Internet Usage Pricing, necessary and beneficial

AT&T is considering usage based pricing

Time Warner tries metering internet use

Comcast mulling Net usage cap

Internet Service Providers (ISPs) are smartly moving towards usage based pricing structures as opposed to our current all-you-can-eat buffet agreements of today. Although the ISPs will be vilified by many of my fellow geeks for adopting such service changes it is clear that this evolution is inevitable, necessary, and even beneficial.

To see the logic of such a pricing system we must first recognize the difference in usage levels between your casual and uberusers. Most casual internet users check email and occasionally surf or shop ebay whereas uberusers have bittorrent constantly downloading, watch movies via Netflix online, downloading the latest Linux .iso, and putting hours a day into Call of Duty 4 Multiplayer. The difference in the amount of throughput required for these activities is measured in Gigabytes yet each user pays the same price for a Mb connection. We already buy 99% of our services based on usage metrics (water gallons, electricity kilowatt hours, cell phone minutes) yet it seems irrational when an ISP considers the same practice. It is not fair to require the casual users to subsidize the rest of us.

Econ 101 – Internet service providers are for-profit companies that exist to make money. An ISP invests money into networking infrastructure so they can sell a service and return a proft. I build networks for a living so I take this point a bit personally – Building a network for a graphics design firm is very different then designing a network for a drycleaner. Why? The graphics design firm will be using high resolution images that will tax the storage and transport technology that I put in place. Their business demands a much higher throughput and more storage. Bigger servers, faster switches, redundant technology, it all COSTS MORE. Higher demand equals more robust infrastructure which equals more money. Those with a need for more throughput should pay more money to cover the cost.

Benefits – America is a large country and we have a great need for more widely available internet access in our rural ares as well as faster internet access in all areas. Ubiquitous high speed internet is only going to happen if ISPs have the money to invest in expanding their infrastructure and customer base. I think a usage based pricing modeal will provide cheaper access to those who need it and will in turn allow providers the ability to push their networks geographically further.

In conclusion I think usage based pricing will be fairer for customers, provide for better competition, and may well offer faster speeds in the long term.

Now a word of advice to the providers –

Make these changes with openness and integrity.
Be clear concerning restrictions and pricing up front.
Offer unlimited usage agreements with premium plans for high need users.
Allow us to drop local phone, long distance, and cell phones and still access the “bundled rate.”

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