RE: ISP service pricing models

["tim clifford" <tjc@lacunanet.net>]

> 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.
i'm not sure this works, if my tier n+1 (i'm n) wants to charge me more for
the first than the second then i'll buy the second t1 from another provider.
there's also "tiered" and "burstable" options, which reflect the isp paying
for what they actually use.
>
> 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.

i'm trying to get some independent views of this, but clearly one piece left
out is the notion of oversubscription. the backbone side of this ISP will
have some fraction of the subscriber side, usually something like 6 or 8:1.
So several dsl 2Mbps connections would require a single DS1.  I've said
often that bit pipe business isn't that bad  ;-).


> 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.

this is true in spades, the business case was always the hardest thing to
drive through in the early days of Internet service.   i believe this
discussion is important because it drives the set of requirements likely to
come from operators.  for example, the migration from best effort to
multiple qos in the internet has been driven more by lack of business case
than by technology.
>

Tim Clifford, President and CEO
Lacuna Network Technologies, Inc.
5257 River Road  #635
Bethesda, MD 20816
office: 703.812.8560  fax 703.812.8571
mobile: 301.674.0373 email: tjc@lacunanet.net

> -----Original Message-----
> From: owner-more@ops.ietf.org [mailto:owner-more@ops.ietf.org]On Behalf
> Of James Kempf
> Sent: Friday, June 29, 2001 12:15 PM
> To: James.Kempf@Sun.COM; Chris.Burke@motorola.com; more@ops.ietf.org;
> takeshita@dcl.docomo-usa.com; Roger.Venning@team.telstra.com
> Subject: ISP service pricing models
>
>
> 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
>