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The Internet Businesses The Almighty Buck

A Layman's Guide To Bandwidth Pricing 203

Posted by timothy
from the don't-grant-local-monopolies dept.
narramissic links to IT World's A Layman's Guide to Bandwidth Pricing, writing "Time Warner Cable has, for now, abandoned the tiered pricing trials that raised the ire of Congressman Eric Massa, among others. And, as some nice data points in a New York Times article reveal, it's good for us that they did. For instance, Comcast says it costs them $6.85 per home to double the internet capacity of a neighborhood. But the bit of the Times article that we should commit to memory is this: 'If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company's costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.'"
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A Layman's Guide To Bandwidth Pricing

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  • by xmas2003 (739875) * on Tuesday April 21, 2009 @04:19PM (#27666199) Homepage
    While it is true that most costs are fixed and therefore the costs are no different if every customers takes an Internet break one day, one has to plan to for peak capacity ... or something like a 95% threshold. No different than other utilities such as electricity, plumbing, etc.

    So the reverse is also true - if every customer decided to say, watch grass grow [watching-grass-grow.com] one day, the costs are also the same!

    This is exactly why Tony Werner, Comcast chief technical officer said they engineer for the peak hour. Having said that, it would be nice to get 160mbps for $60/month (as in Japan) ... although I always find it disappointing that almost all of these stories focus on the download speeds and ignore the upload speeds which are at least of interest to folks such as /. readers.

    • by DomNF15 (1529309) on Tuesday April 21, 2009 @04:32PM (#27666363)
      It is actually different from other utilities - the electric company doesn't cap how much electricity you use, neither does the water company, you can use as much as you want, or rather, as much as can flow through given the physical limitations of your electric wires/breakers and plumbing pipes. Your bandwidth, on the other hand, is capped, and is well below the theoretical limits of the coax or fiber optic medium it travels through. When Time Warner etc. design their systems, they do so with these caps in mind. So they only reason they would need to add capacity (spend money) would be to add more users (make more money).
      • by xmas2003 (739875) * on Tuesday April 21, 2009 @04:40PM (#27666489) Homepage
        We might be disagreeing on semantics, but at least for my water bill, we have tiered pricing as I live in the Western US.

        I.e. if I use 10,000 gallons of water (ballpark numbers), I get charged a base rate per thousand gallons. However, for each thousand gallons above that, I'm charged 2x that base rate. And then for each thousand gallons above 50,000 gallons, I'm charged 5x the base rate.

        And yes, this is a "monthly load" rather than an instantaneous load ... but I think somewhat similar to tier'ed ala-carte pricing that the bandwidth providers would like to do ... so seems like a reasonable analogy (?)
        • by SatanicPuppy (611928) * <Satanicpuppy@g m a i l .com> on Tuesday April 21, 2009 @04:48PM (#27666623) Journal

          I don't think there is anything wrong with the idea on principle, however TWC was clearly trying to restructure their internet market to protect their cable tv business. A dollar a gig is laughable.

          Any sort of tiered pricing would have to accurately reflect cost and network usage...Being charged the same for peak and non-peak is ridiculous, as we've already established that all their costs are about meeting the peak.

          Geeks being geeks, off peak usage is where the bulk of our traffic will already end up...Mom and pop will be in bed at 9:00 when the raids and the massive porn downloads begin.

          • by cibyr (898667)

            A dollar a gig is laughable.

            My uni charges us $10/GB. :(

            But staff accounts have unlimited quota :)

        • by moderatorrater (1095745) on Tuesday April 21, 2009 @05:01PM (#27666823)
          Read further into the article. The companies tell their shareholders that they're paying the same amount for the newest, fastest equipment that provides 50megabit connections as they did for the equipment for 6 megabit, but they're charging a couple times more for it than they've charged for their highest internet in the last 5 years. Their profit margins are solid but the amount they invest in the networks is falling. This at a time when youtube is drawing more and more bandwidth and sites like Hulu are becoming more popular. It's a pretty solid case of the ISPs milking their monopolies for all they're worth.
          • Here's my question in all this-- if I can buy webserver bandwidth for $0.10 per GB, why does TW/Comcast/Whoever want to charge me a whole dollar for each GB I use over my monthly plan limit?

            • Re: (Score:2, Informative)

              Here's my question in all this-- if I can buy webserver bandwidth for $0.10 per GB, why does TW/Comcast/Whoever want to charge me a whole dollar for each GB I use over my monthly plan limit?

              It's cheaper to provision for extra bandwidth in a colocation center [wikipedia.org] than at a residence or neighborhood. Whether it's $0.90 cheaper is another question, but you certainly shouldn't judge the cost of residential bandwidth by the cost of colo bandwidth.

              • Re: (Score:3, Insightful)

                by mabhatter654 (561290)

                why not, all the cable lines from all the neighborhoods go to one colocation center that provisions the lines, just like the TV signal comes from one place. The "distribution" cost is part of the "cable" part of my bill. The internet part should be just for the equipment to connect to the internet! So yeah, serving 10,000 houses should be the same cost as a data center.

            • Because the physical plant your webhost has to provide is 1 hardened structure with a buncha equipment.. expensive.. yes.. but now imagine you have to run a few of those buildings, and of course all the physical plant that connects them together and the COs to the houses?
              Once you have plant that large, you also have to deal with repairing it, since you'll have a higher failure rate (downed utility pole if you're overhead, or some guy with a backhoe if it's underground).
              Everyone seems to think that 1mb==1mb

        • Re: (Score:3, Interesting)

          by umghhh (965931)

          all these analogies are flawed which can be seen if you think for a while what you purchase and how it is delivered. In some countries in EU it is much easier because to deregulate the utilities market authorities require the producers and the grid owners to be different entities and the price at the end consist in principle of two parts: grid usage fee and pay per unit of delievered utility.
          There is of course another aspect of this - utilities are common goods i.e. things that we all need. If there is no d

        • by FlyingBishop (1293238) on Tuesday April 21, 2009 @05:16PM (#27667095)

          Not really. Water is a fixed commodity. Though there is a lot of it, there is not an infinite supply, and it is therefore subtractive. If you use 10,000 gallons of water, it inherently prevents anyone else from using that 10,000 gallons of water, and it is irrelevant when you use them.

          In the case of computers, it is entirely possible to use an amount of data in excess of what everyone else is using, and yet still not deprive anyone of their bandwidth, by using it when no one else is using it.

          They need to stop dicking around and use the sort of pricing structure that has worked excellently in the cellphone industry, where you pay by the minute during peak times (whenever that may be) and you do not pay a dime during non-peak times. I'd be happy to pay by the gigabyte during peak hours, and have an unlimited reserve otherwise.

        • by Jurily (900488)

          And yes, this is a "monthly load" rather than an instantaneous load ... but I think somewhat similar to tier'ed ala-carte pricing that the bandwidth providers would like to do ... so seems like a reasonable analogy (?)

          Except if you're proud of being the most advanced Water Technology country in the world, and then get to realize, in Japan everyone has their own Mississipi-sized river now.

      • by mcrbids (148650) on Tuesday April 21, 2009 @04:54PM (#27666713) Journal

        Except that power companies charge by the unit. So do water companies. This is fine, because it costs money to create a KwH, and the price of delivering more KwHs rises as more KwHs are delivered, as it costs real energy and money to pump water.

        Internet is flat-rate, and should be, IMHO because it represents nothing real. Although it costs something to provide infrastructure for more demand, once that infrastructure is created, the cost of delivery is very near zero.

        Here's an experiment, in case this isn't absolutely clear:

        1) Buy/borrow a 2 Kilowatt gas generator. Start it up, and run it for 1 hour with no load. Note how much gasoline it burns. This represents the energy used to overcome internal friction. Then run it for 1 hour with a 1,500 watt blow-dryer running continuously. Note how much gasoline it burns. You'll be surprised at the difference in fuel consumption!

        2) Get a Gb switching hub, 2 computers, and an amp-meter. Plug the computers into the wall, plug the switch into the amp meter. Note the power usage of the switch with no load. Then set up a load where you are using 1 Mbps of traffic between the two computers, and note the Amp load. Then try 10 Mbsp, 100 Mbps, and 1000 Mbps. You'll notice that the amperage (for most switching hubs) climbs very little as you do so, and that the total power consumption is insignificant.

        * * *

        So bandwidth usage represents nothing "real". There isn't a significant energy or material consumption per bandwidth unit. After the cost of infrastructure, and a small fixed cost for powering the equipment, the cost of delivering 1000 Mbps is only marginally higher than the near-zero cost of 1 Mbps. There *is* an infrastructure cost that needs to be amortized over the life of the connection, and this represents the vast majority of the true cost of bandwidth.

        It's just idiotic that the Nation responsible for building the Internets in the first place is so far behind other industrialized nations for using it!

        • by Sycraft-fu (314770) on Tuesday April 21, 2009 @05:10PM (#27666977)

          While it is true that the equipment doesn't cost more to use than not use, that doesn't mean bandwidth is cost free. There are plenty of costs involved in maintaining high bandwidth lines.

          Now as it applies to consumer connections the problem is one of oversubscription. The reason they can offer you bandwidth for less is that they oversubscribe their lines. That is to say if they have a 10mbps uplink, maybe they sell 100mbps of bandwidth downstream. This works well, so long as everyone isn't trying to use their connection full blast all the time.

          It is the same theory you see in a LAN. For example at work here we have gigabit switches to our desktop machines. However, those gig switches are only connected with a gig back to the distribution switches. There are about 20 ports in the room I'm in (we are computer support so lots of computers) but only 1 gig connection out. Likewise, the distribution switches are oversubscribed. Most of them are 48 port Ciscos, nearly full, and they only have 1 gig back to the core. That then in turn only has 1 gig to the firewall, and 2 gigs to the NetApp. However, despite all this oversubscription it is very fast. It is rare for a person to use their whole connection period, and then not for long. We can all share those links without a big problem.

          However, that would break down if someone wanted to use their whole connection all the time. If someone was doing a solid gig to the NetApp without letting up, well I'd be going up and having a chat with them real fast. It would screw over everyone else.

          Same deal with ISPs. They can afford to cheaply sell you a cable line with 10-15mbps. However they don't have dedicated bandwidth for that upstream. It is oversubscribed at a number of levels, just as with our LAN. So if you use it periodically, and leave it low/idle the rest of the time, it works out fine. However if you try to torrent on it 24/7 to 100% capacity, it is a problem.

        • by Wrath0fb0b (302444) on Tuesday April 21, 2009 @05:16PM (#27667103)

          2) Get a Gb switching hub, 2 computers, and an amp-meter. Plug the computers into the wall, plug the switch into the amp meter. Note the power usage of the switch with no load. Then set up a load where you are using 1 Mbps of traffic between the two computers, and note the Amp load. Then try 10 Mbsp, 100 Mbps, and 1000 Mbps. You'll notice that the amperage (for most switching hubs) climbs very little as you do so, and that the total power consumption is insignificant.

          That's great, you've created an intranet and demonstrated it's pricing. Now, of course, try to get a peering agreement with a tier-1 ISP so that your bits can travel to and from the internet at large. Try one month at 10 Mbps and another at 1000 Mbps and see if your bill changes.

          • Re: (Score:3, Interesting)

            by nabsltd (1313397)

            Try one month at 10 Mbps and another at 1000 Mbps and see if your bill changes.

            So, you're saying that Comcast (or other ISPs) change their connection speed to the rest of the Internet on a monthly basis?

            No, of course they don't. They know they need ###Mbps at times, so they pay for that much all the time, and they don't get any price reduction for not using all the available bandwidth.

            This is why it shouldn't matter how much bandwidth end users use...the cost for the ISP is the same regardless. What ISPs should be encouraging is the reduction of peak usage, not total usage. This wi

            • by laird (2705)

              "it shouldn't matter how much bandwidth end users use...the cost for the ISP is the same regardless. What ISPs should be encouraging is the reduction of peak usage, not total usage"

              Theoretically this is true, in that all bandwidth is free except for the peak bit at the peak instant. In reality, however, nobody would agree to a pricing model in which the one user that uses the top bit of the peak pays the entire cost of the internet, and everyone else is free. So, like all of the other "fixed cost / capacity

          • That's great, you've created an intranet and demonstrated it's pricing. Now, of course, try to get a peering agreement with a tier-1 ISP so that your bits can travel to and from the internet at large. Try one month at 10 Mbps and another at 1000 Mbps and see if your bill changes.

            Bad example, since unlike when I get an internet connection from Time Warner Cable and their ilk, if I get a 10 megabit connection from a tier 1 it comes with the expectation that I can use it to rated capacity 100% of the time and if it is underperforming/down I will be able to get credits.

            Time Warner Cable gives me none of these expectations. All quoted bandwidth numbers are best case, if it's down sucks to be me, and if they had their way I could not even max it out for a week.

            The model I've encountered

          • Re: (Score:3, Informative)

            by mcrbids (148650)

            That's great, you've created an intranet and demonstrated it's pricing. Now, of course, try to get a peering agreement with a tier-1 ISP so that your bits can travel to and from the internet at large. Try one month at 10 Mbps and another at 1000 Mbps and see if your bill changes.

            I already do this, in effect. My company has a private hosting farm. We pay a flat rate for our redundant Internet connection at a top-notch hosting facility. It doesn't matter to us how much we use it, because the price is the same

        • Re: (Score:3, Funny)

          Internet is flat-rate, and should be, IMHO because it represents nothing real

          Reminds me of the joke that the power company, with it's alternating current, is taking advantage of us by charging for the same electrons over and over.

        • by maxrate (886773)
          You're forgetting that there is something called 'transport' that needs to be paid for. An ISP is much more complicated then 'switching fabric'
        • by kestasjk (933987) *

          Internet is flat-rate, and should be, IMHO because it represents nothing real. Although it costs something to provide infrastructure for more demand, once that infrastructure is created, the cost of delivery is very near zero.

          I'm not sure, you could say the same for non-fossil-fuel electricity. The cost of nuclear, wind, solar, hydro power is mostly in construction (and decommissioning) costs. Power-grid to internet comparisons are valid.

          Right now I'm just about out of bandwidth for the month. For a few days now, and for the next few days, I've had to cut down on what I download to avoid getting scaled back to unusable dial-up speeds. There is no option to buy more bandwidth to see me through to the next month. That is insane

        • by mariushm (1022195)

          In reality, the bandwidth is not really free.

          For example, if someone in US tries to download something from a server in Europe, it has to use one of the fiber optic cables under the ocean.

          These cables don't have unlimited capacity, they cost a lot to put in place, a whole ship must be on permanent stand-by to go and fix the cable when it's cut by ship anchors or sharks or earthquakes.

          The companies that maintains these cables gives capacity to ISP companies for a certain price, because they have to recover t

      • Re: (Score:3, Interesting)

        by blackest_k (761565)

        It really does depend on how big a consumer of electricity you are, domestic supplies are rather small and insignificant. Industrial Electricity demands can be huge and quite often there are agreements about how much can be used and agreed low use times. it's a trade off better pricing by agreeing to cooperate with the electricity companies.

        Electric companies do offer some incentives for domestic customers e.g Economy 7 in the UK offers cheap electricity in the night and a slightly higher than standard rat

      • by hitmark (640295)

        another issue is that while electricity and water has a max supply (that is, you cant use more water then available in storage, and if you do there is nothing left for others on the same source. and when a power plant is maxed out, its maxed out, and it needs to be fuled by something that can run out, even when it comes to something like hydroelectric), data do not really have that.

        but youtube can feed anyone as much data they want, as long as youtube has the outbound bandwidth and server capacity needed.

        th

      • by AaronW (33736)
        In my case I may not have a cap on electricity, but my rate jumps quite a bit if I go over baseline. I've hit over 300% of baseline where I was paying $0.39/kwh. So I am effectively capped at the pocketbook. Oh, and during heat waves they will kill power with rolling blackouts or by remotely shutting down AC units. There are also many places that do cap water usage as well where fines can be levied as well due to water shortages caused by drought and overpopulation.
      • It is actually different from other utilities - the electric company doesn't cap how much electricity you use, neither does the water company, you can use as much as you want, or rather, as much as can flow through given the physical limitations of your electric wires/breakers and plumbing pipes.

        Obviously your water company has never caught you using a torrential amount of water.

    • by SatanicPuppy (611928) * <Satanicpuppy@g m a i l .com> on Tuesday April 21, 2009 @04:35PM (#27666403) Journal

      Well, upload is a niche market (though I admit, I'd love to be able to get at least a megabit...Even half a megabit would be nice).

      I think the whole lesson to be learned from TFA can be summed up with the following quote: "Why (is the 160mbit commection offered) so cheap? JCom faces more competition from other Internet providers than companies in the United States do."

      We talk a good line about capitalism, but we don't walk the walk. Competition would change the whole game.

      • Re: (Score:3, Interesting)

        by Anachragnome (1008495)

        "Competition would change the whole game."

        Provided the ISPs are not in collusion in an attempt to manipulate market value.

        http://www.comscore.com/press/release.asp?press=385 [comscore.com]

        From the article:
        "By contrast, only 4 percent of those with the fastest connections, over 1 Mbps, report they plan to switch providers."

        The ISPs know this, and ALL bank on this fact when considering price hikes.

        We (those with fast cable connections) are the least likely, and least ABLE, to upgrade out of higher pricing schemes.

        • by SatanicPuppy (611928) * <Satanicpuppy@g m a i l .com> on Tuesday April 21, 2009 @05:19PM (#27667151) Journal

          That's where monopoly busting laws come in. That's what they were designed for...To keep capitalism from eating itself.

          Anyway, most people can't switch providers right now, since they're locked in with local monopolies, or they don't want to buy new equipment to switch between DSL and Cable...Give them more than one option where they don't have to switch their hardware, and that number will go WAY up.

          Personally I am a proud member of the 4%. I am the anti-customer: I switch every 3 months without fail. When the other company calls and offers me a sweet introductory deal I take it, and then 3 months later, I take the next one.

          It's to the point where I leave all the hardware plugged in, and just switch "live" interfaces on my firewall...AT&T fucks with me, goodbye eth1, hello eth2. Cox fucks with me, goodbye eth2, hello eth1. What's wrong with that picture? I'm like a woman with two abusive husbands! I hate this shit!

      • by roystgnr (4015)

        upload is a niche market

        The market for webcams that send lousy video over US 'broadband' connections is pretty huge. So is the market for digital cameras that can record high quality video at much higher bitrates. I suspect the market for uploading high quality live video would still be huge, if only there were home providers with the capability to serve it.

      • by BZ (40346)

        > Well, upload is a niche market (though I admit, I'd love to be able to get at least a
        > megabit...Even half a megabit would be nice).

        Upload can gate your download throughput, at least if you're talking TCP. Packet size on the downstream packets is limited, and you have to send ACKs. ACK packets are 40 bytes. So if your downstream bandwidth is 10x your upstream and your MTU below 400 or so, your upstream bandwidth is what determines how much TCP traffic you can actually get.

        In practice, MTUs are cl

    • by pnuema (523776)
      So how is there a "coming bandwidth shortage"? The only way there is a bandwidth shortage is if 1. They have oversold their networks (not my problem), or 2. Have shitty engineers (also not my problem). Why should I pay more for their mistakes?
      • by laird (2705)

        "The only way there is a bandwidth shortage is if ... They have oversold their networks (not my problem),"

        All ISPs sell consumers "over-sold" bandwidth, in that they build out enough capacity to support average usage, not simultaneous peak for all customers. This is how consumers get such cheap internet access.

        If you want committed bandwidth, you have to pay for it. For example, if I really wanted 15 Mbps of committed bandwidth, that would cost at least $300/month, because they I'd have to pay for the guara

    • by Mr. Underbridge (666784) on Tuesday April 21, 2009 @04:39PM (#27666463)

      While it is true that most costs are fixed and therefore the costs are no different if every customers takes an Internet break one day, one has to plan to for peak capacity ... or something like a 95% threshold. No different than other utilities such as electricity, plumbing, etc.

      Exactly. This is what's so brain-dead about the argument that bandwidth is free - it's only free once you've built out infrastructure to handle capacity, but something has to pay for that. This is common, as you point out, to any industry in which one-time costs dominate per-unit costs.

      I compare it to the pharmaceutical industry - pills cost, say, $0.05 to make. Why do they cost a great deal more on the market? Because you have to price in the cost of research and development.

      I think the fairest thing is to do what many cell phone plans do; namely, metered or capped usage during peak hours, and free access off-peak. If a user is savvy enough to schedule iso downloads or watch video off-peak, it shouldn't cost him much since that traffic truly is nearly free.

      • This is what's so brain-dead about the argument that bandwidth is free - it's only free once you've built out infrastructure to handle capacity, but something has to pay for that. This is common, as you point out, to any industry in which one-time costs dominate per-unit costs.

        BW is free on the margin and not free in aggregate. This means that the value is in getting a connection - incremental usage is a very shaky cost structure.

      • by PitaBred (632671)
        Pills actually can be quite complex and expensive to make. The chemical components are often hard to synthesize or isolate, and can take many different processes to get to the desired product. If that weren't the case, aged brandy would cost as much as water. I mean, they're both liquids, right?
      • I compare it to the pharmaceutical industry - pills cost, say, $0.05 to make. Why do they cost a great deal more on the market? Because you have to price in the cost of research and development.

        Right! because pharmaceutical companies never charge far more than the research costs and milk rich charities for all they have?

    • Re: (Score:3, Informative)

      by phantomfive (622387)
      Here is the quote that gets me:

      Cable systems in the United States use the same technology and have roughly the same costs. Comcast told investors that the hardware to provide 50-megabits-per-second service costs less than it had been paying for the equipment for 6 megabits per second.

      They are wining that they aren't making enough, even though upgrading the equipment is cheaper? Something's not right here....

      Oh, yeah. Here it is:

      By contrast, JCom, the largest cable company in Japan, sells service as fast as 160 megabits per second for $60 a month, only $5 a month more than its slower service. Why so cheap? JCom faces more competition from other Internet providers than companies in the United States do.

      Competition. They have a monopoly, so if they can push it, why not? I can see dollar signs in their hair [dilbert.com]. I'm not going to say lots of regulation is the key here, but how about forcing them to let competitors use their networks? Competition is good for the consumer.

    • by poetmatt (793785)

      If they engineered for peak hour they wouldn't have capacity problems. Let's not spin things creatively.

      Meanwhile, the backbone they use for HDTV is not even having real capacity problems but hey guess what they did! They gave you a free downgrade on the bandwidth for their HD channels!

      What a value.

    • I had 100mbps down 50mbps up for ~$40 in Japan in a modest-sized city of 400,000 while I was staying there. It was part of NTT's new B FLETS package that they're pushing throughout the entire country.

      I might add that right before I left, they began the ~controversial~ practice of bandwidth capping. They sent out a letter to everyone asking to please not upload more than 500 gigabytes in a single month, but downloads remained unlimited.

  • Why limit ourselves? (Score:5, Interesting)

    by Statecraftsman (718862) * on Tuesday April 21, 2009 @04:26PM (#27666303) Homepage
    I prefer the government installs the fiber and leases it to companies that provide billing, maintenance, and tech support services. Let competition in those areas bring prices down. Internet access is a public good and greases the wheels of the commerce. It's not something to be taxed and exploited by large monopolistic corporations.
    • by Lord Ender (156273) on Tuesday April 21, 2009 @04:40PM (#27666503) Homepage

      Yes, if we were really a capitalist society, government would maintain ownership of natural monopolies (roads, utilities) and set up competitive systems whereby businesses compete for operating (not owning) them.

      Today, we let the businesses own these natural monopolies outright. That's the opposite of capitalism; there's no competition.

      • by MobyDisk (75490) on Tuesday April 21, 2009 @05:31PM (#27667329) Homepage

        You are mostly right, but it is actually worse than that.

        The natural monopoly is on the LINES, not the SERVICE. But the US government grants a monopoly for BOTH. I am okay with only having two companies providing lines to my house: cable and telephone. The problem is that there are only two companies offering service over those lines: the local cable company, and the local telephone company.

    • My hometown did that, and then sold the fiber network after a few years rather than continue bleeding money. That's not to say that it can't be done (there are a few other cities around here that seem to be doing it just fine), but there are risks and people need to be willing to research it thoroughly and stick to it. Unfortunately, governments in the US don't seem to be able to stick to anything for more than a few years.
  • by Dan667 (564390) on Tuesday April 21, 2009 @04:27PM (#27666317)
    In the mean time, support Massa get his bill passed. If we wait, TWC will just come up with something else equally bad and US taxpayers paid for $200 billion in infrastructure so there should be limits on what Time Warner can do.
    http://blog.wired.com/business/2009/04/congressman-to.html [wired.com]
    Write your congressman to support this bill
    https://writerep.house.gov/writerep/welcome.shtml [house.gov]
    Get it passed.
  • no transit/upstream? (Score:3, Interesting)

    by Timothy Brownawell (627747) <tbrownaw@prjek.net> on Tuesday April 21, 2009 @04:28PM (#27666331) Homepage Journal

    If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company's costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.

    Does this just mean that Time Warner is big enough to only have settlement-free peering instead of paying anyone else for connectivity, or does it mean that their connectivity is priced by pipe size rather than data transfer?

    • Re: (Score:2, Informative)

      by jcm (4767) *

      Does this just mean that Time Warner is big enough to only have settlement-free peering instead of paying anyone else for connectivity, or does it mean that their connectivity is priced by pipe size rather than data transfer?

      No, they purchase transit from Level 3.

      • by c_g_hills (110430)
        It sounded like the OP was asking a rhetorical question. The point is if the customers are communicating with hosts through peers with which they do not have SFI, then the ISP's costs are higher since they have to pay for transit.
      • by homer_ca (144738)

        What ballpark figure does transit cost anyway? 1&1 sells a web hosting plan with 1.2TB transfer for $5/month. I suspect that price is subsidized by their low volume users, though. TW is in a different position from a web hoster because they have to build out bandwidth for backhaul to the peering points.

  • by Anonymous Coward

    They don't want to do anything new, but they want more money, because business these days is about finding new ways to charge more while doing the same or less. I believe this is another cause of our current economic woes that is not getting enough attention, because we aren't creating any new value but the economy somehow continues to grow.

  • by jcm (4767) * on Tuesday April 21, 2009 @04:34PM (#27666399) Homepage

    Disappointed in the "research" that went into the original article. Most definitely if everyone didn't use any bandwidth for a day or two, then a cable company would likely pay less that month for the their transit bandwidth. In Time Warner Cable's case, they get their transit bandwidth from Level 3.

    I'd guess Time Warner Cable is paying about $10/mbps (or less) on the 95th percentile. So if the top 5% five-minute averages of traffic to Level is thrown out, then the top average left is what they pay for. I would bet there are a few samples each night that are in that top 5% of samples, if everyone did NOT use the Internet one night during peak, the sample that is left at the 95th percentile would likely be less and they'd pay less that month for transit charges.

  • by FurryOne (618961) on Tuesday April 21, 2009 @04:36PM (#27666421)
    TW announced that it was going to test market tiered broadband in Rochester and a few other cities, but just announced that they were shelving those plans. Most publications pointed to protests by TW customers as the reason. Was it? While it's true that there were protests, I think another "influence" caused them to take a second look at their plans. Here's what I think... TW right now works hard to bundle their Broadband service with their VoIP and TV services. Sure, they can hide the cost in the bundle, but they can't hide the bandwidth. Right now, they pump at 1.2MB/s, or about 10Mb/s. that sounds pretty good until you realize that some 3rd world nations provide 8 times that much for only the equivalent of $10/month! - but that's another story. So what could get TW's panties in a bunch? Let's see... Right now, my "old" iPhone is on the Edge network, which is, I think, around 750Kb/s. Not very fast, but slow & steady. The data plan for it is $20/month. No competition there for TW! How about the "newer" iPhone?... it uses 3G (HSPA) for it's data. Right now, 3G from AT&T goes at 3.6Mb/s and costs $30/month. Still no big competition, but for lots of users, it would suffice in place of TW if AT&T would allow "Tethering" - using the phone as the network connection. (Which they don't right now) What worries TW is what is coming next. AT&T and others are currently upgrading their HSPA networks to the next "bump" in speed, to 7.2Mb/s, and that's where they become direct competitors to TW's Broadband. What's even worse is that "NetBooks" from Dell, LG, and Acer are due to start shipping in the near future, and they have built-in HSPA & WiFi support. Who needs TW's cable when you can be connected almost anywhere, anytime - wirelessly. But it doesn't stop there. HSPA can be tweaked up to 14.4Kb/s, but the next phase - "HSPA+" is already proven. It requires more hardware changes though. AT&T's goal is to rollout HSPA+ by 2011, and that's 21Mb/s!! Yup, that's twice what TW is allowing right now over cable, and you'll be able to get that over the air. That's what's got TW scared shitless. The idea that you won't need a cable to get your phone, internet, or even TV shows. That makes their whole monopolistic infrastructure about worthless!! AT&T and Verizon will rollout plans for access not just for phones, but for loads of electronic goodies, from computers to cameras to game sets. The netbook idea has been tried before, but it always required a cable. What got this new paradigm started was the introduction of the iPhone - not just as another "phone", but as a "portable computer," or an extension of your office. More and more people are finding themselves using the mail, the browser, and other applications on a daily basis, and becoming dependent on a constant internet connection. Why do we need to sit at home in a room when we can be at the beach, or in a hammock, or even at a bar, and extend ourselves into the rest of the world?
  • by Twillerror (536681) on Tuesday April 21, 2009 @04:40PM (#27666497) Homepage Journal

    At the consumer level power is generally sold by the Kilowatt. Phone converstaions used to be by the minute, still are for cell. Water is sold in cubic feet.

    I think we have finally reached a point where bandwith should be sold by the Gigabyte.

    Ultimately I think cable companies and straight ISPs should sell the fastest cable connection possible. Maybe charge a flat fee at first if the new
    speed requires a new modem and that sort of thing. We are fast approaching speeds of 50mpbs which if we actually could obtain from
    servers out there would be pretty close. Once we hit 100mbps we are good with speeds above only needed for special circumastance. Most content
    won't be streamed live, but rather pre-cached almost as DVRs do it now.

    Just like the other type of resources we can give breaks for per unit the more you purchase. So 1-20 gig is 50 cents a gig. 20-40 is 30 cents and so on.

    Users who want to stream HD movies can instead of buying the HD channel package on their cable bill.

    I wish it was possible to distinguish between the guy downloading a linux .iso and someone downloading a pirated movie, but we can't.
    Either way both are using more than the grandma checking her email, but somehow pay the same amount.

    This might not be popular, but I think deep down most of us know it's the compromise we need. If you want to drop you cable bill and
    go with Hulu...fine. Just realize you have to pay. This idea that we can get everything we always had for 20-40 dollars a month just
    because the magic internet came along is bs.

    What really irks me about cable companies is they want to put caps, but provide absolutlely no way to contest it. My bill
    does not have a usage number on it, but if I go over it they'll let me know. You can go look at your power meter, call your phone company, or look at
    your water meter. Put in usage monitoring first then we can talk. You could even put out a bill with IP, number of packets, and amount of data.

    • Re: (Score:3, Interesting)

      Just like the other type of resources we can give breaks for per unit the more you purchase. So 1-20 gig is 50 cents a gig. 20-40 is 30 cents and so on.

      This would be fantastic if that were the actual price, but TW wanted to charge 75 bucks a pop and then a buck a gig after the initial cap. When it becomes more expensive to download something than it does to have it burned to a CD and sent via snail mail, the internet ceases to have credibility as a medium. (Case in point, a game I just bought online, 3 bucks to ship it, its 4 gigs in size on a DVD, why should it cost me more to download it, than to have someone pack it, carry it 750 miles, transfer it by

    • by BcNexus (826974)

      Once we hit 100mbps we are good with speeds above only needed for special circumastance.

      You're foolish to suggest that a certain amount of bandwidth is enough for an unspecified period of time. The influential Mr. Bill Gates has pointed that out quite nicely: http://web.archive.org/web/19970107024714/http://htimes.com/htimes/today/access/oldfiles/gates23.html [archive.org]

      QUESTION: I read in a newspaper that in 1981 you said, "640K of memory should be enough for anybody." What did you mean when you said this? (L. Marshall, lmarshal@science.watstar.uwaterloo.ca)
      ANSWER: I've said some stupid things and some wrong things, but not that. No one involved in computers would ever say that a certain amount of memory is enough for all time.

    • by cdrguru (88047)

      Do you understand how the cable infrastructure works? How about DSL?

      What you are talking about might work, if there was a single unbroken fiber link between your home and the connection to the Internet backbone. It doesn't work that way. Instead, your cable connection goes to a network node which has a single fiber link to the cable company distribution point. Which then has one or more links to further on up until you finally reach a backbone point.

      DSL is pretty much the same way - there is one shared

    • I think we have finally reached a point where bandwith should be sold by the Gigabyte.

      Ultimately I think cable companies and straight ISPs should sell the fastest cable connection possible.

      Except that the actual economics are the complete opposite. It costs a large amount of resources (both labor and equipment) to provide you with that fast connection. It's the "running coax or fiber to your house and connecting it to high-capacity network gear" part that's costly and difficult. Once you're connected,

    • by russotto (537200)

      Just like the other type of resources we can give breaks for per unit the more you purchase. So 1-20 gig is 50 cents a gig. 20-40 is 30 cents and so on.

      The economics of it work the other way. Most of the cost is fixed; there's little (though not zero) marginal cost for those first few gigs. When users start pulling enough that the capacity of the network is strained, THEN you start getting big costs. And of course time matters -- the user pulling 10GB distributed over the entire month is adding a lot les

    • I wish it was possible to distinguish between the guy downloading a linux .iso and someone downloading a pirated movie, but we can't.

      Agreed, then we could round up all those commies, and commend those consuming corporate content (even if they aren't paying for some of it)!

  • Wait! (Score:4, Funny)

    by camperdave (969942) on Tuesday April 21, 2009 @04:43PM (#27666551) Journal
    'If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company's costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.'

    Wait! Are you trying to say that the cost of transmitting a bunch of zeros is no different than transmitting a mix of zeros and ones?
    • Unfortunately the internet tends to be packet-switched rather than circuit-switched, so yes, it costs more to transmit a bunch of ones and zero than (not) to transmit a bunch of zeros.

      Besides, the zeros compress better :)

      • You bring up a good point. Do cable providers use compression techniques? Could the cable modems be used to compress and decompress items as they come in and go out? I realize that anything leaving their networks would have to be decompressed but could they use an internal scheme to compress data once it's on their network?
  • Bad Logic (Score:5, Insightful)

    by fm6 (162816) on Tuesday April 21, 2009 @04:54PM (#27666715) Homepage Journal

    If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company's costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.

    And if no tweenies show up to tonight's Miley Cyrus concert, the cost of putting it on will be pretty much the same. Does that mean that Miley should go to a flat rate, come-as-often-as-like model?

    All retail businesses are based on assumptions about normal behavior. Hypotheticals that posit unlikely behavior aren't arguments. If they were, then we could suppose that every TW customer might decide to visit YouTube at precisely the same moment, and that TW should build out its network to support that and charge accordingly. Are you ready for $1,000 a month for DSL?

    Let me anticipate the same lame point that gets made every time we have this discussion: Even if TW ripped off the government by pocketing the money they were supposed to use for expanding their infrastructure, we still have a "no free lunch" scenario. Even thieves need a sustainable business model.

  • If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company's costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.

    No, but if each uploaded the equivalent bandwidth of a YouTube video to a non Time Warner customer, the company's cost would be quite different. The internet is fundamentally a sender-pays system at every tier -- you can only justify peering with a large provider if you can take from him roughly as much traffic as you load onto him. You can get your peering agreement terminated pretty quickly if you dump lots on the other guy but don't take any back (see, e.g. http://tech.slashdot.org/tech/08/11/03/0143239. [slashdot.org]

    • What you've said doesn't quite stack up. Peering agreements do mandate that traffic must be about the same in both direction. But this does not imply a sender pays system. It implies that anyone that has a surfeit of senders, or of receivers, pays. For example the AT&T peering agreement mandates that traffic flows must be within 2:1 in both directions.

      Most ISPs are largely receivers of data. As a result they try and attract server business because it helps them balance their flows for negotiating peerin

  • by DJRumpy (1345787) on Tuesday April 21, 2009 @05:30PM (#27667303)
    Excellent article. The end is the best part of all. The bits at the end are my favorite:

    "Cable systems in the United States use the same technology and have roughly the same costs. Comcast told investors that the hardware to provide 50-megabits-per-second service costs less than it had been paying for the equipment for 6 megabits per second.

    Questions about the speed, availability and affordability of Internet service in the United States will be central to the study Congress has required from the Federal Communications Commission next year. And cable and phone executives are worried that the commission may call for more regulation of Internet service, which currently is free from any government price controls."

    This industry is screaming for more regulation and competition. They have had a stranglehold on the market for well over 10 years and it shows in the exploding cable and internet costs. Burn the MOFO down!
    • I agree with this entirely. I'm lucky enough to live in a large, competitive market (Verizon FiOS, TWCable, AT&T DSL) but in my circle of friends I am the exception. I'm the only one who has choices that don't included capped usage levels. And I'm the only one with Verizon FiOS as an option. Consumers shouldn't have to move into competitive markets just to get fair service levels and prices.
  • Disingenuous (Score:4, Interesting)

    by Spazmania (174582) on Tuesday April 21, 2009 @05:36PM (#27667391) Homepage

    If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company's costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.'"

    Of course, those customers would be glued to blank screens since TWC lacks the capacity to have every customer watching youtube at once. Their network would grind to a halt. And the network expansion necessary to handle all of them watching youtube all day would have a considerable additional cost.

    Comcast says it costs them $6.85 per home to double the internet capacity of a neighborhood.

    Comcast also says that their users like their service and don't leave it the instant Verizon installs FiOS in the neighborhood. You shouldn't put much faith in what Comcast says.

    • by DragonTHC (208439)

      even if that's what it costs, shouldn't they charge every subscriber that $6.85 fee so they can double the capacity?

      I'd pay a $6.85 fee once to double my bandwidth. I'm sure everyone else would also.

      but the truth is this, bandwidth costs nothing once you have the infrastructure in place.

      of course you are limited by your equipment though. So the statement actually holds merit.

      • by Spazmania (174582)

        bandwidth costs nothing once you have the infrastructure in place.

        Actually, not so. Unless you're a so-called "tier 1" provider, or more precisely a "transit free" provider, you pay by the 95th percentile megabit for your traffic. A customer who uses 1 megabit *all the time* will cost you between $5 and $100 just for the bandwidth between your network core and the cores of other ISPs, before you even factor in the local infrastructure cost to get that megabit from your network core down to his computer.

        FYI,

    • Re: (Score:3, Insightful)

      Comcast says it costs them $6.85 per home to double the internet capacity of a neighborhood.

      Comcast also says that their users like their service and don't leave it the instant Verizon installs FiOS in the neighborhood. You shouldn't put much faith in what Comcast says.

      The actual line in the article is "Comcast, the nation's largest cable provider, has told investors that doubling the Internet capacity of a neighborhood costs an average of $6.85 a home.". We should believe them in this case, since AIUI they can get in actual real trouble with the SEC if they lie to their investors.

  • by joocemann (1273720) on Tuesday April 21, 2009 @05:57PM (#27667749)

    Someone please double my internet bandwidth!

  • My pricing options are: Verizon DSL Comcast 6 Mb Dial-up

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