Pay-As-You-Use High-Speed Internet?

Stephen Sprunk stephen at
Mon May 17 22:42:49 UTC 2004

Thus spake "Jonathan M. Slivko" <jslivko at>
> Personally, I would like to see a senario where everyone just pays for
> what they use - it would be a much better system for allowing people who
> don't neccessarily need to get on the Internet at high-speed, get on
> high-speed which will not only increase revenue for the ISP's, but also
> for the customer who can now use DSL/T1 access in a much more effective
> Questions? Comments? Suggestions?

One major disadvantage of usage-based billing is that your revenue is
unpredictable.  With flat-rate service, possibly tiered, you know ahead of
time how much revenue you'll bring in that month and therefore can budget
more effectively (and deliver consistent returns to shareholders).

Another factor is that usage-based billing tends to attract people who use
less than average and repel people who use more than average, at least when
your competitors offer flat-rate billing.  Depending on how you build your
pricing model, this can hurt a lot more than you'd expect.

One can take an important lesson from the telcos...  When the incremental
cost of usage was high compared to their fixed costs, usage-based billing
made sense.  However, today incremental costs are negligible but fixed costs
are high, so logically the telcos are migrating to extracting a fixed income
(to cover their fixed costs) and little if any usage charges for the typical
consumer.  I'm curious where others think we are on that progression, or if
it even applies to ISPs.


Stephen Sprunk        "Stupid people surround themselves with smart
CCIE #3723           people.  Smart people surround themselves with
K5SSS         smart people who disagree with them."  --Aaron Sorkin

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