More Sidgemore on per-bit pricing (fwd)

Pushpendra Mohta pushp at cerf.net
Mon Dec 7 20:12:52 UTC 1998


Folks:

While cost of a service and price extended to users dont have to be
correlated, it helps to understand what the costs are.

The cost of carrying Internet services is very destination and
origination specific. Destination/Origination in this context includes
the distance traveled which affects the raw cost of transport, but
also the specific destination/origination country/region where
regulation might affect the cost of doing business.

The argument about billing based on destination being very expensive is
not entirely true. Whether on not they bill on this data, most any one
planning a global IP backbone measures traffic distributions very
carefully, not only for network engineering but also to understand the
cost of business. The granularity required to bill on this data may
have to improve -but it is not a big leap to make.

Lot of what pricing you see is a reflection of the fact that large
portions of the total IP traffic is within the US. It has also been
cheaper for non US ISPs to backhaul to the US and use the US as a
hubbing node rather than build in region networks because of the
monopoly environments. This has also contributed to the US being the
location where the majority of the traffic has been switched. Both of
these trends are changing.  In this new world, the share of costs so
far being borne by non US ISPs and people building global IP backbones
will need to be re-examined.  Many of the arbitrage based opportunities
that build on this "share of cost" or distance insensitive pricing
disparity will vanish. The cost models will reflect new global
realities.

Also, based on the basic wisdom -if the cost of travel is distance
sensitive, you try not to travel large distances- people will start
paying more attention to elegant content distribution architectures
which include caching/mirroring and use of multicast. (Before anyone
picks on this, I understand the win on performance is much larger with
these techniques than any spectacular bandwidth savings. Because the
speed of light is what it is, some of these techniques may be the only
way to fill broadband consumer pipes etc.)


Finally, as to the other discussion in this thread about flat rate vs
metered pricing. If you buy into the basic notion of IP connectivity
becoming a commodity service and look for parallels in other industries
you find that many of the mature ones are indeed metered usage priced.
Many appliances tap into the electricity service in our homes, and we
pay for them aggregated roughly on a metered basis. Within physical
limits, one can use all one wants .. i.e the electricity service has a
"burstable" component. Even the postal service offers a flat rate
(hence the term "postalized rates") within a region and a different one
for inter-region packages. This is further modulated by the cost of
small packages vs big packages that have different service costs.
Why does then paying for many "information appliances" that 
tap into an "IP service pipe" in a similar fashion seem so outlandish ?


--pushpendra

Pushpendra Mohta          pushp at cerf.net        +1 619 812 3908
Vice President            Internet and Advanced Data Services
TCG CERFnet               http://www.cerf.net   +1 619 812 3995 (FAX)




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