More Sidgemore on per-bit pricing

Sat Dec 5 20:22:21 UTC 1998

On December 5, 1998 at 15:05 dts at senie.com (Daniel Senie) wrote:
 > Barry Shein wrote:
 > > 
 > > One possible positive effect (for the consumer) of "per-bit" pricing
 > > is the opportunity to buy larger pipes but only pay for what you use.
 > > 
 > > Right now flat-rate pricing mostly assumes you're going to, within
 > > some statistical model, actually use the bandwidth you get, or
 > > certainly that someone buying a DS3 is going to use a lot more
 > > bandwidth, on average, than someone with a DS1.
 > > [Rest of post deleted for brevity]
 > 
 > I wonder if the northeast is more expensive than elsewhere, but from my
 > recent shopping for T1's for myself and my clients, I find the cost of
 > the service over a T1 isn't the budget buster. For one location, all T1
 > circuits (before buying IP service, just the telco charge) is $613 a
 > month. To another location, the circuits are $900 to $1500 a month.
 > Adding $500 to $1000 on top of that for full-rate service, vs. adding
 > $200-$500 on top of that for "burstable" service just doesn't generate
 > much excitement.

I don't think the model becomes very exciting until you model it for
DS3 and beyond, as you say below that there's not enough money
involved to get excited about.

But even at around $1K/mo for a T1 flat-rate, simple extrapolation
puts a 1gb line at $1 million per mo, even if there's a 50% discount
for that, $500K/mo, the customer base would be somewhat limited. Even
a 155Mb/s ATM calculates to around $100K/mo using straight
extrapolation. Being able to get an atm line in for, say, $10K/mo and
then paying the burstable rate might seem very attractive to some.

 > Until the base telco circuit prices are lowered dramatically, the
 > pricing of packet service over them, while not "noise," is certainly
 > less interesting.

This is certainly true, and no doubt something someone in Sidgemore's
position is considering since Worldcom does local loop or is certainly
capable of affecting local-loop pricing.

 > Now, if the whole circuit, T1 and IP packet service, were all priced on
 > the basis of traffic, that'd be interesting. An underutilized T1 would
 > incur some small base charge, plus traffic/usage increments beyond that.
 > That'd be quite attractive, though I doubt the phone companies would
 > think so.

Exactly my point.

-- 
        -Barry Shein

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