MFS WorldCom/WilTel/LDDS

Tue Sep 3 03:21:54 UTC 1996

>I think you are confusing dialup and leased line capacity planning
>models.  They are inherently different.  If I have a POP in City A

They aren't inherently different.  You run into the same problems
at every level.  8 28.8Kbps dialup modems into a terminal server
hanging off a 28.8Kbps line (as some ISPs have been known to do) has
the same problem as 8 T3 customers off the same T3 provider line (as
other ISPs have been known to do).

>The trend is for flat rate dialup and usage based rates for leased
>line.  Those ISPs that ignore that trend will not last.  The kicker

In industries with competition, customers have shown a preference for
fixed rates over variable rates.  Avis, Hertz, etc tried several times
to introduce milage charges on car rentals in the US.  Some car rental
company always breaks ranks, and "unlimited" milage car rentals return.

A current problem Internet is line capacity only comes in a few different
sizes; small (DS0), medium (T1), large(T3), and extra-large (OC3c).
One reason ISDN is extremely popular is its just a bit bigger than
a DS0, and a lot less than a T1.  Because the next step is so large,
customers tend to stay with their current size long after it stops
fitting their needs.

So-called "usage-based" pricing is just a klunky work around to the too
big a step between sizes problem.  Customers  want something just a bit
bigger than a T1, but don't want something 28 times bigger.  Usage-based
pricing lets customers use something just a bit bigger even though the
provider uses a massive pipe to deliver it.

I suspect when Cisco's 11.2 traffic-shaping hits the streets, you
will be able to buy more "fixed-rate" Internet connections at the
in-between line-speeds providers previously only offered on
usage-based pricing plans.  Sure, some providers may resist initially.
But someone will break ranks, and the others will eventually follow.

Customers like fixed rate prices.  And as bank mortgage rates show,
customers are often willing to pay more for a fixed-rate price than
a variable-rate price. As long as there is competition, ISPs that
ignore that trend, may end up like the car rental places that charge
by the mile.
-- 
Sean Donelan, Data Research Associates, Inc, St. Louis, MO
  Affiliation given for identification not representation