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Summary:

Oregon ISP BendBroadband said recently that it will offer different tiers of service for its customers, ranging from 10 GB a month at speeds of up to 12 Mbps to a Gold package that allows people to use 50 GB a month at up to 16 […]

Oregon ISP BendBroadband said recently that it will offer different tiers of service for its customers, ranging from 10 GB a month at speeds of up to 12 Mbps to a Gold package that allows people to use 50 GB a month at up to 16 Mbps. The more BendBroadband customers pay, the faster their service and the more they can consume. As for the 2 percent of residents the ISP estimates will use more than 50 GB, they can pay $1.50 extra per GB.

In this situation, residents are paying for speed and capacity. As broadband consumers we are conditioned to pay for speed (you could have dial-up for free or $10 a month); paying for capacity, on the other hand, is anathema to most netizens. But Time Warner is implementing the idea in Beaumont, Texas, with per-byte overage charges.

Those who build businesses on the Internet recognize that limiting access to broadband capacity limits the number of things people can dream up to do with that capacity. The average person is unlikely to care about metered broadband because it’s unlikely they’ll ever need (or want) to download more than 12,500 songs or 33 movies that BendBroadband estimates 50 GB a month can provide

But those dreaming of producing the next interactive reality TV show, which would require contestants to upload HD video over their cable modems, will obviously be bummed. Is it a viable business model for ISPs to charge for faster access and ignore the bytes? Unlimited capacity has certainly jumpstarted the Internet economy, but at some point, should people pay to keep it going? If so, which people?

  1. Why is there so much talk about pricing per GB and no discussion about pricing per GB and distance? If bandwith is so expensive, then distance should have a HUGE impact. Watching a video stored in Los Angeles from Stockholm must be a 1000 times more expensive than wathing a video stored in the same town. Is bandwith really that expensive?

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  2. Stacey,

    You’ve hit the nail on the head. When a small minority drives exponential consumption growth on a current residential broadband business model who picks up the check … the majority … or should the minority fund their own usage patterns.

    We see 91% of our residential users fitting into a plan with 10GB/mo, 7% into a plan with 50GB/mo and 1.5% fitting into a plan with 100GB/mo.
    Customers in the 50GB/mo consume about 10 times more on average than the lowest tier while customers in the 100GB tier would consume 25 times more than the lowest tier.

    This is an issue of fairness.

    Frank

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  3. In Australia we’ve been paying for access on two tier service plans since as long as I can remember. So for some of us this model is the way is all we’ve known and the concept of having a connection with unlimited capacity is just a dream.

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  4. @Frank,

    As a consumer I would prefer to know my maximum bill. If I have subscribed to a 10GB plan, I should be able to get high speed service for the first 10GB. If I exhaust this quota, I should still be able to get service at a lower speed, e.g 256 Kbps. Of course, the consumer can also opt to continue to pay for high speed service on a per byte basis.

    The Internet service is a utility in our times and cutting it off completely or sending a huge bill for it will scare people away from using

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  5. Its funny how these things change your perspective. Because I read this and think, well I guess I dont really need your services.

    Everyone says the age of the Mobile is coming. Each device has its own connection to the world. With the 3G and 3.5G services coming to the cell providers it becomes a much better deal to pay for internet service you can use any where (including home) and just drop the old home based service all together.

    First it was the traditional phone companies getting dropped for cell phones. Then another piece went to VOIP. Home internet has never really had a competing technology. But I already pay for cell phones for every member of my family and we dont have a home phone. So I guess we will just be paying for mobile internet and drop the cable connection as well.

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  6. [...] I know that this has been written before, but I’m a bit nervous when I read on Om Malik that another ISP is trying to put monthly bandwidth caps on their users. Part of the attraction of the internet is that no one asks how much you are using. On the other [...]

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  7. Internet service is not a utility. It’s a business. You speak as if you were a socialist. And the usage patterns and the copious amounts of data that people consume has quite simply changed. Thus, the economics have changed. Thus, retail has changed. At least Bend is being honest about it, unlike AT&T or Comcast.

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  8. @Milo, Internet service is a utility! Or near as.

    @Adnan, I like your proposal. Consider the baseline 256 kbps a regulatory requirement. Above that, the market can take over.

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  9. [...] Interestingly, technology hasn’t been at a place where these types of IP-based metered billing models were a viable option. Today, they are, and ISPs are being given little alternative. And trust me, your Internet access bill is NOT going to get cheaper as a result. We’re starting to see basic metered models emerge already. [...]

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  10. [...] have written about Bend Broadband of Oregon resorting to such tricks. Comcast, recently proposed bandwidth caps as well. What it means: get ready to pay more and get [...]

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