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ACA claims metered pricing is the only sustainable pricing model

Consumers continue to be outraged when cable companies try and move from flat fee models for internet access to tiered pricing plans based on usage. Early dial-up ISPs tried the pay per usage plan and found across the board that unlimited usage scenarios were much more popular with customers.

Today, broadband connections around the country for the most part are unlimited and users can download as much content as they want (in theory). The reality is that most ISPs today already attempt to throttle users who use what is deemed excessive bandwidth. At the same time, many ISPs are pushing new tired pricing plans that force users to pay significant fees for each gigabyte of data downloaded or transferred after what are typically very low monthly allotments of bandwidth.

Time Warner was the most recent large ISP to announce trials of tiered pricing that would have seen customers paying $150 per month for unlimited bandwidth as opposed to the roughly $40 per month an unlimited plan costs today. The outrage from customers and lawmakers was much stronger than Time Warner had anticipated and the company announced that it would be dropping its tiered Internet pricing plans for now.

According to the American Cable Association (ACA), metered bandwidth Internet pricing is coming and will be a necessity. According to Patrick Knorr of the ACA, his company, Sunflower Broadband, is already charging customers metered rates for internet access and has been doing so for several years.

The ACA argues that metered pricing is going to be a necessity as demand for bandwidth increases with the adoption of high-bandwidth video services. According to ACA chair Steve Friedman, the metered charges are not intended to inhibit content, but to ensure quality of service for all customers using the service. Friedman says he isn’t sure that Time Warner did a good job explaining that. That rationale is the same used by cable companies when they tried to block certain types of content with the claim that it was to prevent piracy and offer quality service to all users.

ACA President Matt Polka says that while metered internet is in early development, that outcome is certain. Polka claims that there is no limit to the build-outs that ACA members have to do to meet customer demand and with new services coming ACA member simply won't be able to support all of that at $40 per month.

Polka likens internet usage to his heating bill saying that he would like to pay the same amount year round, but in the winter when he uses more, he has to pay more. If Polka's heating company suddenly decided that he was only allowed 4 cubic feet of gas before an overage charge of $2 per cubic foot was assessed to support the need to install more gas pipelines to "ensure quality service," he might feel like the majority of Internet subscribers do.

Knorr insists that bandwidth-based billing is the only way to manage infrastructure and that it is simply a case of raw math that the infrastructure to accommodate the growth in HD downloads isn’t there at this point. He continues saying that the only way to rationalize a business model is to put some of the responsibility on the subscriber.

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RE: They dont get it....
By Oregonian2 on 4/29/2009 3:17:52 PM , Rating: 2
Unfortunately you are not correct (and I hate that you make me defend them).

Your comments are mostly true in terms of the direct costs for the "last mile" connection (even ignoring local routing needs that may go up). But those aren't the total cost of service.

Has to do with where the data is going (or coming from) en masse into/outof the central office. That portion will bear an average traffic load proportional to the total traffic of all connected customers divided by some period of time. If they can get by with an OC-12 but have to increase to a OC-48 (or add additional OC-48's) that'll cost. If the backbone provider (assuming now that it's a separate entity) has to put in more cross country fiber to provide the bandwidth, they'll charge the ISPs to pay for it plus profit.

Having the last mile bandwidth usage go up doesn't increase costs for that last mile, but does in aggregate increase backbone costs for the ISP.

You argue that the ISPs should not "oversell" the lines (technically it's called "statistical multiplexing") but that notion is pragmatically impossible. Don't mean to be nasty, but really it is if you look at the numbers.

With my FiOS, I'm given 0.02 Gbps download speed. Let's assume that my metro area has 200,000 homes similarly equipped (probably double or more homes than that, but not all would be internet equipped at this rate -- but then all business bandwidths would be added to this total and I'm ignoring them).

We're talking about 4-Terabit backbone links from my small area (and would be in multiple directions for redundancy and for routing purposes). Now talk about the 100 Mbps that's been bantered about and we're up to 20-Terabit backbone links to our small area. Imagine large metro areas and the national/international bandwidths required. I don't recall the speeds of the current national backbone system, but I don't think it's available now to handle just our area w/o statistical multiplexing.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA
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