An Iowa ISP's Metered Pricing: What Will the Market Bear?

An anonymous reader writes "The East Buchanan Telephone Cooperative started charging cellular prices for home DSL internet service starting on January 1st, 2014. A 5GB plan costs $24.95 a month while a 25 GB plan will run $99.95 per month. 100 GB is the most data you can get in a package for $299.95 per month. Each additional GB is $5. They argue that the price increase is justified because their costs have increased by 900% since 2009. About half of their customers use less than 5 GB a month while their largest users use around 100 GB a month. They argue that the switch to measured internet will appropriately place the cost on their heaviest users. With the landmark Net Neutrality ruling this week will larger providers try to move to similar price models?"

Comments

Re:It doesn't cost any more to serve more data

[rolfwind]

I, personally, like the idea of paying for what you use.

People already paid for what they used. It's called bandwidth, and they brought the tier level they needed. That it was on 24/7 just meant that they got 30 days of it. All the companies are doing is jacking up the price while giving you less time.

This isn't water or electricity. Bandwidth is not a limited resource in the same way. This is just a company trying to keep overselling what it has and not upgrade.

Re:no

[aurizon]

A rural co-op is owned by the subscribers - is it not? There is no corporate profit. Just the equipment and cost of wages and wiring and tech stuff.
1057 customers, and a build cost of about $3 million = $3000 per customer. This stuff gets obsolete in 5 years or less = buy more, scrap the old = $600 per customer per year = $50 per month each. Thed add electricity, maintenance, tech support, new installs.

They then get the FCC grants which have shrunk a bit (Since 2009, he says, the FCC has decreased access charges by $285,004 and Universal Funding by $282,228, for a total of $566,232 or $531.68 per customer. The decrease is expected to continue. During the same timeframe internet demand has grown by 1,000 percent.)
(He goes on to explain that EBTC has 1,057 customers as of Dec. 31, 2013, and serves a 165- mile area. That means customer density is roughly seven customers per square mile.)

This looks like the typical problem that Canada, Australia and a lot of rural America face = low density of subscribers.

Do they share all cost equally?, or do they try to charge proportionally?

They have the classic small town bind.

If you get a densely built area of apartment houses that can be fully fibered, costs per megabyte can be very low, but not here. If they want the high speed, they must make some overpay (those who use only 5 meg per month), or get some proportional pricing.

With a large corporation, they could over charge the dense cities and subsidize the country sides.

Re: It doesn't cost any more to serve more data

[bmajik]

So you're telling me I can get a 100mbit upstream link with resale rights for $45/mo?

That's astounding, since as near as I can tell, getting any kind of dedicated circuit at all is over $400/mo, and any CIR is ontop of that.

I worked in the ISP industry a long time ago. We had a frac DS-3 to UUNet. Our bill was either 4 or 5 digits, per month.

It was provisioned over Metro SONET, iirc, so it's not like we were paying off some huge trench fee.

We were selling 56k Frame Relays for more than $45/mo. Think 10x that cost.

Speeds have certainly gone up since then -- a lot. But prices haven't come down. If you want a carrier grade connection, you pay.

As an aside, I recently moved to a rural location where there is no broadband provider. I called a nearby ISP that serves the closest town. They said $10-15k per mile to trench and bore for fiber, plus the costs of actually laying fiber.

There's no CATV here. There's no possibility of DSL here. HughesNet says its oversubscribed in my area and either sells only their slowest tier or nothing at all, depending on who you believe.

So I'm using a Verizon LTE box. Metered internet really sucks, and its very expensive. It changes your usage habits entirely. We cancelled our Netflix streaming and went back to discs. I never watch stupid youtube movies any more because they're not worth the bandwidth charges I'd rack up watching them.

I've been looking for tower space in a nearby town that I can lease, so I can put up some UBNT gear and do a point-to-point shot from their tower to a tower on my property, and backhaul unmetered internet from a place that has it to my farm.

I've spoken to a few neighbors; all of them who have internet service use cellular data. I think I could build out a pretty slick rural wifi and cover my costs with it -- but that's entirely dependent on being able get some kind of uplink out here.

Doing internet service in a rural area is hard and expensive.