Tony,
In most cases their service provider lured them in with the hype of
an "Unlimited use" 3Mbps connection and then told them that they can't
use all of it[1]. Where else in life are we handed something and then
told that we can't use it[2]? If we could prevent the providers from
misleading their potential customers this problem would fade away.
Agreed.
All of my access plans are charged for usage in some way. Most are
based on monthly Gigabits allowed to pass through my network. It's
easy to understand and so far I've never had a client surpass the
bandwidth included in the plan. If they get close I let them know and
provide them with a way to gage their usage more accurately. If usage
patterns change substantially, then I lower the maximums or change the
plans. If a contract is in place, nothing changes for the length of
the contract.
Sounds like a good plan. You can do that at gigabit speeds, because people
that know they need to buy gigabit speeds understand the business.
Residential End users on the other hand do not.
The bottom line is no Internet provider on the planet is selling speed
pre-allocated for sustained throughput of speed sold.
[...]
Over-subscription is based on a business model where your customers
typically consume 1% of what you are selling them. That doesn't
change the fact that you sold them 99% more than a typical customer
uses. If usage patterns change, then contracts need to be updated and
marketing needs to change their tune. There is no basis in law
(IATNAL) for retroactively changing a contract because one side
realizes that their business model was based on flawed assumptions[3].
Great point. These low price points that follow assumptions, are fueled by
large marketers like ILECs and Cable companies. And all ISPs get squeezed
into this position.
Providers will definitely have to rethink how their products are
marketed and sold. Legislating usage restrictions independent of
marketing's messages to consumers is a foolish way to correct an
oversight because it makes it nearly impossible for consumers to
determine what exactly they are purchasing.
Thats the point. You don't want them to understand. You only need to
guarantee they get what they need. If you sell by features and consumers
understand all that, you'll always loose he business because someone else
always has better features. They don't need to evaluate what they are
buying, they just need good guarantees to protect them. So if their
perception of perceived value is not there they can go elsewhere. Thus
bringing up the need for competition.
If we turn it around, VOIP companies like Vonage are no different. One
time I setup a Fax server on a pool of 4 or 5 of their VOIP lines.
[...]
This is yet another example why it should be illegal to advertise
'unlimited' when that is clearly not the case. "Unlimited" has a very
specific meaning in the English language and it doesn't include the
possibility for restrictions. While the fine print of your contract
probably told you that it wasn't acceptable to actually use what you
were sold, the marketing messages certainly didn't.
agreed. it wouldn't hurt to have the FCC go fine a bunch of large ISPs for
their deceptive marketing. Right now people lie, because they can.
This is a time bomb waiting to happen. Worst of all it sets the stage
for market pressures to force ISPs to sell under cost, because marketing
has to over state the capabilities of the network.
[...]
Marketing has absolutely no reason to overstate anything if we have
a competent oversight mechanism in place to prevent companies from
misleading consumers about the products that they are selling. I
think that a much better solution to this problem would be to force
all companies to be completely transparent about their services and
provide consumers with a simple way to accurately compare similar
items. For example, if I were selling 3Mb/384kb DSL I would have to
state that the average available bandwidth for my customers last month
was 1.2Mb/150kb, average packet loss was 5%, latency was an average of
100ms across the network and you are limited to continuous bandwidth
of 512kb/30kb and daily restrictions of 300MBytes of traffic[4]. This
type of information would allow consumers to make an informed choice
instead of blindly choosing the $14.95 (plus $40 for the phone line
that they don't tell you about) 3Mb DSL that can barely move 256kb/s
of information in either direction.
Agreed. but hard to inforce accuracy of published data.
Yes, I know that this is difficult to implement and to enforce, but
we would be much better off if we put our government's resources into
this instead of having them pretend to protect consumers by compelling
megacompanies to wait three years before they begin to pillage the
industry.
agreed.
Laws will have to be put in place to compensate those that incur the
costs, or the quality goes to crap. I'd hate it if broadband stuped to
the low level of PC hardware and electronics. I remember I used to be
able to buy an original IBM PC, and that bad boy would last 10 years
without a hickup. Now I'm lucky to have PC hardware outlast the first
year. Consumer electronics typically come with only 90 day warrantees,
its rare that they last over the first year either. BUtits a commodity
market, forcing lowest price and features, with reliabilty nd durability
forced right out of the equation.
I completely disagree. Laws are supposed to internalize natural
externalities, not to force certain companies to fit into the business
models of other companies. Product quality suffers when consumers are
uneducated about the goods available and not able to vote with their
feet. The recently approved mergers have definitely facilitated the
latter. Now is the right time to enforce fair trade practices so that
the former has an opportunity to take hold before choices are so
limited that no amount of consumer knowledge will allow them to make
any choice much less an informed one. I am slowly realizing that the
'differentiate your product' lessons taught to marketing students will
ultimately lead to the collapse of capitalism through irrational
consumer behavior due to misinformation.
Good point.
Its not just SBC that needs compensation, its independant ISPs. What
going to happen when a huge marketing engine like an AOL or Google, or a
Comcast, or SBC starts selling their IPTV and VOIP over every ISP's
network for free?
Hopefully, the non-oligopoly ISPs will have 'seen the light' by then
and realized that there is no such thing as an unlimited service.
Simply charge for usage like most other services out there. Let the
consumer decide how they would like to use their bandwidth. One of
the primary reasons for the success of the Internet was that it was
independent of the artificial limitations of the circuit-switched
pay-per-connection-minute network. Add these limitations back and
content providers will migrate to a new Internet. Why do you think
that Google just bought a substantial number of fiber miles?
The problem is that if I charged for usage I'd be out of business, because
nobody uses their service very much.
Instead I charge for QOS, I can deliver it since the network is so
underused.
One view is that it will force consumers to buy more bandwidth from
ISPs. Another is it will just cause lots of bad will between ISPs and
there customers, when they learn they are going to get charged more. Its
deceptive the the end user. We need a "truth in lending " type rule for
ISPs.
Exactly. We already have it. It's called the "Prevention of Unfair
Methods of Competition Act" (15USC) [5]. It just needs to be enforced.
And an ISP should get compensated for the use of their network
based on their cost to operate their network, not the average cost that
others may pay.
I completely disagree. An ISP should be compensated however they
would legally like to be compensated. Companies should not be allowed
to sell at a loss, however. If they are compensated through
advertising revenue from pop-ups, fine. If revenue comes from per-bit
accounting, fine. As long as the consumer is clearly told what they
are purchasing as prominently as the price, things will work out[6].
This works for 'wholesale' network providers too. The 'NDA to see a
realistic price list' thing has to be stopped because it prevents
'consumers' from being able to easily compare their options before the
purchase.
Good point.
[...]
And what makes it worse, is how do you tell whose network gets used and
how much?
[...]
I'm a believer in 'charge at the edges and manage the middle.' I
admit that it's more of a faith than a science, but I can't imagine a
world where I need to pay CableCo-C $2mc (micro-cents) and ILEC-A $3mc
every time someone visits my web site. Managing the relationships
simply takes too many resources. Sure you could only charge the 'big'
players, but the scaling issues are still unnecessarily expensive --
especially if they are legislated and regulated by the government.
I think what needs to be important is that companies are forced to make
policies that are not discriminatory. For example, its also to charge of
a $1 to take a packet from network 1 as long as you also charge the same
$1 to take a packet from network 2. In other words, If you set a price
for passing VOIP, VOIP is VOIP regardless of who provides it, and the
cost to the ISP is the same, and therefore should be compensated the
same. But not in a way that inforces that one prvider will have a lower
competitive advantage over the other.
[...]
This makes little sense to me. Why would I charge someone who is
moving 10Mbps through my network the same rate as someone moving
10Gbps through my network? The 10Gbps player would probably be
woefully over-charged. It just gets too complicated to regulate this
way. Do I charge $1.5mc/call-sec for G.711u and $1mc/call-sec for
G.729a VoIP sessions? The inefficiency of the payment structure would
most likely overshadow the cost of the bits.
I agree. Discounts with scle is OK. The point is if ISP1 passes 10 gb of
data he should not be charged more than ISP2 passing 10 gb of data.The fact
that the person changes that passes the data, doesn't make it cost more. 10
GB is 10 GB, regardless of who sends it.
The potential for competitive advantage is essential for any
competitive market. It is impossible to legislate that away without
creating a different market. In the past few years the major ILECs
realized that they had a difficult time competing within the current
technical environment and decided to use the government to change the
playing field. So far they have been extremely successful and will
probably cost consumers a considerable amount in the long run. Our
best option in this country has almost always been a level playing
field for competition instead of strict, specific regulation in a
potentially competitive environment.
Agreed.
I have to say Tony, that was a well written and insightful post.
I can't debate against most of your points, there is no basis to.
Tom DeReggi
RapidDSL & Wireless, Inc
- Tony
[1] Yes, there are probably limitations spelled out in the user
agreement, but who can actually read and understand them in a way that
allows them to compare two or more options?
[2] Ok, so there are examples, but my point was that it's an
inefficient way to do business because the consumers are unable to
make an informed choice about the services they purchase until after
the sale (when they were kicked off for 'abuse.') This only leads to
the type of 'competition' that we have in the cell phone industry
where there are choices but there isn't much difference in the
services offered and actual costs are so buried that we need
multi-year contracts to 'cover the costs involved.'
[3] Except for the dreaded black space on the "Wheel of Fortune" of
course.
[4] These numbers don't even remotely reflect the stats on my actual
network :) They may anecdotally fit those of certain DSL providers,
however these numbers in no way reflect any real network in the past
or present.
[5]
http://caselaw.lp.findlaw.com/casecode/uscodes/15/chapters/2/subchapters/i/toc.html
[6] Yes, there are DOS attacks and other non-obvious issues that
consumers can't predict, but we don't deal with this sort of thing
very well in any model. At least a per-bit model would give consumers
additional incentive to make sure that their PC is either protected or
off the network.
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