News - Pay for broadband per megabyte says Verizon CTO

[Saracen]

OK I just noticed this on the main page so one more reply - the point I was making about the swimming pool is that no-one, to my knowledge, minds if a neighbour fills a pool, even though they are getting better value for money than the rest of the street or whatever. ....

Water companies have the power to force homes with swimming pools (of over 10,000 litres capacity) to switch to metered charges. They haven't yet done so aggressively, but as water charges go up, expect to see this coming. Oh, and ponds too.

[aidanjt]

It is a close-ish analogy but with electricity it's a bit different - if it were free people would draw massive amounts and massively overwhelm the grid. With Internet, it's in a way free now (in that you don't pay for how much you use) and it copes just fine - people don't all download at the same time. Like what I said before - it's not broken so don't fix it. They say they are doing it to get more money to improve the network but they've managed alright up to now haven't they? So yeah there are more people using it so more equipment is needed but because more people are subscribed that means there's more money to do it with. I fail to see why he thinks his statement makes sense - it doesn't to me...

No, not at all. Electricity has almost an identical infrastructure type. If you overload the electrical grid it gets bogged down and everyone experiences a brown/blackout. The exact same thing happens with the tubes. Routers get overloaded and dumps packets like it's going out of fashion.

But you're not paying to use the infrastructure, are you?.. You're paying for your *consumption* of electricity. The grid is merely a delivery mechanism, the carrier, the cost of maintaining which, is calculated into the Unit value. Likewise, with the internet, you're paying for your *consumption* of bandwidth. Both electricity and internet bandwidth have a pound value attached to the production of those resources. It is the *consumers* of those resources who pay for it. Charging by the Watt/Byte/Litre/etc is the only *fair* method of recovering those costs. Flat-rate consumption of anything is guaranteed to result in inequality and inefficiency.

Re: earlier 'p0rn' comment.
It was average forum humour. Take it as intended. i.e., not seriously.

[TheAnimus]

OK I just noticed this on the main page so one more reply - the point I was making about the swimming pool is that no-one, to my knowledge, minds if a neighbour fills a pool, even though they are getting better value for money than the rest of the street or whatever.

Try it.

When the leaking water infrastructure that is Victorian means you are subject to hosepipe bans etc.

But no one is investing enough to upgrade the pipes to stop this leak, and allow them to send more water. It then becomes chronically un-fair.

I just can't see your argument that you should be allowed to use as much of this commodity as you want, without paying the full price!

[nichomach]

We disagree; I would argue that we pay for capacity, and that it is perfectly possible to stratify and control products based on that to ensure fair access. Indeed, bandwidth throttling on the basis of FUPs avoids your black/brownouts neatly, while still preserving a flat rate access model and certainty of costs.

[TheAnimus]

but you don't.....

Bandwidth is far more complex than that. The cost of sending a packet to South Africa, is wildly different to New York.

[nichomach]

but you don't.....
Bandwidth is far more complex than that. The cost of sending a packet to South Africa, is wildly different to New York.

Do I assume, therefore that you'll be arguing for variable pricing depending on where your packets are being routed to? From? Or via? Unless you are, your point doesn't impact on the argument at all.

[Arthran]

Do I assume, therefore that you'll be arguing for variable pricing depending on where your packets are being routed to? From? Or via? Unless you are, your point doesn't impact on the argument at all.

Net Neutrality at its finest

[arthurleung]

No, not at all. Electricity has almost an identical infrastructure type. If you overload the electrical grid it gets bogged down and everyone experiences a brown/blackout. The exact same thing happens with the tubes. Routers get overloaded and dumps packets like it's going out of fashion.

But you're not paying to use the infrastructure, are you?.. You're paying for your *consumption* of electricity. The grid is merely a delivery mechanism, the carrier, the cost of maintaining which, is calculated into the Unit value. Likewise, with the internet, you're paying for your *consumption* of bandwidth. Both electricity and internet bandwidth have a pound value attached to the production of those resources. It is the *consumers* of those resources who pay for it. Charging by the Watt/Byte/Litre/etc is the only *fair* method of recovering those costs. Flat-rate consumption of anything is guaranteed to result in inequality and inefficiency.

Re: earlier 'p0rn' comment.
It was average forum humour. Take it as intended. i.e., not seriously.

Routers get overloaded, yet, but there is no cost associated with the extra bytes going through the router, unlike electricity which if you push more current you get more losses (squared).

For example it cost £100 to maintain a 100M shared connection with 10 ports, charge 10 users each £10 to use the connection. If the users are light-users it just get wasted. If the user think they only need to pay £1 because they barely use it, who is footing the rest of the bill?

BT used to charge a port cost and have a fixed contention ratio. That system worked fine a couple years back, then they changed to usage based charging (so that ISPs can cram more users in the same pipe). See what happened? Worse customer service, more capping, and unreliable connection.
Just look at how quickly the internet speed doubled back a couple years back, I remember going from 512K -> 1M -> 2M like 12 months per step. The grow is now much slower. Back in the days you get max speed regardless of which ISP you're on, anytime of the day.

[Saracen]

We disagree; I would argue that we pay for capacity, and that it is perfectly possible to stratify and control products based on that to ensure fair access. Indeed, bandwidth throttling on the basis of FUPs avoids your black/brownouts neatly, while still preserving a flat rate access model and certainty of costs.

Whether we are on a flat rate or a metered charge, we all pay for capacity and we all pay for usage. The difference is how the pricing model works.

This is a fixed versus variable cost argument, and any business I can think of has both, and both are reflected in pricing.

For instance, a fish and chip shop has fixed and variable costs. The costs of their equipment are (relatively) fixed. So, at least for a given period, is rent, insurance, and so forth. But you pay for that when you buy your fish and chips. They've just amortised it over a period, and built-in an average element.

The cost of the fish, staff costs and electricity are obviously all variable, though some vary more easily than others. And you pay for those in the price of your fish.

They could offer a flat-rate charge, where every customer can have as much fish and chips as they like for a fixed monthly fee. They could also offer a fixed rate like that, but capped to 10 portions a month. I suspect they don't because for a product like fish and chips it wouldn't work commercially. But they could.

That's the point that those arguing that a metered rate is fairer are making.

Both infrastructure and service provision have both fixed and variable rates. How you define prices, regardless of whether it's a flat rate or metered rate, both fixed and variable costs will be included. The difference is that with a metered rate, the more you use, the more you pay. With a flat rate, not only are all customers charged an element of the fixed costs, but the variable ones are averaged out. Of that flat rate, an element of it covers the total cost of providing adequate capacity to service demand from both high and low volume users.

The point aidan is making (as I understand it) is that even once you have the capacity in the network, providing a service has a cost. Each marginal unit provided has a cost, because as usage goes up, so does cost. It isn't necessarily in direct proportion, and it certainly isn't linear, but it goes up. On a flat rate charge, those variable costs are averaged out to come up with baseline costs, and prices need to be higher than that or the ISP might as well pack up and go home. The flat cost therefore represents an element of fixed cost and an averaged element of variable costs that doesn't reflect usage.

The question is whether that's what we want or not, whether it's fair and whether it's right. Another analogy (and as I said earlier, analogies only go so far) would be the income tax system. Consider two households, next door to each other, and in both, husband works and wife doesn't. In both cases, husbands do identical jobs in the same company for identical pay. Household 1 has 4 kids, and household 2 has none.

If they earn the same, they pay the same basic rate of tax. Yet, household 1 puts a greater load on the system. It has to provide 4 school places for 11-16 years (or whatever), it has to provide medical facilities for 4 kids, and so on. And on top of that, household 1 gets benefits for having the kids that household 2 doesn't. Of course, long-term, the situation reverses and household 1 has produced 4 hopefully productive members of society that will in turn get jobs, earn money and provide the tax revenue that keeps the country running while both sets of parents are drawing their pension.

It therefore might be desirable to have a flat rate not dependent on usage, be it schools or broadband, and it might be that a flat rate is desirable either because it's easier to market or because metering costs are too high to be justified. That will change if the costs of production and supplying the service go up, or if other factors (such as environmental concerns change, as with water) where the pricing mechanism is used to shape consumption.

About the one thing that's certain in all this is that this type of argument is never straight-forward and, like EU membership, will have benefits and drawbacks and it's a case of deciding which outweighs which, and which is fairest, and by how much and on whom.

[jimbouk]

I remember going from 512K -> 1M -> 2M like 12 months per step.

And then going to 'upto 8meg' which turned out to be slower than 2meg in terms of actual usage and latency. The overloading of lines, high contention ratios and poor service surly are indicative that bandwidth is a very finite resource.

And again people, please read the actual quotes from the article. What is being proposed in America already exists on many ISPs in the UK by charging when you go over the allocated amount of bandwidth. Reduction in line speed as mentioned is an alternative wallet friendly approach taken by other UK isps.

[arthurleung]

And then going to 'upto 8meg' which turned out to be slower than 2meg in terms of actual usage and latency. The overloading of lines, high contention ratios and poor service surly are indicative that bandwidth is a very finite resource.

And again people, please read the actual quotes from the article. What is being proposed in America already exists on many ISPs in the UK by charging when you go over the allocated amount of bandwidth. Reduction in line speed as mentioned is an alternative wallet friendly approach taken by other UK isps.

When they introduced 8Mbps BT removed the CBC (I had that on 2Mbps Zen) and changed everything to UBC. CBC had a fixed contention ratio of <50:1, while UBC does not (probably run somewhere around 200:1). That was ALSO the time that the price war was in full force.

Taking the average bandwidth usage back in the days its certainly much cheaper to use UBC than paying a fixed port cost to BT (CBC)
http://www.ispa.org.uk/press_office/page_111.html
As they could cram more users to the pipes 5 years ago.

Obviously nowadays the average bandwidth usage go up a couple times, and it also cost a couple more times to use UBC pricing (whether BT reduced price I don't know, haven't been paying attention since I moved into halls / use Be LLU after that). Its either price hike (much lower allowance for slightly less money, then slap on the per GB price, or hike the per GB price, or kick the excessive user, or increase price on top tariff) or screw the users with FUP and bandwidth shaping. Obviously the later one is less apparent to the users.

I had to say this was probably a conspiracy by BT. All ISPs had to follow suit or lose majority of the low-usage customers, and how they're suffering from it.