What Kind of Alternate Business Models Could ISPs Use?

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?"

Not really the point...

[TripMaster Monkey]

I'm sure there are several alternate business models that ISps could employ that would result in fairer, more even-handed access and pricing.

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.

But that would mean...

[deoz]

that they would charge the current $60-$70 for low bandwidth customers who don't mind the throttling, and those of us who have 2-4 torrents going at a time are gonna pay double, or more; and the only one that wins is the provider. I seriously doubt this would produce cost savings for any consumers.

Pay as you go

[jockeys]

honestly, internet access is very nearly a commodity, why not bill it as such?

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.

Re:who cares about business models?

[nacturation]

Compared to the insanity of last year, having an all-normal day would be one hell of an April Fool's.
 

Re:first post

[Anonymous Coward]

If you're getting charged because you're using more, you're exactly the kind of person that is overusing current resources. Switch ISPs, go to a hosting company, or find another way. You're making the experience less for the rest of us that only moderately use our connection and raising our rates. The low-use users are subsidizing you.

Is this a serious question?

[carnivorouscow]

I know I'm risking what little karma I have as a new poster but this question seems bizarre. Throttled connection speed is primarily a US problem and has a lot to do with the telecoms not keeping their promise to Congress to create a fiber optic network across the nation. Now they're reaping what they've sown and are trying to create an excuse to pass the buck to their customers rather than fulfilling their obligations.

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.

Summary is not quite right

[NeutronCowboy]

Essentially you pay about $60-70 for a connection that you only squeeze maybe $35-45 worth of usage out of it./blockquote.
From my understanding, you actually pay $60 for a connection that ought to cost you about $600. For what real usage costs, compare the home pricing with business pricing. Speakeasy offers symmetric T1 for $400. That gets you 1.5 Mbit both ways. Get a home connection, and they charge you $50 for a basic DSL connection of 1.5 Mbit down, 384Kbit up. And that's if your connection is good and noise free.

This idea that the actual cost of a connection is $60 is ludicrous. Yes, companies played a dangerous numbers game that didn't account for all the new ways that end users can saturate connections, and they're trying to play catch-up now through questionable methods. But some end-users are also using far more than what they're paying for.

That said, this is no excuse for the sorry state that broadband is in. Monopolies (or, at best, duopolies) are killing the American broadband market. My connection has stagnated at 1.5Mbit (actually ~800 Kbit due to line noise) for the last 8 years, with prices regularly going up for unfettered access. When looking at how connections improved in the rest of the world, I can only believe that a complete lack of market forces could lead to this stagnation.

Deliver Promises.

[headkase]

How about they give you what they promise, set their price against what they actually think it costs and let competition work its magic. Promising what they don't deliver fscks up Adam Smith's invisible hand.

Secret April Fools Joke secrets revealed

[davidwr]

CmTaco: We need an April Fools theme for this year.
CbNeal: Let's be subtle. If we don't do anything, the joke's on everyone who likes pink ponies. I hate pink ponies.
CmTaco: Ingenious. I like it.
CbNeal: Bwuahahahahahaha
CmTaco: Bwuahahahahahaha

Re:first post

[calebt3]

No, the low-use users are simply not using all that they paid for, and Comcast takes advantage of that fact.

ISP can't say one thing and deliver another

[gnasby]

The crux of the problem is that if an ISP says they are providing a "3MiB/s-down with 300kb/s-up" connection, that is what they should be delivering. You can't sell something as one thing and then not deliver it - this is called fraud.

If they can't deliver at the speed they sell it as, then they shouldn't be allowed sell it as the higher speed.

The fact is that they want to be able to promise one thing and then reneg on the delivering the goods. Why do we let them get away with this?

Graham

Accountability?

[jc42]

One major problem is: How would I know that I'd been charged fairly?

In my experience, when I get details of my net usage, there's a lot of stuff there that I can neither control nor account for. Thus, most browsers honor a page's request to refresh it every N minutes, and don't give me a way to turn it off. Any browser that's running can be using bandwidth without most users being aware of the fact. This is especially true for pages that include advertising.

For a while, I had a smartphone with wireless net access. Even when I didn't use it, it ran up packet charges. When I asked, I was simply told that the networking software sends packets on its own. "That's how it works." It's not obvious how a customer can challenge something like this, except via extremely expensive lawsuits.

And what about that advertising? I didn't want it, but it comes "free" with the content that I wanted. Would I be charged for downloading the ads? Of course, I would; what a silly question. Even (or especially) the flash ads. Yeah, I have flashblock installed, but not all browsers honor it, and not all users are aware that it's possible, so this is a potential source of large charges by the ISP.

But the fundamental question is: When my ISP tells me I used X gigabytes last month, how do I know they're not just making up a number? What tools are available that will tell a customer exactly how many bytes of bandwidth they actually used? And if this number differs from the ISP's number, would the accounting tools' data stand up in court?

Unless you can answer this, a pay-per-byte scheme is merely an way for an ISP to charge customers whatever they like, and the customers have no recourse other than to terminate the service entirely.

Re:who cares about business models?

[jollyreaper]

Compared to the insanity of last year, having an all-normal day would be one hell of an April Fool's.
 

But I'm ready for it now! This is like watching what's supposed to be a horror movie, you're all ready for the jump-scare, the woman is walking around in a dark house in her panties looking in all the creepiest rooms, opening cabinets, peeking behind shower curtains, and nothing! Not even a cat jumping and screeching from some impossible location no cat should be in.

Finally I'm ready to not get suckered on April Fools and they sucker me by canceling it. Bastards.

Re:first post

[shaitand]

'And that, of course, is why most Slashdotters don't want pay-as-you go pricing: They'd be at the top of the usage list and so would pay accordingly.'

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.

Re:first post

[shentino]

"No, the low-use users are simply not permitted to use all that they paid for, and Comcast takes advantage of that fact."

Fixed that for you.

Re:first post

[Wavebreak]

It's exactly this kind of thinking that the ISPs use to justify filtering p2p and whatnot, and it's completely wrong. You pay for a speed of X, then X is the amount of bandwidth you should be allowed to use. If you're not, that's fine, but doesn't change the fact that those that do are perfectly within their rights to do so. If your ISP doesn't want you to use the bandwidth, they shouldn't be selling it to you. What you use it *for* is irrelevant, they shouldn't even *know* what you do on the interwebs, that's your problem, the RI/MPAA's, and the law enforcement's if it comes to that. Not theirs.

Overpriced to begin with.

[v(*_*)vvvv]

The problem with pay-as-you-go being optional is that the people who use less will opt for it, while others will go with the unmetered plan. This gives no upside for the ISP. Either one or make the pay-as-you-go a premium rate, in which case it won't be cheap anyway (like prepaid phones). Also, there is the whole measuring infrastructure that adds to the things they need to do and will mess up on.

The bottom line is there needs to be more competition, and better infrastructure. The infrastructure needs to be public property and cable companies should be able to compete over shared cables.

I am not satisfied with my cable service or their internet service, but I have no alternative.

Re:first post

[ShieldW0lf]

I personally think internet services are too important to be left to the market, and should be provided by government free of restriction to all people, just like other essential services.

Pay per use just disinclines people to expose themselves to culture and knowledge that they might have investigated out of curiosity but will not pay for sight unseen. This hurts society in profound ways.

The entire "pay per use" mechanism needs to go away forever. We're never going to move from a rationed society to a society of plenty while this meme holds.

Re:first post

[Matimus]

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.

I don't know about your provider, but mine only offers the option to downgrade the bandwidth. If I could downgrade the amount of data transfered per month, it might work for me. Unfortunately, that isn't an option.

It isn't a crime to use the connection, but there is no option for the guy who wants a fast connection but only uses it to for playing games and watching youtube videos, as opposed to say bittorrent.

Re:first post

[XenoPhage]

If you're getting charged because you're using more, you're exactly the kind of person that is overusing current resources. Switch ISPs, go to a hosting company, or find another way. You're making the experience less for the rest of us that only moderately use our connection and raising our rates. The low-use users are subsidizing you.

Overusing resources? Wait a minute here.. Last time I checked, Verizon is selling me a DSL connection capable of 3 Mbps down, 1 Mbps up. They advertise it as such, and I am billed for this service. Am I not allowed to use the service I'm paying for? Should I only be using 1 Mbps down and maybe 100 Kbps up? Or, perhaps I should only be using it in bursts, 3-5 seconds per burst with a suitable wait interval in between. Kind of how the typical web browser works.

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.

Re:Taxes

[sm62704]

At the risk of getting into the same tired argument with the same slashdotters I argued with yesterday about health care*, I have to agree with you. I don't believe natural monopolies like roads and electricity should be left to the private sector. Here in Springfield [wikipedia.org] our power company is owned and run by the city government. Our rates are the lowest in the state, and our electricity is the most dependable.

-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.

Re:Very simple solution

[Wavebreak]

If they throttle you, and CLEARLY tell you so before you buy, then that's fine. I wouldn't buy a service from them if I had a choice, but it's fine. What I have a problem with is selling you bandwidth and not delivering. And resorting to the "you're degrading other people's service" bullshit. You use what you pay for, it's that simple, and if it hurts others then it's the bloody ISP's fault for making promises they can't keep. Not yours.

Re:Such a great deal.

[ncryptd]

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.

Based on this, I assume that the US is different than Europe (or at least Germany.) I currently have a couple servers in a datacenter in Germany, and I pay _way_ less than $100/mbit -- more like $15.xx/mbit (after conversion from Euros). And it's not bottom-of-the-barrel bandwidth either -- I have reliable, very low latency (around 10-20ms) pings to most of Europe too.

Bandwidth seems to be _far_ more expensive in the US, both for residential lines, and for servers. (I could be wrong on this, as I haven't bought bandwidth in a US datacenter in a couple years.)

As for what business model should the ISPs use... well... for starters, adopt the business model of clearly stating exactly what your accounts do and do not provide. If you say "unlimited", make sure you really are selling unmetered connections. Don't say "fair use policy applies" -- say "customers on this plan may transfer up to ___ GB per month." Don't manipulate people's traffic -- that includes faking RST packets to hurt BitTorrent, but it also includes manipulating DNS queries to point unused domains to your "parking" (read: spam) pages. Don't prevent outbound access on any port -- in the US I was shocked to find that the ISP that serviced the building I was staying in blocked all outbound connections on ports 25, 587, and 2500. If you start blocking ports, you're not providing an Internet connection -- you're providing a limited form of Internet access. Basically, the ISPs should adopt the model of actually providing what they claim, and not treating their customers like children.

Or pocket the money

[tlambert]

Or pocket the money and not lay any new cables anyway, which is the most likely thing to happen.

The problem with these companies is that the infrastructure should be publicly owned. Then if Comcast doesn't want to provide the service you want, you can fire them and hire someone who will.

The problem comes from municipality granted monopolies for payola from the companies who want the monopolies. The municipality gets a chunk of money that it can spend on something other than the service, and the company gets to wield monopolistic power and get away with providing an inferior service with no fear of the consequences of doing so.

-- Terry

Pay as you go is being blind to the future

[edmicman]

Come on, what is wrong with a lot of you?!? Sure, at this point in time a minority of users might be using the majority of the pipes. "Tax the heavy downloaders!" you say. Have you forgotten that Microsoft (X-BOX Live and Marketplace), Sony, Apple (HD movies), Joost, Tivo, Netflix, Amazon, etc. etc., all want to push more and more bandwidth intensive apps and uses?? Sure, Joe average may only use 5GB now with occasional YouTube videos. Maybe $15/mo would be good for him. But if the big players have their way, and they will, Joe will be watching, buying, and streaming HD video and games in the near future. 5GB ain't gonna cut it. The ISP's would love to knock everyone up to a "high tier" service that's $100/mo, but that sucks if that's the entry point just because the ISPs have milked this cash cow as long as they could.

ISPs creating tiered service levels is only them trying to prevent the inevitable - that they are being pushed into only providing an on-ramp to the Internet, and that's all. We're in the middle of a revolution in how content will be delivered, this crazy notion of tiered service levels is only going to mess that up. Of course, it will be steamrolled by innovation in the field.

It's like a small town experiencing a population growth, and wanting to turn Main St. into a toll road to discourage new citizens. Tiered pricing isn't designed to make things more fair; it's designed to discourage those at the top end and make those at the bottom end feel like they're getting a good deal.

We're already seeing mobile phone service becoming a commodity, with carriers offering true unlimited service after years of nickel and diming you for each partial minute you use. Are the cell carriers going to start complaining that everyone is actually talking constantly 24/7 and using up their lines? No, they'll build out more infrastructure to meet the demand. Why would the ISPs go the opposite route??

Re:first post

[RobBebop]

What about the option of borrowing wireless from a neighbor? I am a light browser who would be more than willing to go without Internet at home (with knowledge that I can go to a coffee shoppe if I *really* need something online). However, my neighbor pays for his access and doesn't mind that I utilize the connection a little bit at night or on the weekend. And the price is *much* more reasonable than paying Comcast $30-50 per month for "premium access".

Which -- I think is the entire point. $50 per month is TOO MUCH for somebody who absolutely positively could live without the service... and there is no $10 per month option for somebody who is only interested in downloading 20% of the amount of digital information as the guy who wants to run BitTorrent while he sleeps.

I would gladly give Comcast $10 per month for the amount of home internet use that I do. And if I get a "Error: Usage exceeded" during the 3rd week of the billing cycle -- then I would consider upgrading. But with only the "overpriced" option to choose from, I choose not to subscribe.

And frankly, this suits Comcast just fine, because there are plenty of people who are completely willing to pay for the $50 price point so that they can continue to run their business.

As an example: some people "need" internet so they can work from home 2-3 days per month. If they save 2 hours of commute time by connecting from home - guess what? The $50 connection paid for itself - because their time is probably more valuable to them then the cost and convenience of the connection.

Re:first post

[NerveGas]

It's not a problem of cables, it's all about pricing.

Go out and find out how much it costs to buy, say, 100 megabits of real, honest, unlimitted, *guaranteed* bandwidth. Divide that by 17, and look at just how much you would have to charge users taking up a full 6 megabits just to break even. Then factor in the cost of your network and maintaining it.

Whether their business practices are honest or not (often, they're not, as they don't tell you what they're going to do) is irrelevant. People who think that it's their right to max out a multi-megabit connection for the cost of a couple of lunches need to wake up and join reality.

If broadband companies don't limit user's use, then there are only three eventualities: Either service will suck for everyone, everyone's prices will rise greatly, or prices will rise for those who use the most. There's no other way for the company to stay in business without something subsidizing them. When you look at countries with ultra-cheap broadband prices, they're subsidized.

Re:Not really the point...

[rmerry72]

What if you charged on a per bit basis just like the electric or gas company? ... More bandwidth, more bits/month getting to the user, the more money the user pays to the ISP.

This is essentially the model used in OZ now, only you prepay for a block of GB as part of your monthly stipend, then your either capped or pay an excess useage charge depending on your ISP. It hasn't helped and didn't lead to lots of investment in infrastructure - we still have some of the worst broadband facilities and the most confusing plans in the world.

Part of that is because we are also caught with a private monopolist: Tesltra. Government telco sold off in chunks over the last decade that owns the last mile to just about every property in the country. And they don't want anyone using it unless they can charge a "fair" (read exorbitant premium. Part of it is the fact that most people undervalue broadband, ie they won't pay more than $XX a month and yet want everything.

I've often thought a pure dollars per gig model would work better, rather than a prepay in blocks and if you don't use it you've done your doe. Recently I've opted for excess usage plans, so I have the option of purchasing more GBs. Problem is these are usually price anywhere from $3 / GB to $14.95 / GB or more. Kind of places a value on those movie torrents or Ubuntu upgrades. Don't feel like paying $10 in bandwidth charges for every Ubuntu distro. :-(

But think of it this way. Its hard for the average Joe to make a rational decision on what a GB is worth, and how much they'll need. How many GBs will you need to surf the web for the month? What if you're surfing YouTube a lot, or MySpace? How about the newspaper that refreshes every 10 minutes sending you all there ads again? Will you visit media intensive sites? Will you tolerate ads anymore? How can you evaluate cost when the measuring unit on a user pays system is beyond your understanding and can differ by a factor of 100 in the space of 3 clicks? How do you plan your monthly budget under those conditions?

Or another way. Petrol is priced by the litre, but most people see the value of that petrol in the number of KMs they drive. That's an easy model because KM/litre is fairly constant for all driving conditions and roads and even fairly uniform for most cars. Got a big car pay a bit more per week. Drive more KMs to work, pay a bit more. But not 100x more!

How would you price petrol if the efficiency of your vehicle changed by a factor of up to 100 on each road you took? 2 ltr / 100 KM on the Pacific Hwy, then 134 lt / 100KM on Falcon St, then back to 12 lt / KM on Military RD, then 0.5 lt / 100 KM on the Spit Bridge? How do you budget your weekly petrol spend under those conditions? How do you plan a trip to the City next Friday night (all of 12 KM).

Re:Or pocket the money

[electrictroy]

A company that "pockets" the money rather than invest in laying new cable to high-demand customers... ...is a company that will lose customers to the competitors (Verizon DSL, FiOS, Dish, Netscape). Comcast would be extremely foolish to follow the "don't upgrade; pocket the money" paradigm, but if they do, then you can "vote" with your dollars and go choose somebody else.

Re:Or pocket the money

[Blastercorps]

It's been said many times before. Very few people HAVE a choice other than no broadband at all. At home I am lucky to have the choice between comcast and verizon. Few people in my area have that choice. And this is the problem. If there was consumer choice then comcast would either adapt and provide the service they advertise/sell or they would die. But there isn't, so they don't.

Re:Or pocket the money

[Original Replica]

Or pocket the money and not lay any new cables anyway, which is the most likely thing to happen.

That might not hold true if they can only charge for the number of gigs that they have actually supplied and there was demand that couldn't be met because of insufficient infrastructure. The problem under the current system is that the ISPs aren't losing potential sales because of thier failure to keep pace with demand. They get the same flat rate regardless of what they supply, tie the money directly to the amount of content delivered and the ISPs will do everything they can to get as many gigs to click through your internet meter as possible. P2P and YouTube will be their new cash cows.