On Tue, 22 Jan 2008, Tom Vest wrote:
But even assuming you manage to define a "reasonable" cap, how will you defend it against competitors, and how will you determine when & how to adjust it (presumably upwards) as the basket of "typical" user content and services gets beefier -- or will that simply tip more and more people into some premium user category?
Seriously Tom it's not *that* hard and like we've been saying plenty of ISPs in many countries manage to do it. The different companies just play around until your profit, costs and income all balance nicely In NZ and Aus as the costs of bandwidth have decreased (and the demand has increased) then the bandwidth quotas have tended to go up. Lets say that a customer costs around $25 per month in last mile charges, staff, billing, marketing, profit for a 6Mb/s DSL. In the US right now you spend $5 on marginal bandwith usage which at $10 per MB/s gets you 150GB across the month. In Australia where the bandwidth cost is closer to $200 per MB/s per month that $5 only gets you around 8GB. Pricing flat rate will either put you out of business or cost so much that you not get 90% of customers. So in Australia you'll do a $30 cheap account with a 5GB/month quota, a $40 account with a 15GB Quota and a $60 account with a 40GB/month quota. This keep you bandwidth cost about the same and allows you to capture low end customers for $30 as well as heavier users at $60. Cheap entry level option and heavier users can pay more to get more. In the US 150GB is more than 90-something percent of users do and 6MB/s line speeds ( mostly) keeps the heavier users from going high enough to screw the average above that. So you keep a simple flat pricing scheme because that is easier to market and makes you more money. Just like helpdesk calls are usually free even though some users use up hundreds of dollars worth of them per month. On the other hand, image a few years down the track and you are at a US provider with $5 per Mb/s per month transit costs, most of your customers have 100Mb/s connections and : the bottom 30% of your customers average 0.25 TB / month = $4 / customer The next 40% of your customers average 1 TB / month = $15 / customer the top 30% of them average 3 TB / month = $45 / customer So you average bandwidth cost is around $20 per customer. Options are: 1. Increase prices to $45 per month and keep flat rate 2. Introduce tiered accounts 3. Traffic shap until bandwidth costs drop enough. Now right now option 3 seems to be common which sort of indicates that bandwidth usage by home customers *is* a problem. In many cases the choke point is at the last mile but it still doesn't really change the numbers. Providers have a budget to spend per customer on bandwidth, when they start to exceed that then something has to give. Of course with a bit of luck the cost of providing bandwith will keep falling as fast or faster than the average customer demand. Personally I doubt that long term home demand will exceed 30Mb/s or 10TB per month ( around 1 HDTV channel) on average. -- Simon J. Lyall | Very Busy | Web: http://www.darkmere.gen.nz/ "To stay awake all night adds a day to your life" - Stilgar | eMT.