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[ NNSquad ] Re: Canada goes crazy

I want to be careful in responding to a number of these messages. I want to clarify that the bit price may make indeed sense to carriers. But it is crazy at as a societal policy and one created by legislation rather than the marketplace.

Charging for bits is like Intel charging for CPU cycles instead of selling processors. In fact in the old days we’d sometimes slow down timesharing systems to create revenue.

We’re talking about various accounting and billing models and their consequences including the incentives. The carriers set the capacity on their networks and they have an inherent conflict of interest. Having economists set the price is just as foolish as they are proxies for the carriers since they accept the current business model.

Before I get into prices and congestion I’ll note the big “cost” is the need to have a billing relationship with every provider along the path – the ability to bill for bits is just a symptom. It means I’m only connected in locations where I have a prior arrangement. The costs of maintaining the billing infrastructure are enough in their own right but the real damage is in preventing ideas that don’t serve ARPU. To put it simply – you’re disconnected when you leave home. 3G provides some limited respite but is far from equivalent.

We should pay for copper, fiber and radios instead of metered bandwidth. As with CPUs the demand would create capacity. This is the point behind community ownership of facilities funded as such rather than by the sale of bit transport as a service.

This should be simple enough but I’ll go into more detail given the number of questions raised.

I agree that infinite bandwidth is an illusion. It works because at any point in time we have a whole raft of applications that find value in what we have and that creates an incentive to provide more capacity. This is the virtuous cycle of hypergrowth. Fortunately we’re already at a point with existing broadband in that we have a lot of capacity on existing copper and coax as provisioned.

The problem is that today capacity is defined by business models and regulation and not by physics. To keep things simple I’ll use copper as my example but only as an example – this is not a plea for more copper. Note that copper capacity has not increased in 25 years because has been no incentive – if anything the incentive has been to find reasons such as 12000.000000 ft to claim limits.

Sure if you move a lot of bits you are taking a portion of the capacity of the copper wire – the capacity that the carrier has chosen to in order to maximize ARPU rather than maximizing bit flow. This is one of the perverse aspects of charging by the bit – it means that increasing capacity would make it more difficult to justify claims of scarcity. Once you have a gigabit connection how do you justify a bit charge?

If you charge for bits then you have every incentive to increase the value of the bits by limiting them. Not only does a superabundance lead to a price collapse in such a model, limiting bits means that carriers are get an advantage in offering their own services. But if the bit business was so good why did Verizon drop their FiOS plan?

There is an alternative accounting model in which the community owns the physical infrastructure and doesn’t pay for redundant “broadband” and gets 100% instead of 1% of the capacity. If the capacity is used because it has value then the community would simply add capacity.

From: nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org [mailto:nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org] On Behalf Of Vint Cerf
Sent: Friday, May 07, 2010 16:10
To: Peter Sahlstrom
Cc: nnsquad@nnsquad.org; Matt Larsen - Lists
Subject: [ NNSquad ] Re: Canada goes crazy


resources ARE consumed when you access the Internet. The access provider has finite capacity to and from the network. To the extent you are competing with others for a shared access resource, your use prevents others from having unlimited data rate. So instantaneous bandwidth is the key resource that is "consumed" second by second. 





On Fri, May 7, 2010 at 2:59 PM, Peter Sahlstrom <peter@stormlash.net> wrote:

As has already been pointed out, there is no convenient analog for
what we are purchasing when we buy internet access, so it's hard to
determine what a truly fair pricing model would be.  I think the chief
difficulty is that although no resources are consumed when the network
is used, there is still scarcity in how much network capacity exists
at a given time.

In most cases, ordinary users don't experience bandwidth scarcity any
more than they experience scarcity in electricity or water, despite
the fact that all these systems have limited instantaneous capacity.
An ordinary homeowner can turn on every light and open every faucet in
their house, and they're not likely to see any substantial dimming of
bulbs or loss of water pressure.  In order to maintain this illusion
of unlimited capacity, providers must continually forecast expected
loads, and where necessary, upgrade their network to raise the
congestion ceiling.  Because these upgrades are driven by the behavior
of the heaviest users during times of peak congestion, it is fair to
expect those users to be the ones to pay the greatest share of the
upgrade cost.

One reasonable model for this type of scaled billing is that used by
the natural gas utility here in Atlanta.  Each user's bill lists a
"Base Rate" fee, which includes a "Peaking Service" charge, which is
calculated annually based on how much gas a customer used during times
of peak demand.  This allows the gas company to insure that enough
capacity is available at those peak demand times, and forces the users
most responsible for necessitating upgrades to pay for the costs of
those upgrades.  A similar billing model for internet connectivity
would allow service providers to penalize users who cause the most
disruption to the network without imposing limits on how much data can
be transferred, or with whom, or in what way.

I'd appreciate hearing thoughts anyone might have about this approach.
 Does this seem fair?  Is it practical?  Has it already been
implemented anywhere?

Peter Sahlstrom

On Fri, May 7, 2010 at 12:29 PM, Matt Larsen - Lists
<lists@manageisp.com> wrote:
> I'd like to add to the reasons that billing for bits is NOT crazy.
> Anyone who has had to manage a network recognizes the need to balance the
> nearly unlimited demands of users with the scarcity of network resources.
>  While many of the academics and lawyer types on this list would like to
> imagine a perfect virtual network that has unlimited capacity, the truth of
> the matter is that there are limits to a network's capacity and the network
> resources degrade considerably when users are not limited in how much they
> can consume.
> As the operator of a wireless broadband network, I get to deal with limited
> network capacity on a daily basis.   After watching our per-user bandwidth
> consumption steadily increase, we have begun implementing bit-caps.   A
> detailed description on what we did is available at www.wirelesscowboys.com.
> Bits may not be "consumed", but network resources certainly can be.
> Pretending that network resources are NOT scarce is the the real bad idea.
> Matt Larsen
> vistabeam.com
> wirelesscowboys.com
> wispdirectory.com
>  [ Wireless and wired technologies have fundamental differences that
>    can indeed make differing billing and regulatory approaches
>    reasonable.  What's really problematic is the way carriers have
>    pushed flat-rate data plans in both spheres and now, after
>    subscribers are "addicted," want to switch to measured models.
>    One might almost suspect that this was the plan all along, hmm?
>       -- Lauren Weinstein
>          NNSquad Moderator ]
> On 5/7/2010 8:12 AM, Bob Frankston wrote:
>> (Thanks to Aleks for this pointer)
>> http://www.cbc.ca/technology/story/2010/05/06/crtc-usage-based-billing-internet.html?ref=rss
>> The idea of charging people for bits consumed is a crazy idea since you
>> aren't consuming bits. We've been through this before - do I need to
>> explain
>> once again how bad the idea is?
>> .         It creates scarcity. A copper wire (or fiber or radio) is just
>> sitting there idle. We limit how much can be used.
>> .         Even if there is a temporary constriction somewhere else it
>> means
>> we can't use the capacity locally. To take it to an extreme imagine if
>> there
>> is such a limit in your house - you can't copy too many files between your
>> computers.
>> .         FiOS VoD, for example, goes over IP through my router. I can't
>> watch much "TV" [sic] if the limit is applied to those bits. If the limit
>> is
>> not applied we have a vertical playing field where the provider has all
>> the
>> advantages.
>> .         Any sane price doesn't allow making video affordable if we're
>> going to make the cost of other uses visible.
>> .         As with SMS any market that permits prices to be millions of
>> time
>> cost (determined by competition with Moore's law) isn't really a market in
>> a
>> useful sense. It's rent taking gone to hostage taking.
>> But basically it shows a deep inability to comprehend the very concept of
>> connectivity using best efforts. It's railroaders banning the use of roads
>> unless you buy a ticket for a ride every time you leave your driveway even
>> if it is just to reorder the cars in the driveway.
>> Others care to add to the reasons why this is crazy?
>> http://frankston.com/public
>>    [ And coming soon to a U.S. ISP near you (and me) too, I'll wager.
>>      Since the FCC chairman has shown no interest in including any
>>      sort of pricing or realistically effective competition-enhancing
>>      elements in his proposed "third-way" regulatory plan, the
>>      dominant ISPs are ensured a captive audience of users who will
>>      "pay through their noses until their skulls are a vacuum" (as one
>>      high level ISP executive expressed it to me yesterday --
>>      picturesque, this guy, and a master of invective as well ...)
>>          -- Lauren Weinstein
>>             NNSquad Moderator ]