
ISP explains data caps to FCC: Using the Internet is like eating Oreos - rosser
http://arstechnica.com/information-technology/2016/09/internet-data-is-like-oreos-isp-claims-while-defending-data-caps/
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SwellJoe
"Ironically, those who think ISPs are greedy pigs or evil villains because
they charge based on consumption through caps or usage-based pricing"

That's not the only reason people think ISPs are greedy pigs and evil
villains. Their customer satisfaction rankings speak volumes about what people
think of the major telcos and cable companies. When they have an effective
monopoly, charge vastly more than what companies in a dozen other developed
nations charge while providing the same or worse services (often much more and
much worse), and treat customers as if they owe the company their business, it
shouldn't be surprising that people are deeply unsympathetic to their desire
to provide even worse service at even higher prices.

They're regulated because it is a market with very little competition at the
last mile. And they're regulated because it is an industry that has shown
itself to be horrible at self-regulation or moderating the abuse they inflict
on consumers (from its very earliest days). I'm all for market solutions, but
I'm all out of sympathy for telcos and cable companies when it comes to their
crocodile tears.

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sreenadh
There was a comment left by "conan77"[I am not "conan77" & I have not asked
for any permission to repost it here, but I hope "conan77" will be cool with
it as the comment was really nice and puts across the real issue rather well.]

"Let's say you have a bad Oreo habit. Like a box a day. With such Oreo
consumption, you have negotiated a deal wherein you get a full month's supply
for $100. 30 boxes or so for $100. Now a few days before the month is up, you
run out of Oreos. You see, you have visitors , and they like Oreos too. You
would thing you could just to to 7-Eleven and buy a box for $5. But you can
only buy Oreos from your current supplier, as the local municipal government
has legally mandated that there are only two OSPs (Oreo Service Providers)
allowed to sell Oreos in your city. You have to pick one (which you have) and
you can't switch mid-month without paying for the next month you'll never
receive. So you get the extra box from your OSP, and pay the overage fee of
$25 a box.

Yeah, the internet is exactly like Oreos."

source: [http://arstechnica.com/information-
technology/2016/09/intern...](http://arstechnica.com/information-
technology/2016/09/internet-data-is-like-oreos-isp-claims-while-defending-
data-caps/?comments=1&post=31950983#comment-31950983)

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magila
Obviously sympathy for residential ISPs is in short supply, but I do not envy
their situation when it comes to pricing models. The pricing model which most
closely matches their cost structure, peak hour usage billing, would get them
eviscerated regardless of how fairly it was priced. We know this because it
happened to cell carriers who tried peak hour billing. People don't want to
have to think about peak hours at all, even though they are critically
important to the ISP's bottom line.

So we get these wonky billing schemes that the ISP can't really defend because
they're not about to come out and say that their customers aren't rational
enough to handle a more sensible scheme.

To be fair, I'm sure the fact that it kneecaps Netflix doesn't hurt their
enthusiasm for usage caps, and residential ISPs are overpriced in general, but
there is an element of customer behavior which pushes ISPs in this direction.

~~~
oconnore
This would be cool. Netflix could offer an automatic daily batched download at
2:00am to get around peak times.

~~~
db48x
Your computer can already do that.

~~~
oconnore
Really? There is a program to batch download Netflix?

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yellowapple
"Of course, it would be nice if your two dollars bought you the right to eat
an unlimited number of cookies, but you know that is not the way our economy
works."

I take it this person has never seen an all-you-can-eat buffet in one's whole
life?

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Melkman
Well, that's a bunch of nonsense. If you eat twice as much oreos you use up
twice as much resources. For network connections that is not true. Once a
connection has been made no extra resources are used for traffic over that
connection. The only problem is in the uplinks when a provider has estimated a
1:100 overbooking should be enough but customers start using their connection
for more than 1% of the time.

~~~
gwright
It is a bit difficult to understand what you are saying. All packet based
networking is dependent on the mathematics of statistical multiplexing and the
aggregate behavior of the subscribers.

While there are fixed costs for a connection (i.e. a subscriber with a
physical connection via DSL or cable) the total required Internet bandwidth is
highly dependent on the aggregate behavior of all the subscribers.

Outliers in a statistical multiplexing situation can push total traffic into
an over-subscribed realm. It is certainly possible to simply raise the rate
for all subscribers to cover the network build-out required to satisfy the
outliers, but it isn't far fetched to think that the outliers should bear most
the cost via an alternate rate plan, overage charges, etc.

The bigger problems is that we don't have effective competition for Internet
service at the last-mile level. If you are a business in an office building
serviced by multiple fiber providers, your Internet costs are going to be
quite competitive. Otherwise you are basically beholden to the local telco
and/or cable company and the regulatory infrastructure in your state.

~~~
nitrogen
Punishing outliers too aggressively, however, will result in stagnation
because no novel services will be invented that might require more bandwidth.
Then the lack of those services' existence is used as proof that more
bandwidth is not required.

~~~
gwright
Since when has novelty created an obligation for a resource to be sold at
below cost? There is nothing special about Internet bandwidth in that regard.

Should electric rates be increased so that some novel use of electricity can
become affordable due to the subsidy of other rate payers? What if the use of
electricity was 10 times a normal residential use? 100 times? 1000 times?

~~~
nitrogen
Who said anything about selling below cost?

But if you insist, there are many things sold slightly above cost for most but
slightly below cost for a few, because the averages still work out and it
serves to benefit the society as a whole. Insurance is one example. Maybe,
again if you insist, bandwidth could be sold slightly below cost to a few, to
facilitate investment in the future.

~~~
gwright
Insurance is a very bad example because it is predicated on not knowing who
will be the outlier. If you know who is the outlier you can just charge them
more money directly.

The numbers matter here but when I say below cost, I mean that the average
price paid by the outlier is less than if they were paying their weighted
share.

Example: Let's assume I'm selling something such that by selling one unit at
$1 I make a reasonable profit. If I have 100 subscribers and 95% of those
subscribers use an average of 5 units per/month but 5% use an average of 50
units per month, I have to provision for 725 units/month (95 _5 + 5_ 50).

If I charge everyone the same monthly rate, I would charge $7.25/month per
person to get my $725 of revenue.

But 95% of the people are only using 5 units. They are paying almost 50% more
than actual usage would justify. This is because they are subsidizing the 5%
who are each getting 42.75 units subsidized for 'free'. Their monthly rate is
'below cost'.

I doubt the real-world data is bimodal in exactly this way but I think this
illustrates what I was trying to communicate.

I did find this interesting quote from
[http://www.techhive.com/article/2055502/why-your-internet-
se...](http://www.techhive.com/article/2055502/why-your-internet-service-
provider-wants-to-nix-all-you-can-eat-data-buffets.html)

> According to Comcast, the current median monthly data usage for its
> customers is roughly 16GB. AT&T claims that the top 2 percent of its users
> (in terms of data consumption) eat up 20 percent of its network’s total
> available bandwidth. Telecom analyst Teresa Mastrangelo, principal at
> Broadbandtrends, suggests that the 80/20 rule applies, in that 80 percent of
> the data is going to 20 percent of users. “It may even be closer to 90/10,”
> Mastrangelo says.

