If I am not mistaken, the true "benefit" to 95% billing is that it allows the provider to charge for bits they never delivered. The average will skew on a burst of traffic (>5% of the average) and you pay for it as if you had averaged that level the entire time.
I'm not sure what you mean by "you pay for it as if you had averaged that level the entire time". Couldn't someone equally say that I can burst at a full DS3 24 hours a day 7 days a week and I pay for it as if I only sustained that bandwidth 5% of the time? The reality is that a customer who sustains a full DS3 24 hours a day 7 days a week costs about as much to service as a customer who sustains a full DS3 only a smaller portion of the time. Plus, when there is excess bandwidth available, it makes sense to let the customer have it.
It seems like quite an irrational settlement model. Why not simply bill for every bit that crosses your network? There certainly is a per-bit cost.
Because bits moved at peak time cost you more than bits moved off-peak. You have to design and build a network to tolerate your maximum sustained bandwidth, not your average bandwidth. Plus, you want to reward customers who can and do move bulk transfers to off-peak times. Which would you rather have, a customer who sustains 1Mbps 24 hours a day seven days a week or a customer who sustains 100Mbps every Monday from 2PM to 3PM? Do you think the cost per-bit is the same?
Or maybe not. Perhaps the electrical suppliers here in California should bill in the 95th percentile, and cite the Internet as a rational example.
It's a shame that the current electricity metering and billing system has no way to reward those people who shift some of their load off-peak. If it did, the on-peak rate could be raised while leaving the off-peak rate the same. This would help ease the crisis significantly while having much less impact on poorer people who can't afford to pay 40% more for their electricity. Imagine if electrical companies could bill based upon actual cost (minute to minute). Imagine if people could set their meter to turn off different circuits if the rate exceeded different amounts. Do you realize how much of the problem this would solve? Yes, Internet billing is still in its infancy. Billing based upon peak available bandwidth is obviously not right as it punishes people for leaving room for growth and needlessly slows down their transfers when bandwidth is available. Billing based just upon bits moved is obviously not right as it fails to reward load leveling and makes it too hard to leverage existing customers to get future ones. I can say from experience that 95th percentile billing seems to happen to produce the right number. DS