Transaction Based Settlements Encourage Waste (was Re: BBN/GTEI)

Sat Aug 22 19:42:25 UTC 1998

Applying the current model of the telco transaction based settlement to the
current end-user pricing model of the Internet is broken.  There is a major
disconnect between the two.

When a standard telephone call is made one or the other end-user supplies
revenue to the company/organization which supplies thier local service.
Whereas in the Internet today, both sides pay for the privelege of having a
full time open (or long-term part time open) connection to the network.
These Internet end-users do not look anything like telephone end-users.
Any attempt to apply the current telco model to the Internet model without
significant rewriting of one or both will most likely be a taxation upon
anyones sanity.

There is another disconnect within the Internet that should (if it isn't
already) be driving stong change that would most likely invalidate any hack
that is developed on the current model.  Whereas the cost of delivering
packets outside of a small geographical area (call it the "Zero-mile" area)
is based upon milage and bandwidth used.  Currently in the US most
bandwidth is sold at a flat price per Mbit.  Whether or not it's billed
upon usage or billed upon some predetermined level that the user cannot
exceed.  This constitues another disconnect between base cost of goods and
revenues of sales.  As the industry grows more mature, these need to be
tied together, otherwise in the end, the end-user will be gouged in one
manner or another, and the disconnect of COGS versus Revenues tends to lead
toward artificial operating costs.

-Chris