MFS WorldCom/WilTel/LDDS

Michael Dillon michael at memra.com
Thu Aug 29 06:15:47 UTC 1996


On Thu, 29 Aug 1996, Dick St.Peters wrote:

> What research into the growth of telephone, telegraph, and train
> systems immediately reveals is usage-based pricing generating revenue
> to pay for the infrastructure to handle the growing traffic.

It also reveals that pay-per-message (telegraph) is not as successful a
model as pay-per-month (telephone). The same things could be said about
trains (pay-per-trip) and cars (basically flat-rate). Of course neither
cars nor telephone are purely flat-rate models but then, neither is any
ISP that I am aware of.

> The people with a clue are those who can tell the difference between
> predicting the death of the net and predicting the end of the free
> lunch.

The economic models of telephone systems are very complex and it is
difficult to figure out what true costs are to provide service. No doubt
this is because generations of telco employees have been working on
obfuscating the whole thing in order to justify the widespread use of
metered rates.

But one thing is certain. It costs more money to meter and to bill based
upon metering than it does to bill flat rates. Perhaps this is why the CEO
of Canada's largest telco conglomerate chose the following quote from an
economist article to open a recent talk

      The significance of the issues in play was summed up as follows in a
      major feature on telecommunications in the Economist last September
      [1995]: 

“     The death of distance as a determinant of the cost of communications
      will probably be the single most important economic force shaping
      society in the first half of the next century. It will alter the
      decisions about where people live and work; concepts of national
      borders; patterns of international trade.  Its effects will be as
      pervasive as those of the discovery of electricity.”

IMHO the phrase "death of distance" is another way of saying that the
current metered billing infrastructure collapses. And if this happens how
can we be sure that metering itself will survive? Already the costs of
billing are becoming close to 50% of a telco's expenses due to the
plummeting costs of switching gear and other hard goods used in
telecommunications. The best the future could hope for is that metering
survives alongside flat rates but only for higher quality services. This
could mean that metering is only found outside the public global Internet.

You can read the talk by Red Wilson of Bell Canada Enterprises and some
comments by an industry consultant at
http://www.angustel.ca/future/fut.html

Michael Dillon                   -               ISP & Internet Consulting
Memra Software Inc.              -                  Fax: +1-604-546-3049
http://www.memra.com             -               E-mail: michael at memra.com






More information about the NANOG mailing list