North American Network Operators Group

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Re: Why do some ISP's have bandwidth quotas?

  • From: Mark Newton
  • Date: Fri Oct 05 22:51:04 2007

On Fri, Oct 05, 2007 at 01:12:35PM -0400, [email protected] wrote:

 > As you say, 90GB is roughly .25Mbps on average.  Of course, like you pointed
 > out, the users actual bandwidth patterns are most likely not a straight
 > line.  95%ile on that 90GB could be considerably higher.  But let's take a
 > conservative estimate and say that user uses .5Mbps 95%ile.  And lets say
 > this is a relatively large ISP paying $12/Mb.  That user then costs that ISP
 > $6/month in bandwidth.  (I know, that's somewhat faulty logic, but how else
 > is the ISP going to establish a cost basis?)  If that user is only paying
 > say $19.99/month for their connection, that leaves only $13.99 a month to
 > pay for all the infrastructure to support that user, along with personnel,
 > etc all while still trying to turn a profit. 

In the Australian ISP's case (which is what started this) it's rather

The local telco monopoly bills between $30 and $50 per month for access
to the copper tail.

So there's essentially no such thing as a $19.99/month connection here
(except for short-lived "flash-in-the-pan" loss-leaders, and we all know
how they turn out)

So to run the numbers:  A customer who averages .25Mbit/sec on a tail acquired
from the incumbent requires --

   Port/line rental from the telco   ~ $50
   IP transit                        ~ $ 6 (your number)
   Transpacific backhaul             ~ $50 (I'm not making this up)

So we're over a hundred bucks already, and haven't yet factored in the 
overheads for infrastructure, personnel, profit, etc.  And those numbers
are before sales tax too, so add at least 10% to all of them before
arriving at a retail price.

Due to the presence of a quota, our customers don't tend to average
.25 Mbit/sec over the course of a month (we prefer to send the ones
that do to our competitors :-).  If someone buys access to, say, 
30 Gbytes of downloads per month, a few significant things happen:

 - The customer has a clear understanding of what they've paid for,
   which doesn't encompass "unlimited access to the Internet."  That
   tends to moderate their usage;

 - Because they know they're buying something finite, they tend to 
   pick a package that suits their expected usage, so customers who 
   intend to use more end up paying more money;

 - The customer creates their own backpressure against hitting their
   quota:  Once they've gone past it they're usually rate-limited to
   64kbps, which is not a nice experience, so by and large they build
   in a "safety margin" and rarely use more than 75% of the quota.
   About 5% of our customers blow their quota in any given month;

 - The ones who do hit their quota and don't like 64kbps shaping get
   to pay us more money to have their quota expanded for the rest of
   the month, thereby financing the capacity upgrades that their 
   cumulative load can/will require;

 - The entire Australian marketplace is conditioned to expect that
   kind of behaviour from ISPs, and doesn't consider it to be unusual.
   If you guys in North America tried to run like this, you'd be 
   destroyed in the marketplace because you've created a customer base
   that expects to be able to download the entire Internet and burn
   it to DVD every month. :-)  So you end up looking at options like
   DPI and QoS controls at your CMTS head-end to moderate usage, because
   you can't keep adding infinite amounts of bandwidth to support 
   unconstrained end-users when they're only paying you $20 per month.
   (note that our truth-in-advertising regulator doesn't allow us to
   get away with saying "Unlimited" unless there really are no limits --
   no quotas, no traffic shaping, no traffic management, no QoS controls.
   Unlimited means unlimited by the dictionary definition, not by some
   weasel definition that the industry has invented to suit its own

 - There is no net neutrality debate to speak of in .au because everyone
   is _already_ paying their way.

Like I said a few messages ago, as much as your marketplace derides 
caps and quotas, I'm pretty sure that most of you would prefer to do 
business with my constraints than with yours.

  - mark

Mark Newton                               Email:  [email protected] (W)
Network Engineer                          Email:  [email protected]  (H)
Internode Systems Pty Ltd                 Desk:   +61-8-82282999
"Network Man" - Anagram of "Mark Newton"  Mobile: +61-416-202-223