I used to believe in the desirability and inevitability of metered rates for the Internet. However, my studies over the last few years have convinced me that flat rates are underappreciated and have a promising future. This is not the place to summarize my papers on this subject (all are available on my home page), but I couldn't resist the temptation to note that the discussion on this list over the last few days provides an interesting additional argument in favor of flat rates. First, while there have been many postings about 95th %tile pricing, nobody has said what that pricing actually is. Well, here is an example of such pricing, downloaded from the UUNet page 2 years ago. (I could not find current prices there on a quick scan. Perhaps somebody else can post them, especially for higher bandwidth connections.) Ignoring one-time start-up fees, regular flat rate T-1 service was available from UUNet at $2,495 per month. The burstable rate (based on the 95th %tile rating) was: T1 Usage Level Burstable Service Monthly Rate 0 to 128 Kbps $1,295 128 Kbps to 256 Kbps $1,895 256 Kbps to 384 Kbps $2,495 384 Kbps to 512 Kbps $2,750 Over 512 Kbps $3,000 Note that even if the link is not used at all, you pay more than half the cost of a full T-1 connection. (Hence some of the imaginative gaming schemes that have been proposed, involving rotating Web hosting traffic among a bunch of connections, are clear losers, as some posters have already noted. It is less expensive to have a single unlimited service T-1 than two burstable one.) Moreover, if your usage gets above a certain level, you pay more than for the full T-1. Yet another factor that comes in is that of discounts. The prices listed above were the list prices. I have been told by one member of this list that substantial discounts are common for full connections, but seldom for burstable ones, which makes the case against flat rate links even weaker. Second, after these preliminaries, here is the he novel argument for flat rates that I draw from the discussions on this list. Prices serve two main purposes. One is simply to collect enough money to pay for the service that is provided. How that money is collected can be based on a variety of criteria, such as charging what the service is worth to the consumer (as in airline Saturday night stopover restrictions, designed to get more money from business travelers than from discretionary vacationers), or fairness (which has many dimensions, as the discussion on this list showed, as in whether charges should be based on distance packets are carried, on time of day, ...). The other possible purpose of prices, and one often touted as their advantage on the Internet, is that they can be used to influence user behavior in ways that lead to more efficient utilization of resources (such as charging for email to reduce spam, or getting users to reduce their traffic during periods of congestion). However, for this second purpose to be realized, users have to understand the pricing scheme, and have to modify their behavior in response. But let's look at the discussion on this list. Here we have a group of unusually sophisticated Internet professionals, apparently many paying these 95th %tile prices. Yet it appears that many (perhaps even most) have been too busy to figure out how those prices are calculated. Most of the gaming that is going on (and that appears to be relatively little, by just a few sophisticated players) is apparently in ways to get around the rules of this 95th %tile schemes, while most people just pay the bills as they arrive and do not worry about what they should be doing differently. Yet if the members of this list behave like that (and I am definitely not suggesting this is economically irrational behavior, people do weigh costs and benefits, and my conclusion is that most people have more valuable things to do), then can one hope to introduce any sophisticated pricing scheme to the great bulk of Internet users? Andrew Odlyzko ************************************************************************ Andrew Odlyzko amo@research.att.com AT&T Labs - Research voice: 973-360-8410 http://www.research.att.com/~amo fax: 973-360-8178 ************************************************************************