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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?"
if there were competitors, and not just vendors screaming free market when they adjust prices but then hold up monopoly contracts with the city/state when a community tries to come together and go their own way.
Well as much as I don't agree with this yes it does. More data use by the end user means the ISP has to pay for bigger connections and redundant connections often at that. Yes cost goes up for everyone. However the price of the inter connections have gone down a lot since 2009 so not sure how they have seen a 900% increase other then by adding that many more customers.
http://www.dslreports.com/shownews/Canadians-May-Sue-NorthwestTel-Over-Broken-Usage-Meter-127342
please have people leave that provider in mass.
It depends upon what the ISP's upstream connection is. In Alaska there were problems because the pipes were only so big but demand was bigger.
But the larger question here is ... is there competition? If someone doesn't like the service/pricing of The East Buchanan Telephone Cooperative can they get equivalent service from a different provider?
I, personally, like the idea of paying for what you use. Provided that there is competition. Otherwise the "average" will keep dropping as people try to limit their expenses and the price will keep creeping up.
My wife and I are pretty close to just turning off Internet at home. We can only get AT&T, and we can only get legacy DSL at 1.5mbit. Usually when I'm sitting on the PC at home I'm thinking that I'd rather be doing something else anyway, like right now, in fact.
One thing that's getting missed here is what cooperative means. My parents are part of another tele coop in another part of Iowa. Tele coops are relatively common in very rural areas and are owned by the subscribers and, at least in the case of my parent's coop and this coop, the subscribers receive dividends. (see http://www.eastbuchanan.com/about/dividends.htm )
If the subscribers don't like it, they should show up to the coop meetings and have their say in the company that they themselves own.
As a customer, I do mind metered internet because it's bullshit.
This isn't electricity (minimal and always on anyway so the difference is negligible, at least for these middle men) or anything, this is about forcing limited supply when there isn't any.
Would you like metered television too? No longer broadcast to you 24/7, now you get to watch 90 minutes a day, and after that you have to pay? Would that make sense to you?
Bandwidth is already rationed by setting speed levels. I already pay quite a bit more a month for the highest speed level residential and businesses even more so.
People rationing bandwidth at night by not using any isn't going to save anyone anything. It's just dark fiber.
More so, I would argue that mindsets like yours is setting us back. The need for speed is what brings us advances, getting us forward, allowing surgeries and other amazing stuff over the net. Metering is just a setback there.
All metered internet will do is make the Cable ISP slobber as they grab netflix and hulu by the balls and cut off their customers through draconian price increases. By some reports, they already lost some 25 million customers. You don't think they want to stem and reverse the flow? They are hurting, and they are hurting because they didn't change with the times (NO, I don't want the sports channels and every other overpriced bundle just to see the 3 channels I watch, fuck off.)
Score: -1 Factually incorrect.
It absolutely costs more to install a bigger pipe for the ISP. The fact that the ISP has to over provision, and hence a small increase in bandwidth can be absorbed without instantly needing to upgrade the pipe does not mean that that extra bandwidth is free.
Switches, cables and admin systems all cost money, and these costs all increase with the amount of bandwidth running through the system.
I actually applaud them for moving to a metered bandwidth model – it makes sense. What I don't applaud is the blatant gouging. The prices should be roughly 100 times lower than the ones they are offering.
The free market already fixed this problem, if you don't like your provider, you're free to chose another. That's what makes capitalism and America great.
-- Ethanol-fueled
this craps only starting due to the likes of netflicks and hulu threatening there overpriced packages people are cutting the tv cord and they don like it.
If Alaska filled their pipe with fiber instead of oil, it'd be much faster.
From TFA (heresy, I know):
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. (...) 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.
These are people in rural areas, where it's not very profitable to deliver service in the first place. Public funding is going down, actual bandwidth going up, a little fiber laid down in the dotcom days is growing old and they're in a short squeeze. These prices smell more of desperation than gouging, it can't be easy to break even with those numbers. I doubt any competitors will move in to take over this gold nugget.
Live today, because you never know what tomorrow brings
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.
The free market already fixed this problem, if you don't like your provider, you're free to chose another. That's what makes capitalism and America great.
-- Ethanol-fueled
I don't know the details in this ares, but I doubt they would e setting up this kind of metered service tiers if they had and competition. Its a telephone coop, which suggests small town rural.
Too often, the situation is that there is no viable competition, as the market is too small or too remote to attract competition, or it has been legislated away by cities granting right of way to exclusive contracts.
Sig Battery depleted. Reverting to safe mode.
No, this is nothing like Australia. Those rates are obscene. Australia may have metered internet but the prices are far, far lower.
25 USD for 5 GB? (Australian ISPs would typically give you ~50 GB for $30 AUD, which is roughly equal in value)
99.95 USD for a paltry 25 GB? WTF? 100 bucks in Australia gets you unlimited plans the ISPs that offer unlimited (e.g. TPG) or very-high-quota plans with others (Internode, one of the more expensive ISPs, gives you 1.2 TERAbytes per month for $109 AUD).
This is only "Welcome to Australia" if the Australia you're talking about is the Australia of the year 2000.
What they should do is throttle it at peak times, lock everyone down to 2mbt during peak hours, charge extra for everyone who does not want to be snapped
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
costs have increased by 900% since 2009
I call BS. Prices are dropping everywhere. Backbone bandwidth, -50% per year. It costs only $1,800 through $3,000 to do FTTH. At $300/month, you could be the proud owner of a 1gb/1gb dedicated fiber connection in 10 months. If I have to choose between someone being a total idiot or being greedy, I'm doing with greedy.
EBTC's profit margins on internet service were above 40% in 2012. See the document below. They have also built out line of sight wireless internet service, so they will not need to maintain those rural DSL cabinets in the future. https://docs.google.com/file/d/0B1MxEnYSkSD_V2ZjdEdfeFNTMnM They could easily serve all of their existing customers using wireless if they chose too. Prairie iNet is a company that uses similar wireless technology. They can serve 250 customers per tower. EBTC currently has 3 wireless line of sight towers. Prairie iNet offers speeds of up to 20 Mbps with unlimited usage for $70 per month. They offer service in a smaller town 8 miles south of EBTC. http://www.prairieinet.net/residential/pricing-plans/
Trunk bandwidth is the cheapest part of being an ISP as long as you're not out in the middle of no-where. At $0.45/mbit for dedicated backbone connection. Bandwidth is charged by 95th percentile. That means the customer must average about 2 hours of transfer per day all month long. In order to consume 100GB, that means an average of 7mb/s for 2 hours every day, or about 2 Netflix streams. That would cost the ISP about $3.5, but they turn around and re-sell it for $300. Sounds like easy money. You just need to get your foot in the door. Once you're "that" ISP, you just print cash.
I'm Australian so are more than used to metered internet access. Unlike most Slashdotters, I like the concept of metered internet, in that it gives you options to only pay for what you need and not subsidise other users so much. Grandpa who just checks his email every day can get by fine on the $15 plan that has minimal allowance, while Johnny McTorrentLeecher can cough up for the large quota or unlimited plans.
But even in Australia, a country with a higher cost of living than the US and less in the way of developed internet infrastructure, the costs of metered plans are far, far lower than those quoted in TFA. 100 bucks for 25 GB is like something out of the early 2000s, when broadband itself was relatively new and DSL was mostly of the 256 kbps or 512 kbps variety. For comparison, the offerings of two Australian ISPs that are roughly indicative of a typical "cheaper ISP" and "more expensive but better quality ISP":
TPG (http://www.tpg.com.au/products_services/adsl2-standalone)
50 GB - $29.99
150 GB - $39.99
500 GB - $49.99
Unlimited - $59.99
Internode (http://www.internode.on.net/residential/adsl_broadband/easy_broadband/)
50 GB - $49.95
100 GB - $59.95
200 GB - $69.95
400 GB - $79.95
1.2 TB - $109.95
(And you can take $20/month off the above if you bundle a home phone service with the same provider too)
Comparing to this, this Iowa ISP's prices are insane. Metering sucks if THAT is what you have to pay (particularly in a country where unlimited plans are ubiquitous for less money).
Metering CAN work well, and CAN be fair (pay for what you need ... light users don't have to subsidize the heavy users). But it requires proper choice of plans (within an ISP) and proper competition BETWEEN ISPs to work. If there's a monopoly then yeah, it's very unfair. Fortunately for all the issues we have with internet in Australia, most people in urban or suburban areas (which is 90%+ of the population) do enjoy good ISP competition. If you have a phone line, then you can get DSL from a wide range of providers (at least a dozen, sometimes up to 20, depending on location).
Too often, the situation is that there is no viable competition, as the market is too small or too remote to attract competition, or it has been legislated away by cities granting right of way to exclusive contracts.
Sometimes is has NOTHING to do with how small or remote your town/city is. I live in a well populated suburban town in New England and our choices for internet are either Cox cable or AT&T DSL. Cable speeds are between 10-15 Mb but the fastest DSL we can have is less than 5 Mb. Verizon advertises FIOS for our area but if you try to subscribe you'll be told they don't offer it in our town. Many New England towns are vendor locked and the consumers are left with little or no choices.
Do what thou wilt shall be the whole of the Law - Aleister Crowley
we have one of the most expensive/slowest internet connections in the first world, if not THE most expensive. it is ridiculous that our government allows this kind of bullshit. it isnt just in rural areas that this occurs... it also happens in city districts where the city has a contract with an internet provider to where it is the only one that ppl can get in an area. Our university falls under this category... we are in the middle of a city, but the only internet we can get in the area is time warner... and they use this to totally screw everyone over. we pay almost 30$ a month for 5mbit internet.... and it has a shitty connection.
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.
Sure it is. You can saturate a network switch.
Any sufficiently unpopular but cohesive argument is indistinguishable from trolling.
If the market looks like communism, then sure...
Where are the competitors here? What companies can the victims of these jack*sses flee to? If the answer to that is the sound of crickets, then "communist" price controls are entirely appropriate.
They are appropriate for the same reasons that public utilities are heavily regulated.
A Pirate and a Puritan look the same on a balance sheet.
Capacity costs, but it doesn't cost THAT much. However, that doesn't translate well to transfer. If you have 1Mbps from 6-10pm, you might as well have it 24/7, it's not any more expensive to provision.
Because of technological progress, the same connections that could do 1GBps in the '90s can do 100GBps (or more) now. The Gbps dumb switches that cost >$1000/port in the '90s cost $80 total now (or $300 -$1000 for 48 ports if you want it smarter).
What I don't understand is people pretending bandwidth is getting more expensive when actual costs are in freefall.
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.
My opinions are my own, and do not necessarily represent those of my employer.
This stuff gets obsolete in 5 years or less
Which is where things get interesting.
When you are building a completely new network or first introducing broadband onto a phone network unlimited traffic makes a lot of sense. Most of your costs at that point are per subscriber not per unit of data and when building a completely new backbone it makes sense to make sure it has plenty of spare capacity.
Then years down the line your network starts creaking at the seams. What you thought was plenty of capacity when you built the network no longer is. You start thinking about a major upgrade to your obsolete (but still fuctional) gear but then you look at why you need that upgrade and discover that it's a relatively small proportion of users who are using most of the traffic. Do you make everyone pay for the upgrade or do you try and place it on the heavy users only?
Having said that this case seems to have swung the balance between "charging for connections" and "charging for data" too far in the opposite direction. Having data prices high enough that people have to balance the cost of installing security updates against the risk of not installing them is almost certainly not a good thing.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
This has nothing whatsoever to do with net neutrality. But NN has been in the news lately, so by mentioning it in the summary, maybe they can get more page views!
In other words, ISP's have not invested profits (or small price increases) back into their networks to keep ahead of the tidal wave. Wouldn't it make sense to do incremental updates over the span of several years?
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.
You're confusing transit costs with delivery costs. I'm not sure if you can get a 100 Mbps link for $45/mth, but you definitely can get a 1000Mbps link for $450.
Transit is so cheap these days that it's almost free; it's very cheap, keeps getting cheaper, while many other costs are not getting any cheaper (electricity prices don't ever seem to go down, for example). As a result, transit seems to be making up a smaller and smaller percentage of costs.
Let's take the example of wholesale internet service in Canada. Say that you want to service 1000 customers, and that each customer uses at peak 2Mbps on average. You've got $15 for the DSL or cable line, roughly $3 for the share of the incumbent aggregation network connection, $40 for the aggregation capacity costs, and $1 for the transit. On top of this, there are obviously colocation costs, manpower, office space, etc. But let's just pretend the only costs are the actual network-related costs: you're already at $59, and the transit is less than two percent of that. Once you add in all the other costs, transit is basically inconsequential.
Why should robber barons serve their customers when they can rob them blind ?
The problem with the United States of America is that history kept on repeating itself.
Back then it was the railroad fellas who monopolizing the transportation, then came the petroleum fellas, and then the US government supposed to have done something to curb the power of those robber barons ...
And when everyone is not looking, the robber barons bought up Washington D.C. and here we go again.
How come South Korea and Japan can have ISP which provide their customers with Gbps throughput while on the United States of America the end users have to put up with all those robber barons ?
Back in the 1980's, just when the Net was started, everyone was pulling their own cables. At that time the competition was fierce, and customers (particularly those staying in cities) get a lot of very nice choices.
And then the telcos stepped in, bought up the politicians and changed the laws - forcing the indies (the *true* ISP) to either shut down of sell out, and look what we have here ... another round of robber barons intending to squeeze the last penny out of their customers.
Sigh !
Muchas Gracias, Señor Edward Snowden !