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What Kind of Alternate Business Models Could ISPs Use?
Posted by
Zonk
on Tue Apr 01, 2008 01:42 PM
from the nothing-wrong-with-the-ppu-strategy dept.
from the nothing-wrong-with-the-ppu-strategy dept.
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?"
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Not really the point... (Score:5, Insightful)
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.
who cares about business models? (Score:5, Funny)
Where's the A material? Even Poniez is looking good at this point.
Re:who cares about business models? (Score:5, Insightful)
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Re:who cares about business models? (Score:5, Insightful)
Finally I'm ready to not get suckered on April Fools and they sucker me by canceling it. Bastards.
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Re:who cares about business models? (Score:5, Funny)
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Split Solution (Score:4, Interesting)
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.
Re:Split Solution (Score:5, Interesting)
However, charging for usage *is* a better solution, for many reasons. The most important is that it aligns the ISP's interests with those of its customers. Right now an ISP's best customer is one who doesn't use the product at all; heavy users are their least profitable customers. This is the root cause of all the problems people have with their ISPs (port blocking, BitTorrent blocking, not upgrading infrastructure, cooperating with RIAA subpoenas, terrible customer service, outspoken opposition to bandwidth-using services like online video); it all stems from the fact that ISPs have a huge incentive to *discourage* use of their product! Under a charge-for-usage scheme, that's all *reversed*. ISPs would make the most money from the heavy users, and so would encourage usage by eliminating all blocking and filtering, upgrading infrastructure, telling the RIAA to get lost, improving customer service, and encouraging bandwidth-using services like online video.
In addition to making ISPs the friends of their customers, charge-for-usage would also solve some of the Internet's big problems. Suddenly people with trojaned Windows zombie machines would be charged for all the crap they spew, giving them an incentive to secure their machines. P2P users, instead of being subsidized by the majority who use less bandwidth, would see the real costs of their traffic in their bill. If there's any truth to the "bandwidth crisis" the ISPs keep whining about, charging for usage would solve it.
So charging for usage is desirable, but how can we do it without huge overage fees? It's easy. Instead of paying for bits transferred directly, we should pay for the *speed* of transfer, almost like we do now, but with one addition: each bit transferred lowers your speed cap slightly. This cap is explicit with a big speed gauge and graphs showing your usage (it is important that this graph be very user friendly so people can figure out what is using their bandwidth). Here's the key: at any time (not necessarily monthly) you can press a "speed boost" button that charges your account and raises the cap, but it's not automatic. Under this scenario there are no explicit tiers and not even a fixed monthly payment. You pay exactly the amount you want, when you want, and get service commensurate with your payment; blazing fast or just enough for email, it's up to you. There are never overage fees; instead your service just becomes slow. If your computer gets trojaned your service will slow to a crawl, you'll look at your graph and see a giant spike of traffic from the computer in question, and you'll know to fix it *before* you press the "speed boost" button.
I hope someday ISPs and ISP customers alike will come around and see that some method of charging for usage is the only sensible way to do things. With this scheme we get all the advantages of charging for usage, but none of the drawbacks. No overage fees and no hard caps.
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$/MB (Score:5, Informative)
Pay as you go (Score:5, Insightful)
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.
Plenty of case studies... (Score:5, Interesting)
Here's an example: Videotron cable internet [videotron.com] (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 [videotron.com]. Again, you pay a premium if you want that level of service, which is fine.
Is this a serious question? (Score:5, Insightful)
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.
Deliver Promises. (Score:4, Insightful)
Taxes (Score:5, Informative)
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.
Re:Taxes (Score:5, Insightful)
-mcgrew
* there are some here who believe that the huge problems we have financing our health care are, believe it or not, caused by overregulation rather than the fact that the customer has no choice, nor can have any choice. I have to agree to disagre with these folks.
Parent
Alternate business model: (Score:5, Interesting)
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.
Re:first post (Score:5, Funny)
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Such a great deal. (Score:5, Informative)
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?
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Re:first post (Score:4, Insightful)
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Re:first post (Score:4, Insightful)
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Re:first post (Score:5, Interesting)
Why screw around with all the 'consumer' level stuff and the headaches that go with it?
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Re:first post (Score:5, Interesting)
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.
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Re:first post (Score:5, Insightful)
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Re:first post (Score:5, Insightful)
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.
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Re:first post (Score:5, Insightful)
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.
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Re:But that would mean... (Score:5, Interesting)
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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