The Great Exchange

Perry E. Metzger perry at
Wed May 27 22:45:19 UTC 1998

Michael Shields writes:
> In article <199805271744.NAA21312 at>,
> "Perry E. Metzger" <perry at> wrote:
> > In the long run, why are we assuming there will be locality of
> > traffic?
> > 
> > It is true that the old PSTN has locality of traffic, but it doesn't
> > have flat rate pricing, or the usage patterns that the Internet has.
> Why are you assuming that the Internet will continue to have
> non-distance-sensitive pricing, when it clearly has distance-
> sensitive costs (ultimately)?

I'm assuming it for several reasons.

1) The price of metering packets by destination exceeds the cost of
providing the underlying service as it stands. This does not make me
think that distance sensitive pricing has a bright future.

2) Long distance carriers have essentially eliminated distance
sensitive pricing for domestic U.S. calls, and at the moment the price 
on such calls is only a hair above the local carrier settlement costs
of 7 cents per minute (3.5 cents per side.) Cellular carriers are
getting into the act, eliminating long distance charges for a small
flat fee. International pricing is also plummeting. None of this leads 
me to believe that the future for metered PHONE SERVICE is very
bright, and you're trying to argue that metered internet service has a 
bright future?

3) It does not appear that moves towards metered pricing have been
well recieved by consumers. ISPs are sticking to their current pricing 
model, although they are often limiting the flat rate zone to
"reasonable" personal usage levels of a couple hundred hours per

In short, I see no economic basis for such metering, and no moves
towards such metering. Maybe I'm wrong, but I doubt that we're going
to see any change in this any time soon.


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