From: Thomas Leavitt <thomas@xxxxxxxxxxxxxxxxx>
Date: December 17, 2005 2:28:55 PM PST
To: dewayne@xxxxxxxxxxxxx
Subject: Re: [Dewayne-Net] At Stake: The Net as We Know It
As broadband use grows, the Bells and cable companies say that
intensive users aren't paying their fair share. File-sharers swapping
music and movies account for 60% of North American residential
broadband use, estimates Dave Caputo, CEO of Sandvine in Waterloo,
Ont., which sells technology to manage network traffic. "Your
overeaters get preferential treatment over weaker ones," he says.
IT'S OUR NET. Carriers could raise their prices for consumers who
clog the network. But when Korean phone giant KT noted that 5% of its
users accounted for half of its traffic and floated the idea of
volume pricing earlier this year, the public outcry quickly quashed
any plan.
This is B.S.
I built a multi-million dollar self-service web hosting business (web
Communications, LLC) based on the core insight that bandwidth hogs
should pay up - that you can't let 10% of your users degrade
service for
the other 90%... the business was started after we observed that
80% of
Netcom's FTP connections and bandwidth were being consumed by "Charlie
Tuna" and his pron archive, blocking out access to the other 1,500
small
business "web sites", and making their operators extremely unhappy.
Netcom refused to do anything about this, and refused to install an
HTTP
server, and dropped the opportunity of a lifetime in front of my late
partner, Chris Schefler (who was operating the "Netcom FTP report" and
mailing access log extracts/reports to 1,000+ Netcom customers -
another
service Netcom was not interested in providing), and myself.
We put a web server up, promised that we'd provide as much
bandwidth as
people could consume - as long as they were willing to pay for it, and
had people breaking down the doors to get on, even during our beta
pre-launch phase. Positive cash flow from day one... Netcom could have
owned the web hosting business, if it had listened to its
customers, and
not been obsessed with becoming the AOL of the Internet.
If bandwidth hogging was a genuine problem for the DSL and Cable
providers, and not just an excuse to lobby for walled gardens,
you'd see
consumption based pricing models being put in place - they have the
equipment in place to identify high consumption users, and I'd bet
that
95% of the consumption would disappear the moment such a system
were put
in place - even if it only affected 5% of their user base.
To be honest, I'm somewhat astonished they haven't done this before...
if a business could shed 80% of its marginal costs, and affect less
than
5% of its user base (all of whom pay the same rates), why wouldn't
it do
so? Unless the true costs of providing the bandwidth are almost
neglible... how much "damage" could the negative PR cost?
That said, of course, consumption based pricing has a negative
effect on
broadband innovation, and it is really easy, as a business, to neglect
to adjust your quotas (it does produce increased revenue) upwards over
time and wind up having a large number of people invisibly elect to
either not access bandwidth intensive services, or switch providers.
Witness the Alternative Minimum Tax debate... if not managed so as to
simply retard bandwidth consumption at the margins, to keep the
network
from being overwhelmed, then they are likely to be a drag on
innovation
and a long term sedative for business growth.
Perhaps these dangers could be alleviated by some real-time pricing
metric that makes bandwidth consumption pricier when there is network
congestion, and conversely, that adjusts bandwidth limits upwards and
mandates network upgrades when they start affecting more than, say, 3%
of your post-implementation customer base...
Regards,
Thomas Leavitt