The Great Exchange

Fri May 29 13:56:15 UTC 1998

Michael Shields writes:
> I think pricing based on the actual destination makeup of your
> traffic is more fair than pricing based on the assumption that your
> traffic is like everyone else's.

So, this is an issue of perceived morality and not a technical issue?

I think its only fair that everyone pay for the matchbooks they
use. The fact that matchbooks are generally given away these days,
instead of having people charged for them on a usage basis, is grossly 
unfair.

I think it is only fair that everyone pay for the television they
watch on a metered basis. If you watch for ten hours, you should be
paying twice as much as for five hours, right? Its only FAIR!!!!!

I think it is only fair that you should pay twice as much for a Fedex
package going twice the distance, and I'm MAD THAT THEY DON'T CHARGE
THAT WAY, DAMNIT!

Now that we've all figured out how silly this sounds...  Mr. Shields,
"Fair" has nothing to do with it. The business case in all telecom
markets is going towards distance insensitive pricing, and even flat
rate pricing. The cost of providing service is very low, and not
particularly traffic or distance sensitive in reality. For your
average dialup ISP, the cost of payroll way outswamps the cost of your
connectivity -- cost of equipment and payroll together makes
connectivity look small. I would not be particularly surprised to find
the equation is similar on larger providers, although I have
insufficient experience there to know for sure. Certainly, however, as 
time goes on, the cost of the data on the wire is not per se the
source of expense.

The cost of providing detailed billing -- especially detailed by
destination -- is very high. Not only do you need to waste cycles
counting where every packet is going to and from, but you also need to 
transmit that data, store it for years lest you have billing disputes, 
produce software to create detailed bills, operate a much more
advanced billing and collections department which has to handle things 
like inevitable disputes, etc. All this so that you can divvy up what
is, in fact, not even your biggest cost in most cases? All this while
your competitors are offering a service people prefer, namely flat
rate pricing?

Where is the business case for this, Mr. Shields? Why on earth would
anyone be stupid enough to want any of that crap?

We've had "burstable" T1 and T3 service metering for years, and in
this very restricted domain (charging a fairly small number of bulk
users for their consumption) there has been something of an economic
case for that billing model, especially given that many such users are
resellers. What you are proposing is far beyond even this case, however.

> I could be wrong, and I'd be happy to be shown why.  But I think
> distance-pricing has a sound basis, even if it never materializes in
> the market.

"Sound" is a measure of what the market wants. If the market never
accepts something, the notion that it was "sound" is somewhat specious.

Perry