For the less watched channels that aren't always broadcast, they don't even send the signal if no one is watching. If someone does start watching, they multicast those channels in case a second person down from the Head End starts watching. Again, once you get the first person watching, there are no additional costs, unlike when two people decide to download an episide of the Daily Show and start minutes apart from one another.
Now if more and more folks all decide they don't need to pay for all of that TV and instead all want to watch The Daily Show as a download whenever they want to, then they are all getting those bits from a CDN server somewhere on the Internet. It is likely that TWC won't pay for transit to get to that CDN provider though. Comedy Central uses Akamai (at least from my Comcast home network) for their CDN. AKAM might have caches at e
"You can either pay transit fees OR maintain your network but either way you pay per bandwidth."
Well, okay. But the point is there is no additional cost to TW if the network is 1/4 used, 1/2 used, or fully used. And with DOSCIS 3.0 already here, the cost to upgrade is a one-time upgrade to make their internal network deliver a lot more bandwidth for the same cost. And they want to charge more for that?
So if user X is using 100% of his allocated "bits per second" and user Y is using .1% of his allocated "bits per seconds", it doesn't make any sense to charge user X more, since he isn't costing anything more. Likewise it doesn't make sense to charge user Y less, since he isn't costing you less.
Thus, you quickly conclude that it makes sense to tier users based on capability for marketing reasons (and let me be clear that I think it's a legitimate tiering), but there's no technical reason to tier users. And what's more, the argument that people make which goes something like this "Well, those that use more should pay more", they never say what we're using *more* of that we need to be charged for. You can't use it up, and you can't save it. It's nothing like electricity or water.
Verizon (for right now) has the right idea. Build a big frickin' network with fiber to people's homes put a modem in place that limits the rate so that they can't overload the network and then let people go to town. Perhaps they have a different viewpoint since they came from the data side and moved over to TV rather than the cable companies history of starting with TV and adding data as a sideline.
When you think about it, Comcast's and TW's biggest accomplishment to date is that they make Verizon look like a good guy when it comes to the internet.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
Max bandwidth is also 1/40th what it is here.
Jcom has no bandwidth cap. Either you got that mixed up, or you have an interesting way of reading. It's 160mb/s uncapped for $60 a month.
That's about 16 times faster than the fastest I can get where I am, for $20 less, AND I have a 20gb cap.
Internet sucks in Alaska.
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
I'm a kernel developer AND a gcc developer.
source - Computerworld, somewhere around Feb 2009
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I had 100mbps down 50mbps up for ~$40 in Japan in a modest-sized city of 400,000 while I was staying there. It was part of NTT's new B FLETS package that they're pushing throughout the entire country.
I might add that right before I left, they began the ~controversial~ practice of bandwidth capping. They sent out a letter to everyone asking to please not upload more than 500 gigabytes in a single month, but downloads remained unlimited.
We honestly should have abundance here in the USA. In fact we should have had abundance here in the USA since 2000. By 2006, leveraging the fiber that the telcos should have already put in place to our homes in every large and medium city (even most small cities if it were deregulated, giving business incentives for others to lay some of the fiber) we should have increasing downstream / upstream bandwidths with decreasing costs like they had in Japan once the Fiber was put in the last mile.
The joke will ultimately be on the Telcos. As they continue their current anti-American business, customer-no-service practices they just continue to make more and more Americans angrier and angrier at them.
Eventually the resentment will build to a point that as soon as some independent party (all of the current US telcos have arrangements and have for years...thus there can be NO FREE MARKET without either government intervention and/or some other non telco company entering the market. When that happens, the resentment and anger will insure the CHURN
Cable Systems provide internet on a shared media in the neighborhoods. There is often fiber to the local fibernode in a neighborhood which then splits the RF to feed many homes... how many well that depends and is one of the techniques that the Cable MSO (multi-service operators) use to manage bandwidth.
DOCSIS or Data Over Cable Interface Specification is currently at DOCSIS 3.0 which defines how to implement what is generally termed wide-band DOCSIS. With wide-band the cable providers can continue to compete regarding bandwidth offerings with the Telcos who are deploying technologies like FIOS.
However, this also means the Cable MSOs are required to re-engineer their cable plants with different combining/splitting algorithms which may require more fibernodes deployed to some neighborhoods (which would be a capital cost) may more likely be a software exercise.
To see what is possible the best competition is probably with Cablevision in the NY and NJ area which competes against FIOS. Cablevision is working hard to deploy DOCSIS 3.0 wideband and allow greatly increased bandwidth offerings to customers... to compete and keep its NY/NJ customer base from jumping to FIOS.
Cable operators are caught between a rock & a hard place. Their Cable TV and Movie business is their bread & butter. So to protect those they could try to cap their High Speed Internet offerings BUT that could lead to customers leaving the Cable operator's High Speed Internet service... then using their Internet to enable themselves to also drop the Cable MSO's TV/Movie services.
Age old problem... FAT PIPE or Content Provider.
What you've said doesn't quite stack up. Peering agreements do mandate that traffic must be about the same in both direction. But this does not imply a sender pays system. It implies that anyone that has a surfeit of senders, or of receivers, pays. For example the AT&T peering agreement mandates that traffic flows must be within 2:1 in both directions.
Most ISPs are largely receivers of data. As a result they try and attract server business because it helps them balance their flows for negotiating peering agreements. So if everyone on TW maxed out their upstream allowance it may actually reduce TW's transit fees.
It's hard to find out how much upstream bandwidth costs as most colo providers seem to only do quotes by email these days, but Burst offer $0.05/GB. Unlike Verizon I'm guessing they understand what the decimal point is :)
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My pricing options are: Verizon DSL Comcast 6 Mb Dial-up
I scream. You scream. I assume that means we're both acquainted with the problem. We proceed.
then for $100/month id like a dedicated 10mbit in each direction.
Because the physical plant your webhost has to provide is 1 hardened structure with a buncha equipment.. expensive.. yes.. but now imagine you have to run a few of those buildings, and of course all the physical plant that connects them together and the COs to the houses?
Once you have plant that large, you also have to deal with repairing it, since you'll have a higher failure rate (downed utility pole if you're overhead, or some guy with a backhoe if it's underground).
Everyone seems to think that 1mb==1mb regardless of where and how it gets there.. sorry.. that's just not the case.
If you -want- $0.10GB for b/w, rent out a full cage in a colo and live in it.
As for the $ now vs the $ spent for 6mb.. keep in mind that the $ the spent to get 6mb was -alot- back then.. It'd be like trying to buy a 1gb switch 10 years ago.. you can do it, but it's ALOT more cost.. you can get the same 1gb switch now for -alot- cheaper.
Also when comparing Japan/Europe to the US, remember the biggest benefit to the US is also it's biggest hardship.. we're a f-n big country. A (in my mind typical) Euro town is alot smaller in area compared to a US town of the equivalent population (at least outside the NE corridor) That distance means extra physical plant needs to be installed, operated, and maintained. [citation needed]
That said, I personally dislike my cable company, and the Bell's have fallen by the wayside unless it's your only option, and I wish everyone would just run Ethernet to the home already.
----- The internet has given everyone the ability to have their voice heard equally as loud.. even if they shouldn't be