Blog Post

Yeah, I'd Like Metered Broadband, Too — If It Were Actually Metered

pgesmartmeter1With broadband, as with other utilities such as electricity and water, people should pay for what they use, according to an editorial in The Financial Times today.  Demand and use of the Internet has risen faster than capacity can keep up, which means that the all-you-can-eat model of unlimited broadband per month no longer applies, argues Andrew Harries, chief executive of Zeugma, which makes equipment that can be used to provide metered service. However, he neglects to explain that the ISPs’ version of metered broadband isn’t priced like your water or electricity, but is instead priced like a cell phone plan.

According to Harries:

A little history might shed light on this topic. In the early, pre-bubble days of the mid-1990s, broadband technology was still experimental. There were a variety of digital subscriber line (DSL) technologies vying for supremacy and DOCSIS 1.0 was still in development and it was primarily technical limitations that resulted in broadband being marketed as a flat-rate service.

Further, with Napster and streaming of high-definition video not even on the horizon, broadband operators believed that counting bytes was more trouble than it was worth. Hence, broadband was ushered in as a flat-rate service.

Broadband wasn’t marketed as a flat-rate service solely because of technical limitations. It was marketed as such in order to get people to sign up for it. This is how companies, even back in the dial-up days, got people to go online and explore. AOL (s twx) stopped charging people by the hour back in 1996. When snappier speeds came on, ISPs had to convince people those speeds were worth it, and so they offered flat-rate pricing and talked about faster surfing. And people took them up on it.

Speed is still a huge element of the ISPs’ marketing, even if many folks can’t tell the difference between a web page loading at 5Mbps and 15Mbps. So why push speeds? Because people can tell the difference between tiers for heavy-data services such as video steaming and large downloads. Carriers may complain that we’re using more broadband, but they are actively exploiting that demand in their marketing of faster (and more expensive) service tiers to customers.

But they want to exploit their customers’ wallets as well. And here’s where I have the biggest issue with Harries’ article. He bases his entire argument about metered billing, when in fact he’s talking not about true meters but about a consumption- or usage-based plan analogous to those offered by cell phone companies. This causes him to back off from his most interesting statement (emphasis mine):

To make matters worse, broadband prices have generally declined over the same period – possibly not fast enough to satisfy some. But when coupled with the increase in average speed, the price-per-bit paid by consumers has dropped like a rock.

From where does the capital come that is needed to expand broadband capacity further? Even the academics that populate “public interest” organisations lobbying for greater net regulation recognise, at least abstractly, that broadband operators need to earn a profit if they are to continue to invest in infrastructure.

Given these circumstances, don’t usage-based billing frameworks make sense?

Whoa. In the first part he’s talking about the decline of prices per bit paid by consumers, but he later switches from his use of the phrase “metered broadband” to “usage-based billing frameworks.”  There’s a simple reason for this. Metered billing is something I can’t argue against intellectually as long as my ISP charges me based on an actual price per bit. I would be paying for my actual usage, exactly as I pay my water or electric company. But carriers would never want to do this because it would reduce their profits.

Instead, when ISPs talk about meters they’re talking about different service tiers that don’t reflect actual usage, but herd customers into set plans where most will be paying a monthly fee for more than they use. And if they go over their tier, they get walloped with fees. Last month when Verizon (s vz) CTO Dick Lynch talked about meters, it wasn’t an accident that he compared the future of metered broadband to wireless plans, which are tiered service plans that have proven hugely profitable.

Verizon in its third quarter  reported 28.3 percent operating income margin for its wireless service, and for more of a hint, check out its statements last year to investors when it introduced an unlimited $99 plan. Basically it argued that the revenue lost from the few who would benefit from the plan would be more than made up by those joining it out of fear that they may go over their minutes.  Of course wireline ISPs want a piece of that.

53 Responses to “Yeah, I'd Like Metered Broadband, Too — If It Were Actually Metered”

  1. John Nicholson

    Brett Glass:

    Where on earth are you that your still playing $100 a meg for upstream bandwidth?

    If you’ll commit to a gig-E port from someone like L3 you can get it for $1500 a month. I’ve even heard about cogent going $1 a gig at similar volumes.

    What’s amusing about this entire argument is that wholesale bandwidth thats NOT involving peering is billed by the port of ridiculous size, or 95% usage. Even if Comcast didn’t have its own nationwide fiber network, or Verizon hadn’t bought UUnet and inherited a massive fiber network, they would still be paying well bellow a dollar per meg for transit.

    Brett, I noticed your a bandwidth reseller for last mile access, while I do currently know $100 a meg is normal for this, its the cost of the build out to the site that is why this is so high and has almost nothing to do with the actual bandwidth. If your in an on-net location, or already have dark fiber between an exchange and where your are going you can get bandwidth at 1/100th the prices your talking about.

    Then again, you said you’ve worked in the industry for a long time and know a lot about this stuff, so I assume I’m not telling you anything you hadn’t already heard right?

  2. Ahhh, here we are in America, land of the free, discussing how to monopolize and screw Americans more. I do have a better idea. Let’s let Norway run our Internet providers. Their Socialist methods have them running much faster and cheaper than our free to screw American citizens free enterprise system.

  3. Kaleberg

    There are actually two ways to buy electrical power. Most of us buy it by the meter kilowatt-hour, but large users buy it by the peak half hour capacity. Needless to say, those large users watch their own usage carefully and will even fire up an inefficient diesel generator or knock part of their operations offline to keep from exceeding their peak quota. Right now, most people buy internet access by peak time unit capacity, but they have no clue as to how many bytes they are using. If the ISPs want to start charging by usage, they should start providing easy to access usage statistics. If they don’t they are just trying to scam their users exploiting the information asymmetry. When QWEST, my local, little family based, ISP, replaces my aging Actiontec DSL modem with one that has a big LCD data usage display, then I’ll start negotiating usage costs. For now, I’ll stick with peak time unit.

    You can see why the ISPs want to move to cell phone like penalty based charging. If they can rely on your lack of information, they can basically offer moderately priced service, but make big bucks on your minor slips and screw ups. The banks make most of their profits this way. Let’s face it, they don’t have the brains to make money by investing it or lending it, or we wouldn’t be bailing them out for billions. One recent scam is transaction reordering in which they process your withdrawals first, then your deposits, even if the latter were performed first. That lets them charge you all sorts of penalties. Another approach is to use balance “holds” to drive you into a negative balance. The back rooms at the big ISPs are probably salivating over this and designing data “blocking” and “pre-allocation” algorithms to drive traffic over the standardized access plan peaks.

    I don’t mind paying for what I use. If they want to put me on a byte meter, great, but make sure I have reliable second by second information so I can shape my demand curve. Otherwise, let me buy by the peak time unit as long as I only have to put up with so many brown outs.

  4. Brett Glass

    Go ahead: keep denying the fact that independent ISPs exist. (Never mind that there are more than 4,000 of us in the US alone.) And keep denying that we’re viable competition. If you make policy based on these falsehoods, you’ll get your wish: a duopoly. And then you will be stuck paying higher prices and be locked into business models you don’t like (such as rate plans similar to those of cell phones).

    GigaOm has, for years, been one of the most misleading and destructive publications on the Internet in this regard. Its writers perpetually deny the possibility of telecomm competition (even though in fact robust competition exists) and then gripe about it. One can only wonder who’s paying it to spread such misinformation. Hmmm…. Looking at the ads on this page, it certainly appears that this site receives most or all of its revenue from Google, whose lobbyists deny the existence of competition among ISPs so as to push through onerous regulations that will perpetuate its monopoly. Could GigaOm just be a bought-and-paid-for component of Google’s propaganda machine?

    • Brett: I’m not sure if you’re addressing me here, but for the record: sure, independent ISPs exist. I never said nor implied otherwise. Also for the record: independent ISPs have to buy their bandwidth from someone else, because they don’t have their own nationwide fiber networks. They’re resellers, k?, And they’re at the mercy of the false market created by the backbone providers, and they’re especially at the mercy of big ISPs who are their own backbone providers and compete for the end customers too. Independant ISPs have to pay 50,000 Quatloos for a gigabyte of data because their backbone providers demand it. And the price is set just low enough to keep the indy from going out of business.

      Big ISPs don’t have to buy bandwidth from someone else. They trade it and sell their surplus, and since it doesn’t really cost the market rate to provide the bandwidth in the first place, they easily come out net plus. Yet their service prices are often higher, and they’re crying to the lawmakers about being exposed and facing new consumer protection laws. Indies are not the bad guy here, but i hope they’re not all sticking their heads in the sand. Are Indies viable competition? Sure, if they stop playing Calvinball with the backbones, and join the public in demanding an end to this capping and metering fraud.

      I’m not qualified to attest to GigaOm’s credibility here, but to be sure, I am not a sockpuppet. I’m an unaffiliated blogger who has a grasp of one aspect that keeps getting missed in these “net neutrality” debates. This month’s talking point seems to be “Let’s talk about what a fair cap would be, America” and “What is the fair metering rate you would find acceptable”, when caps and metering are both abominably unacceptable schemes to anyone who understands what and how bandwidth works.

      • Brett Glass

        Austin, again you are dead wrong and obviously unqualified to speak to the issues. My ISP is not merely a “reseller;” we are a provider of last mile connectivity, and we create that connectivity ourselves.

        What’s more, despite your continued insistence upon the existence of a “bandwidth fairy,” there is no such thing. Bandwidth costs money — whether you buy it or build it for yourself. Yes, there is gouging going on at the wholesale level in some areas, and it is necessary to address this. However, neither I nor any of the large ISPs is sitting on an infinite fountain of free bandwidth. Sorry to burst your bubble. Oh, and by the way, there’s no Santa Claus or Easter Bunny either.

      • Everyone can claim to be an expert on the Internet. That means me, and it means you. I’m confident enough to let my points speak for themselves. Even if I were a recognized industry figurehead, I wouldn’t resort to character assassination and basing my case on my sense of entitlement. I’d continue to do what I am doing now, which is to patiently reintroduce the facts which you keep ignoring in your rebuttals.

        Last mile connectivity is not the Internet. You have to buy your backhauls to the Internet. They (and I hope to heck you do have several) charge you a rate which you’re just able to pay, and you pass the bill along to your customers. That is, by definition, resale of bandwidth. I’m not the slightest bit interested in how you advertise yourself or what misleading industry terminology you favor. The only bandwidth you don’t have to “buy” is purely local traffic like your business customers accessing their co-located Exchange server. Piddling stuff. But i’d bet you watch that local traffic for “events” which you can bill the customers for; never mind that it doesn’t really cost you anything either. You’re playing a similar game as the backhaul barons.

        Your sneering nonsense about faeries, Santas and bunnies has just about completely turned your credibility into mush. It’s not very professional nor persuasive. One wonders if it is merely egotism, or if it is barely concealed terror.

    • Brett Glass

      Those of us who actually are in the business of delivering the Internet to consumers are, indeed, the experts at it. Random commenters on blogs, who whine that they want everything for nothing, are about the farthest thing from it.

      • Ha…. let’s step away from this clumsy flaming tendency of yours, and answer me this: do you have an actual, compelling argument for why capping and overcharging is warranted? Because you haven’t provided any. After I torpedoed your applause for the status quo, you’ve basically just been shaking your fist and insisting we take your word for everything. Taking ISP’s word for the current TOS is one of the main problems in the first place. Those are some mighty moldy laurels you’re brandishing.

        And just to frame the question properly, remember, we’re talking about the abuses of those big ISPs, which unlike your small one, serve both end-customers AND have their own backbones. They don’t have to purchase gigabytes at the cartel rate like you do. Let it not be said that I claimed Mr Glass does not get *billed* for his gigabytes. I have said that gigabytes don’t *cost anything*. The bandwidth fairy may not be giving love to Mr Glass, but it’s almost certain she has stock in Mr Glass’s backbone provider. So we’re not talking about Mr Glass’s position in the Internet ecosystem. We’re talking about those big ISPs who get billed zero (net) for their bandwidth, but not only charge end-customers top dollar for it, they’re eager to openly limit it AND charge more for it as it becomes more “scarce”.

      • Oh, wait… I get it. If the big ISPs manage to jack their rates up, so will thousands of little ISPs like yours. I can already see the email sent to the customers, apologizing for “current market realities” and such. Your backbone providers might jack up your rates -this- much, but you’ll jack yours up THIS much, and that’s good for you and your bank.

  5. I find it amusing that these smaller ISP are the ones bitching about bandwidth costs, while it is the Comcasts and Time Warners of the world who are implementing them.

    99% of ISP may be small businesses, but they probably only serve 15% (or less) or broadband customers. IN fact, in a major metro area, I’ve never HEARD of an individual customer who has an “independent” ISP. Ancetodal, but I suspect most of those ISP are in small towns and rural areas. What they pay to their ISP seems far more critical than strangling their customers.

    • Brett Glass

      “Charlie,” have you done any actual research on the subject, or are you simply pulling numbers out of your, er, derriere? The truth is that there are more than 4,000 independent ISPs, and we serve every major metropolitan area as well as rural areas.

    • Smaller ISPs are not in the same boat as the big monopolies. Small ISPs are running on slim profit margins, and can’t afford the higher bandwidth which the major ISPs *OWN*. Major ISPs are in an entirely separate paradigm. Major ISPs are seeing profits rise, and costs drop. One of the reasons the costs are dropping is because they aren’t being strong-armed into doing many expensive equipment upgrades, eh? The other thing is that bandwidth costs them net nothing, so it’s an expense which doesn’t exist for them in the first place. This will continue as long as they maintain the bandwidth embargo, distract the public with sob stories about “bandwidth hogs” and misleading scenarios where gigs cost some arbitrary amount to provide.

      The only fair way to bill for Internet service is by capacity per billing period. No caps. And there’s no excuse for overselling the network hundreds of times over and then brutally fining customers who simply use a bit more than their neighbors.

  6. Brett Glass

    Why do people continue to ignore the simple fact that there is not “bandwidth fairy” who magically delivers bandwidth for free? Bandwidth costs money, and there must be some way of controlling how much a customer who is paying a certain fixed price can consume. Generally, there are three ways: implicit limits (throttling, shaping, and limits on the type of use); explicit limits (throttle or cut off the user after a certain amount is used); or overage charges (which cause the user to limit his or her own consumption). As an ISP, I favor implicit limits, because they are trouble-free and do not cause sticker shock. They are also fairer to smaller providers. (See my testimony at for the reasons why.) But if implicit limits are outlawed by overreaching “network neutrality” regulations, there will be no choice but to meter.

    • Um, no. Bandwidth costs nothing, except in the cases where two ISPs have a penalty-per-gig in place to keep peering even. The vast majority of all costs is in simply keeping the equipment powered, cooled and maintained. As I wrote, a fully-utilized network costs only a tiny fraction more (due to increased human intervention activity) than a totally dormant one. Think about it. All that elaborate “network management” “bandwidth hogging” and “overage charges” jazz is simply about penalizing customers who make it obvious that it’s time for the ISPs to invest in equipment designed for this century.

      • Brett Glass

        In a word: Bul$#it.

        “Austin,” your assertion that “bandwidth costs nothing” demolishes your credibility completely. I pay about $100 per megabit per second per month for bandwidth. In real dollars, right out of my bank account.

      • I’m sorry you don’t own your own continental network of fiber, Brett. I’m sorry you have no choice but to buy bandwidth from upstream providers who charge you the arbitrary market price, which has no relationship to their cost to provide it. I’m sorry you don’t see the difference between an open market, and a faux market maintained by monopolies to keep up appearances.

      • I think I get it now. It may have cost billions to construct a nationwide fiber network but that entire cost was borne by the first bit that traveled over it. Every bit after that was free or, as you point out, “bandwidth costs nothing” (expect for those pesky operating expenses like power and maintenance).

        I see elsewhere you’ve worked for two ISPs. Evidently not in the finance department.

      • Paleo: think about what you’re saying. You’re actually just arguing that the equipment itself costs something. And that is what I’ve been saying. I’ve also said the power/cooling and maintenance/administration costs something. But those costs are not tied to the volume of data traveling across the wires. Those costs are fixed, and were mortgaged over a desired length of time by dividing the payments among the existing customers. One customer transferring more data than another, is NOT costing anyone more than another. There is no bit factory out there which needs to be compensated for the product which it produces! Remember, it’s been proven that costs are dropping even though prices are rising and new subscriptions have fallen off. It seems to me that costs probably plunged at some point, and we’re simply seeing numbers that slowly reveal the inevitable correction.

        The more customers the backbone provider has, the faster it can pay off it’s “mortgage”… or, the less it can charge each customer. Charging less is out of the question, when you have no serious competition. I argue that the telco’s profits (plus the billions they stole from taxpayers in the last decade to expand capacity… but didn’t) have paid for that equipment long ago. At present, they’re trying to keep their vintage switches running as long as they can, because it saves them the expense of upgrading to far faster equipment that likely costs less to operate and maintain. They dont want to invest some of their sweet, sweet clear profits in new equipment which also eliminates their pretense for capping and overcharging their customers! They’d prefer to pack more and more customers onto those smouldering switches *while* maintaining a state of crisis that serves as a smoke screen for charging more. It’s a bandwidth embargo to drive prices up.

        The backbone providers (including big ISPs which have their own fiber) have apparently kept abreast of the sweet spot, where they can reap the most profit over the long term, and hold off on upgrading as long as possible. This amount was projected atop their legacy equipment fees, inflating the “cost” of broadband by an order of magnitude! Were they entitled to do this? Certainly, in a fair market -with real competition-. However, by tying their tribute to amounts of data (rather than the volume capacity) which they convey on behalf of their customers, they created the illusion that they are a traditional utility. Presently, they have set a straw man upon the customers, who are now ignorantly arguing over “fair” billing based upon consumption. There simply is no variable consumption. The fixed consumption which remains (power and maintenance), does not justify the current high prices, let alone raising them (which is another way to view capping and overcharging). The profit which these monopolies are reaping, plus the customer’s need for speed, means the equipment can be afforded and should have been upgraded quite a while back.

      • In summary, ad infinitum, let us appropriately tie bandwidth provider’s profits to their capacity to provide bandwidth, instead of their ability to create shortages. They should compete to provide customers with the fastest service at the lowest price, rather than the most mediocre in the world, at the highest price.

        At present, they are a cartel conducting an embargo to justify raising prices. They use the misassumption that they are like a traditional utility, so that the ignorant public wastes energy and time arguing over the terms of their own sentences based upon the inappropriate “consumption” yardstick.

    • Brett –
      I’m missing a step in your argument. What is your worry about Net Neutrality vis. implicit limits? Why should allowing me, as your customer, to get unfettered access to anything on the ‘net inherently expose you to higher costs?

      • Brett, I read your ‘testimony’ below, and i’d like to say I commend you on your contributions and accomplishments. But what you wrote proves my point about the applicability of your experience.

        You have never been a bandwidth provider. You have been a bandwidth *reseller*. You are at the mercy of the bandwidth providers who you can reach, and the prices they demand. Your concerns about bandwidth are because your budget makes bandwidth a scarce resource which you must stretch as far as you can make it go. Yes, you have to buy bandwidth by-the-gig, but not because gigs cost anyone money. It’s simply the arbitrary deal you’re forced to operate under.

        Major ISPs are in a completely different league. They own fiber that criscrosses the country, as well as connecting directly into customer’s homes. They don’t need to pay someone else for capacity, they *sell* it. They have a tremendous surplus of it, but they’re facing a dilemma. At this stage, the more they sell of it, the less they can sell it for. That is why I argue that they are embargoing bandwidth, to create a false shortage that allows them to not only maintain current prices, but to increase them without improving services or updating their equipment. There simply isn’t any other scenario that fits the facts.

        As far as the small, noble ISPs go, I would like to see them enjoy “unlimited bandwidth” just like end consumers. The bandwidth peering system works well, though ISPs which deliver asymmetrical service to their customers need to rethink that. Their customers will easily be able to download more than they upload during the course of browsing around the web and watching youtube clips. The solution I propose to that is; symmetrical service coupled with permitting server apps and file-sharing everywhere. If your customers can upload about as much as they download, then your peering ratio is balanced and everyone is happy.

      • Brett Glass

        I absolutely am a bandwidth provider. I provide crucial “last mile” bandwidth, which is essential to connect users to the Internet.

        And, yes, I do have to buy backhaul and backbone bandwidth for my customers. However, so long as these are available to me at reasonable prices, and I can pass those costs on appropriately to my customers, this isn’t an issue. I can still do this via metered, flat rate, or hybrid business models.

      • Good heavens, man. You can keep pontificating all you want, but I think folks reading this debate already get it.

        *You* don’t own part of the Internet backbone. You are a reseller by definition. You have to buy access to the Internet -to resell- to your customers, and you have to pay for that access according to the terms of your bandwidth providers.

        They’re charging you arbitrarily by-the-gig because it creates a faux marketplace where they can pretend that costs force them to raise prices.

        Many major ISPs don’t have to buy bandwidth from someone else. They’ve got their own fiber, and they even sell the surplus. They wear several hats; end-user service provider and top-tier backbone provider. But they’re pretending there is a shortage, and that they have to raise prices to keep generating the public’s demand for TCP/IP packets. It’s an embargo. They won’t light up all their dark fiber, because they would no longer be able to charge as much for high speed connections. Despite having the wealth to afford it, they won’t upgrade their equipment because as long as they can “prove” that their routers are close to being saturated, they can fool lawmakers, the Press and people like you into buying the story about them being in a state of crisis.

        I’m glad you’re “happy” with the arbitrary price your backhaul providers are charging you. Naturally, they’re reading what you write here, and you don’t want to say anything to hurt your indispensable relationship with them. Rest assured, they are reaming you. They know exactly how much you, and others like you, can afford to pay them, and that is the variable that guides the invisible hand of that “marketplace”. You have no idea how much it really costs the top tier to carry data, and you’re a fool for believing that the cost meaningfully varies according to how much data is moving, or what kind of data it is.

        Their costs are fixed, and tied to maintenance, and paying for power and cooling. Their profits are tied to the number of customers they can pack onto their straining old switches (and all kinds of “billable events”), and the only thing that threatens that is public enlightenment and changes in regulation.

        Here comes the light.

  7. Mike Raphone

    When I was employed by a web hosting company several years ago, websites were allocated a certain amount of data usage per month and then were charged for overages. One of the sales managers stated that he liked churn. Why! When a customer was successful and began using their full allocation of data per month he would like to see them go. He would rather have new customers that used only a portion of their allocation. He was also not very interested in informing customer that they would be entitled to a refund for unused months of service.

    If ISP’s want to bill for usage the billing system must be accurate. I do not want to be charged for the overhead created by my cable modem. I also think that maintenance downloads should be exempt from being charged against the customer’s monthly usage allocation.

    • Michael C

      You bring up a good point. How can we trust the bit counting methods used by the ISP or the hardware itself. I think if ISPs are intent on rolling out a meter, then the hardware and software must be certified by some weights and measures regulatory body just like gas, water and electricity.

  8. Good article A faster connection should cost proportionately more, and there should be no usage caps. An ISP that makes more money from faster connections will have incentive to increase their capacity and find reasons to convince their customers to upgrade.

  9. Metered bandwidth does not make since. It does not translate to costs. ISPs do have the revenue to expand their network and continue to do so in markets where competition occurs and they have not yet begun colluding. It is competition that is the issue not revenue.

    The only type of additional cost structure I could imagine on top of paying for the transfer rate is paying for packet priority. This is something that none of them seem to take advantage of. It would require additional hardware, but would seem to provide many customers with something they would pay for even when they wouldn’t pay for more bandwidth.

    I don’t understand how people who “research” and write articles about the internet could ever land on metered bandwidth. It simply doesn’t fit the cost structure of the ISPs and it would certainly be bad for the internet in general. Who wants to watch shows on Hulu when the ISP is chargine you $5 per show in bandwidth just to stream it?

    I’m working on a list and every time I see a journalist push for metered bandwidth I add them to the list remove them from my feeds and don’t read another article from them. It is obvious they are being paid or don’t know what they are talking about.

    • Stacey Higginbotham

      Did you read the article? I’m arguing that people pay by the byte if ISPs really want to push out “metered” service. Presumably along with such pricing would come the same type of regulatory scrutiny that utilities deal with to ensure fair pricing. I’m not in favor of metered pricing that charges people $20 a month for 5 GB of data usage. That’s exactly what I’m arguing against.

      • Yes I read the article, and I’ll agree that if it were to go to metered bandwidth it would have to be by the byte, not like wireless where you pay for x number of minutes and then have penalties on overage.

        However my point is it shouldn’t go to bandwidth metering period. The Majority of the ISPs wanting to go to bandwidth metering do not have any sort of cost structure related to it. Exactly as the wireless companies have no cost structure related to how many text messages you send. So moving to price by the byte for data is going to be arbitrary. They can’t say this bit right here cost them x to deliver, because it doesn’t. The bits are mostly free to them, and the only thing that costs money is the physical cable they run to your home, and the back end equipment to hook it up. That is transfer rate related expenses not bytes of data related expenses.

        It is bad for the internet especially video to have any sort of exact data price related to its usage. Perhaps sometime long in the future with the internet is done growing and changing on a yearly basis. As it stands now if someone knows that a hulu video is going to cost them x to watch there gets to be a discussion of whether or not it is worth watching the video at all, at that price point. I don’t see how it will ever be to my benefit as a consumer to be charged for something completely unrelated to its costs.

        I can certainly see how ISPs would love to have this ability then they just have to agree between each other, informally of course, how much they are going to charge per bit, and then great then end of competition. No more competing to provide users with ever larger transmission speeds. Then as there old video delivery business finally dies and consumers are using more and more bits because they are all watching video online; they can make sure they make just as much money as before. Only now they don’t have to pay anyone for the content, just move bits about.

    • Paying extra for “packet priority” is an unacceptable slippery slope. We’re not allowed to examine our ISP’s equipment, and they don’t divulge detailed numbers. How are we to know that their “Premiere Enterprise Priority” service involves simply *not* running packets through a 20-second delay buffer along with all the other chumps? In fact, there are indications that ISPs are already doing this in the ramp-up to “proving” that neutral networks are “hurting” business. Pay them to take away the hurt. Sound familiar? Fugeddaboutit.

  10. Metering – pure metering as in the power model – works as long as the bill is reasonable. Want to see your power bill become unreasonable? install a swimming pool, and a mini “data center” and a couple plasma screen TVs and you will really begin to notice. Just like the non-stop video streaming, multiple HD movie downloads and other high bandwidth uses, you’ll know what really cost you.

    Nobody has ever refused to toast their bagel because of the cost of the power to do so; it’s “priced below the level of indifference” at any income level. As Om points out, there needs to be some creativity in broadband pricing to encourage use without gouging people who accidentally go over “their bucket”. For example, Blockbuster or Netflix could work a deal with ISPs (in our not-too-distant-non-flat-rate future) could bundle the cost of the movie any “big download” surcharge….or…to encourage non-prime-time use they could make it unlimited “between the hours of 1 am and 9 am” when broadband use is low and your big downloads could be scheduled then.

    But – oh yes – please not the “oops” scenario with data. I neglected to check with Verizon when I roamed into BC last summer. I used my computer as an access point for everybody in the house I was staying in…and then, a day later, it occurred to me to call Verizon, who informed me that it was “0.005/KByte”. that’s right – one half cent per KB…which is $5/MB….and my computer downloading that HD TEDTalks video (250MB) cost $1250, not to mention the other 500MB or so the other’s in the home used…talk about sticker shock. Such experiences are not what our industry needs.

  11. Anonymous

    Metered or tiered broadband is fine with so long as the price is acceptable. Acceptable pricing is a discussion of it’s own. I think everyone today is content with the speed delivered to their homes, mobile has some catching up to do. What annoys the heck out of me are the small caps put on 3G data services and the inability to simply pay for a few extra gigabytes if you go over you limit instead of having to pay ridiculous overage charges per MB.

  12. Bits and bytes are not a limited resource which must be generated by effort, nor are they “consumed” when used. It costs nothing whatsoever to transmit terabytes of data across the Internet. An Internet router costs virtually the same to operate at full capacity as it does when it runs idle (some increases in human intervention and maintenance will occur). There is no basis for charging by data transmitted. The only thing which makes sense is to charge for capacity per month. A faster connection should cost proportionately more, and there should be no usage caps. An ISP that makes more money from faster connections will have incentive to increase their capacity and find reasons to convince their customers to upgrade. Fair is fair.

    By charging by usage, ISPs are maximizing the profit they can squeeze out of old, slow equipment. The system allows them to literally force the customers, who would really like the ISPs to upgrade and offer better services, to pay the ISPs to NOT upgrade. This becomes pure profit which the ISPs DON’T spend on upgrading their equipment. They already got billions from the government to upgrade last decade and didn’t. The money’s vanished. Their aging equipment is therefore publicly subsidized. As long as they get away with all this, they will keep charging more and still never upgrade. They have NO meaningful competition in the USA.

    And my favorite gripe is about “bandwidth hogging”. This makes me want to drive over my modem with a steamroller. It is IMPOSSIBLE to hog bandwidth! We’ve contracted for a month of service “as high as” our provisioning allows. I can probably count on one hand the total number of customers who have ever actually managed to acquire 99% of their contracted service. The ISPs oversell their network. That is not the problem of the customer. It’s like they’re advertising an “all you can eat” restaurant, but giving folks only one pass at the food and kicking them out after 10 minutes.

    • You obviously have no idea about how isp’s work. I own and run one so I have a pretty good idea about the economics. All ISP’s depend on the concept of oversell in order to make their networks and and companies function. I serve 2000 broadband wireless customers. My towers can provide a total of 15 mbit of bandwidth to the approximately 100 customers on each. We count on the fact that no single customer is using bandwidth except during those short periods when they are downloading mail, pulling a web page etc. If we dedicated bandwidth to each customer, we would have to provide both 100 meg to the tower, requiring massively expensive radio units, and about 8 transmitters to handle the connections. Rather than charging 39.95 per month to the user, I would have to charge something in the 200 to 300 range to make this work economically. 99% of ISP’s are small companies who get nothing from the government and have to pay our employees, buy equipment, buy internet bandwidth from the major ISP’s like Sprint and ATT, and deal with all of the government tax, accounting and legal junk that makes running a business so fun in the United States. We can’t raise prices to where we would like them to be as we do all have competition and our costs expand almost as fast as our network.

      • Michael C

        And overselling based on statistical analysis is fine……so long as the customers never experience the effects of it. If they do, then you need to re-adjust your analysis and beef up your network. The airlines do the same thing when they over-book a flight, but that doesn’t stop customers from getting pissed when they get bumped.

      • Bob: I have worked for two ISPs, each in the 10,000-customer range, as well as a major cellular provider, so I do know how these things work. I’ve seen the vintage equipment being used, and heard the management’s attitude towards upgrading, and their conversations about manipulating our customer’s expectations.

        However, my experience and yours don’t quite apply in the context at hand. Both you and I are familiar with relatively small ISPs. Ones where we have no choice but to buy bandwidth “by the gig” from upstream providers, unless we keep our peering ratios under control. But buying by the gig is an artificial benchmark that bears no relationship to it’s cost to the upstream provider. It’s just an arbitrary penalty to keep ISPs peering properly.

        MAJOR ISPs have no trouble keeping their peering ratios matched, since they have their own continental networks and can switch back and forth the way bankers funnel money through tax loopholes. They can sell as much (or as little, really) of their “dark fiber” to break even. Bandwidth price per gig is not a matter they’re concerned with whatsoever. By refusing to upgrade their last-mile networks (and complaining about nonsensical “hogs”), major ISPs are creating a false “shortage” by which it seems fair to the American way of thinking, to raise prices and slow consumption down. Remember OPEC?

        Except that this money still doesn’t go into upgrading because once the “shortage” is gone, they would lose their pretense to charge more. Others have also brilliantly pointed out that these same ISPs are afraid of Internet-based competition with their own streaming pay-per-view video services… which by their existence strongly suggests that there is no real bandwidth shortage at all.

        People need to get this through their heads; the bandwidth shortage is artificial. The ISPs are playing on weaknesses in their customer’s “common sense” way of thinking in order to take advantage of them, and to fool lawmakers. We’ve been *trained* to think of utilities in a consumption basis, but Internet service simply does not work that way.

    • Brett Glass

      You’ve got it backwards. “Bandwidth hogging” is the equivalent of going into an “all you can eat” buffet and not only eating your fill but stuffing your shirt, your pants, and several shopping bags with food to take home. Unmetered broadband is predicated on the notion that there is a natural limit to consumption, analogous to the size of your stomach. But if you abuse this — for example, by leaving the video streaming all day and all night or doing P2P 24 x 7 — the business model simply doesn’t work. And this is bad both for the ISP and the consumer.

      P2P is a special concern because it is a method of shifting costs from the content provider to ISPs (see my testimony at But even constant streaming will violate the duty cycle constraints of an unmetered business model.

      • Well, my analogy and yours don’t quite work, since Internet service is delivered straight to the home, 24/7. So let us suppose that the diners cannot take food out of the restaurant with them, but they can stay until closing time. Thus, the hypothetical restaurant manager closes the restaurant early whenever he feels his PROJECTED profit margin is being threatened. Let us also say he is the only source of food in town, just as the major ISPs are virtual monopolies. So “All You Can Eat(*)” becomes more and more about the volumes of conditions hidden behind that asterisk than the capitolized letters on the restaurant’s marquee.

      • Brett Glass

        Yes, every “all you can eat” option does come with some reasonable rules. No sneaking food out to third parties. No staying in the restaurant for days on end. No filling a shopping bag. No raiding the kitchen.

        And as for your claim that the “major” ISPS are “monopolies:” Again, Bull$#it.

        Even in our small town of 28,000 souls, we have 10 infrastructure-based broadband providers and dozens of non-infrastructure-based ones. You are demonstrating your ignorance of competitive options, not that none exist.