ISP service pricing models

[James Kempf <James.Kempf@Sun.COM>]

Roger,


>in Australia, Internet style access is split between pay per hour of
>connected time (dial-in), flat rate (dial in & broadband) & volume charged
>(broadband, permanent dial-in), and all models are accepted. There has a
>been a bit of a furore in Australia recently on download limits specified in
>"acceptable use policy" that is associated with flat-rate broadband access.
>As an indication, volume charged fixed connections have tarriffs generally
>in the vicinity of US$0.10/MB. I have seen a consumer GPRS offering here
>that had a rate of ~US$10/MB for the first 200kB in a session and ~US$5/MB
>thereafter. Consumers (apart from those focussed on "content piracy") are
>comfortable with plans that revolve around a flat rate portion for eg. 250MB
>free and volume charged thereafter.
>

I spent some time chatting at the last IETF with a gentleman who owns
a small ISP. What he had to say about pricing was fairly eye-opening
to me.

In the US, an ISP typically gets their first T1 line priced with the
assumption that a maximum of 50% capacity will be used. If they
want another T1 line, they have to pay more than for the first,
under the assumption that they will be offloading capacity and
that both will be running at over 50%, if not immediately, then
soon.

The maximum DSL bandwidth is around 2 Mbps, which is above a standard
T1 rate, so an ISP can't simply incrementally add T1 backhaul as
they get more DSL customers if they want to offer the maximum DSL
rate to customers. Given this, it is not hard for me to understand
why DSL providers such as Northpoint are going out of business.

All this has perhaps little to do with technology, but it seems clear
to me that even if we spend lots of efforts making the technology
scalable, customers won't see the benefit unless the pricing on
both the supplier and the user side is reasonable and scalable too.

Somehow, $10/MB for GPRS service seems a little much. I suspect that
this pricing is designed to discourage use, as was the case with
CDPD. The fear with CDPD was that if the service was priced competitively,
everybody would use it and analog voice service, which is where
the providers were making their money, would suffer. I suspect something
similar may be coming into play with GPRS as well.

		jak