From: Patrick W. Gilmore (no email)
Date: Fri Jan 18 2008 - 15:53:02 EST
On Jan 18, 2008, at 3:06 PM, Tomas L. Byrnes wrote:
> I always find it interesting that people with a telco background keep
> trying to go back to the ma bell days and ways, even as the telcos
> themselves are abandoning those models for phone service.
I am not at all certain that is what is happening.
> One of the things about usage based pricing in the Internet is that
> the
> system doesn't have the facilities to do that built into it by design,
> so you have to add a lot of equipment and software to do it. This
> tends
> to cost more than the incremental revenue, especially when you
> consider
> the additional customer service costs and churn (there's always a
> competitor who pops up offering flat-rate pricing).
>
> The problem in the ISP industry isn't lack of usage based pricing.
> It's
> that the going rate for basic connectivity was driven below that which
> is economically sustainable by the ILECs when they engaged in
> predatory
> pricing to drive the CLECs out of business in the late 90s. Now that
> they own the market, they find that, having driven the prices down,
> they
> can't raise them, so they are engaging in various subterfuges that are
> designed to cover up the basic thing they are doing: trying to charge
> more for the exact same service.
I disagree.
Pick a number. Any number. Offer broadband flatrate service at that
number. I will show you at least 5% of your customer base who is
either paying an order of magnitude too much, or getting an order of
magnitude more than they paid for. And usually a lot more than 5%.
The problem is "flat rate" doesn't work when the thing being offered
is a shared resource _and_ a single or a few users can use all the
resources. On phone networks, flat rate kinda works because a single
phone call is a very tiny fraction of the shared resource. No small
set of users can harm the rest of the users. (It is still possible
for a medium set of users to harm the rest, but the danger is low.)
That is not true for Internet access, unless you plan to go back to
Kbps speeds. I think that would be less well received than usage-
based billing.
IOW: Usage-based billing makes sense commercially, whether you are a
propeller-head or a bell-head.
And since Internet providers tend to be for-profit businesses, doing
what "makes sense commercially" is kinda required.
Then again, I Am Not An Isp, so what do I know? If you think things
are out of whack, sounds like a business opportunity to me! You
should be able to take your superior knowledge and make a killing
implementing a proper network.
-- TTFN, patrick
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