What Kind of Alternate Business Models Could ISPs Use? 360
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?"
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:first post (Score:2, Interesting)
A flat rate may be the more economic solution for some of us.
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.
Dual-tiered (Score:3, Interesting)
They'd also have access to a baseline service in unlimited amount, but highly throttled...512Kbit say. Plenty useable for basic stuff, even MMOs and the like, but not for mass pirating. The user could toggle between the modes so as not to waste high-speed bandwidth checking e-mail or whatever.
Re:first post (Score:3, Interesting)
I want to know how much my bill is going to be, and I don't want to have to meter myself. I don't want to have to ask "can I afford to log into slashdot today? Can I afford to download that new distro today?"
And I don't see how "pay per view" is going to stop the ISPs from throttling; if their pipes get full they're going to turn your data flow down to keep someone else from getting completely locked out; perhaps someone else that's even more lucrative than you.
What makes you think you're only getting $35 worth (Score:4, Interesting)
BTW - how much data does $35 buy you? Maybe you're getting $100 worth of data for the $70 you pay Comcast, and you just don't realize it. I would venture to guess that if you divided the entire data stream by the revenue, most slashdotters are getting more bits per dollar than the overall system average. Even if you just camp on the throttled ports, you may still be getting more bits than a dollar of Comcast plant depreciation.
Re:Pay in $10 usage increments, + enhanced service (Score:3, Interesting)
If thats not good enough, they have other plans that go as high as 100 gigs per month or more speed as high as 50 megabit/s (the upload speed is shit on that one though!).
If I think my current speed isn't fast enough, I can up my service to the next step up in speed for 48 hours for 3 to 5$, depending on the difference between the services (to up my 7mb to a 10mb its 3$ for 48 hours).
Its definately not perfect, and that ISP has its own problems with throttling and such, but its still a start in term of flexibility, and its much easier for the ISP to deliver this than something rediculous like "UNLIMITED DOWNLOAD AT 20MB speeds, all the time!". Its definately more honest, at least, and considering the reliability of my connection, they obviously CAN deliver.
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: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.
Re:first post (Score:5, Interesting)
Why screw around with all the 'consumer' level stuff and the headaches that go with it?
Just give us honesty (Score:3, Interesting)
Why not go over to 95th? ... (Score:3, Interesting)
"Pay for what you get" - I agree (Score:3, Interesting)
In general, it seems like the point of "package deals" is to screw the customer. If I buy X amount of bandwidth or cell phone minutes per month and don't use them all, I wasted money. If I use any more than that, they charge me a hefty premium.
On the other hand, consumers should see "unlimited" as a good thing only if they expect to use more than the average person, whose usage the price reflects. If I think I will eat $15 worth of food and the buffet costs $10, it's a good deal for me.
In short: "pay for what you use" is obviously fair. Package deals are an attempt to screw the customer; "unlimited" deals are an attempt to screw the provider. (Who, of course, has already calculated the average use and determined that the house will win.)
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.
Socialism... (Score:1, Interesting)
Re:first post (Score:3, Interesting)
Although I am well-paid I still prefer the $15 a month service.
Of course that service doesn't do much good if Comcast decides to block Bittorrent or Itunes.com, and therefore I think Comcast should be disallowed from doing that. If Comcast feels their pipes are full, let them add a higher tier, collect more money, and use that money to invest in more bandwidth. (That may mean every house has two cables running into it; oh well.)
Business models are useless (Score:3, Interesting)
The premise of the question is wrong. There doesn't HAVE to be a business model at all for ISP:s. Currently, no matter what connection you have, what you pay for is NOT for your big fat pipe, it is for the ISP to run the billing. It costs ISP:s a lot more to employ accountants, collect user data, keep customer databases, marketing and send bills than it costs them to deliver traffic. A tiered internet, or a pay-per-megabit system would just add to the overhead as ISP:s would need to employ more accountants and implement more monitoring systems to track exactly how many megabits their users transfer.
Kind of similar to how Nike shoes doesn't cost many Euros to produce using the Chinese child labour they employ, but are marked up hundredfold. But the case with ISP:s is even more egregious because they are all 100% government sponsored institutions. Governments either built all the infrastructure or heavily subsidized telecom companies to do it. The net is public property and companies really have no moral rights to charge money for it.
Re:first post (Score:4, Interesting)
Rather than throttle P2P, youtube.com, or itunes.com, Comcast should identify their customers who download tons of information, impose a limit on those people, and then tell them, "If you go over 100 gigabytes, you will need to pay $100 a month to gain unlimited downloads." i.e. a Tier system:
$15 == 20 gig
$30 == 50 gig
$45 == 100 gig
$100 == unlimted
The more you desire to download, the more you will have to pay. Vice-versa, the less you download (me), the less you have to pay. That is entirely fair to charge customers based upon actual usage.
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.
Re:But that would mean... (Score:2, Interesting)
There are no explicit tiers; you choose exactly how fast you want your connection to be. There is *never* an overage charge; instead your connection will just become slow. There's not even an automatic monthly fee; you choose when to press the button and get charged. The speed drop is a visible indication of how much bandwidth you're using, which takes the mystery out of it; this could be further improved by a gauge on your modem or in your computer's system tray. People wouldn't be reluctant to use their connections, because they would be in full control. They would never be charged unless they pressed the button themselves, and they would never be abruptly cut off from the Internet either.
Re:first post (Score:3, Interesting)
What about a car that has a speedometer which goes up to 75 mph, but really alternates between 120 mph for 2 minutes and 30 mph for 8 minutes throughout your trip, so that the effective MAX speed is 48 mph?
Highway travel (analogous with video streaming/downloading) would be downright impossible because the minimum speed would be insufficient for that route.
ISPs vs. TELCOs (Score:2, Interesting)
Re:first post (Score:3, Interesting)
Metered usage would be the death of Google et al.. (Score:2, Interesting)
-Users would think twice before clicking on those "marginally interesting news links".
-They would stop using YouTube to watch those bandwidth-hogging "cat on the ceiling fan" videos.
-They would stop editing files remotely on Google docs and start to edit files locally again (in word?).
-They would stop clicking on Google ads since it would be an unnecessary waste of costly bandwidth.
-Google, and all advertisers, would be "fenced off" from the "internet eyeballs" and would start to die off as ad revenues plummeted. (You can't click on an ad you don't see.)
-Millions of news & information websites (that depend on advertising) would also start to suffocate - the smaller ones closing shop first.
-Also, the quality of authored pages would take a severe hit as web site owners cut back on those 'costly' writers (similar to what's happening to newspapers now).
-The whole ecosystem would start to suffer greatly as people held back on internet usage in general (similar to the recession now as people hold back on spending, or driving less due to the high price of gas).
It would be a downward spiral that would be extremely hard to pull out of. Even if ISPs saw the error of their ways and restored flat-rate pricing, users by then would be so used to all their great ad/flash/host blockers that they would have no (individual) incentive to remove them from their browsers. Think about it, if you had the ability to remove commercials from tv, would you ever turn commercials back on again? The record industry has already crossed the line of pushing up p2p usage to the point where those users will never return as customers.
The whole net currently depends on people seeing ads. Most people today have no incentive to install ad blockers since their 'flat' internet-fee covers all the additional bandwidth. The free flow of information and the quality of the net we enjoy today is fueled by this advertising; which, in turn is fueled by users' ability to freely travel the net without an odometer counting each byte transferred.
Metered usage would be the end of the net as we know it today.