

Netflix: ISPs who charge by the gigabyte are ridiculous - woodrow
http://arstechnica.com/tech-policy/news/2011/01/netflix-charging-by-the-gigabyte-is-ridiculous.ars

======
rlpb
This is not accurate. Any time you have multiple people sharing a physical
link you end up with a marginal cost for bandwidth in any sensible economic
arrangement. If you insist on having every part of your connection dedicated
to yourself, you're effectively back to a circuit-switched network with the
corresponding orders-of-magnitude price hike in providing it.

For example, in the UK the last mile is usually supplied by the incumbent
(BT), who also (virtually) route that traffic over a private IP-based backbone
to ISPs to provide the backhaul. They charge ISPs by capacity. So these ISPs
effectively have marginal costs that vary throughout the day according to
demand, since they have to pay directly for an appropriate (fixed) amount of
capacity to be available.

We also have LLU (local loop unbundled) ISPs who still use BT's last mile but
provide their own equipment directly at the exchanges, thus effectively
providing backhaul straight from the exchanges. They may only have a fixed
cost for bandwidth depending on how they provision those links. But if they
are buying capacity from anyone else, they will be charged by how much they
are buying, and suddenly they have a marginal cost again.

The article says that Netflix are complaining about the situation where
_Netflix_ have brought the traffic to the last mile. _In this specific
situation_ it makes sense. But in the general case, ISPs still have marginal
costs in providing bandwidth.

~~~
psyconn
The article is not about bandwidth but about the amount of data you can
download at a reasonable price. People are actually willing to spend more time
downloading something instead spending more money.

~~~
hxa7241
The _amount_ of data, when aggregated over many people, adds up to _bandwidth_
of network needed.

An ISP's customers, all added together, are downloading a certain amount per
month. That is, a certain amount of data per time period -- which is
bandwidth.

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adamesque
It certainly seems like a little bit of consumer education should go a long
way, but without competition – or in the presence of collusion – we'll end up
with something looking more like text messaging.

Everybody knows the cost to the carrier is only a fraction of what they
charge, but there's no competitor willing to charge less. Education,
unfortunately, seems to only go so far.

~~~
Qz
On Verizon's family plan, we pay 30 extra per month for unlimited texts for 5
people. 6$ per month for that seems like a fair price.

~~~
chc
It's not really. <http://gthing.net/the-true-price-of-sms-messages>

~~~
Qz
Let me clarify. At 6$ a month, I don't feel like I'm getting ripped off, even
if it really doesn't cost them nearly that much to provide me the service. The
t-shirt I'm wearing costs maybe $1 in raw materials and manufacturing, but it
sold for $20. I got it 50% off for 10$. Am I getting ripped off? Should $10
for a t-shirt not seem like a fair price?

~~~
jessedhillon
> At 6$ a month, I don't feel like I'm getting ripped off

OP's point was about consumer education. Have you considered that maybe you
_should_ feel like you're getting ripped off?

~~~
Qz
I have. I'm not dogmatic about this.

Part of my other point was that the comparisons in the link to why SMS is
ridiculously overpriced, in which the cost of downloading songs via SMS is
calculated to be in the millions of dollars, is that that's a bogus argument.
If you're sending that many SMS's, get an unlimited plan. If your carrier
doesn't have an unlimited plan, switch to one that does. Consumer education is
fine, but there's also something to be said about consumer responsibility.

------
rdl
They're clearly limiting this discussion to wired ISPs, where I think this is
reasonable.

Wireless (cellular) users can look to satellite ISPs to see just how crazy
things can be. On a lot of satellite systems, users are sold "unlimited"
bandwidth, but then aggressive fair access policy, unpublished caps, etc.
apply, so your unlimited 2Mbps x 256Kbps connection might actually only let
you transfer 500 MB/month.

True hilarity happens on the L-band services like Inmarsat BGAN when either
someone leaves Windows Update or other autoupdate turned on, or isn't aware of
the per-MB charging. $3 to $25 per megabyte adds up quickly; I've personally
seen a $160k/mo bill due to users downloading movies and music over a BGAN
system (with the bill paid by a third party, obviously, and no mechanism in
place to communicate costs to the users).

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redthrowaway
Now I wonder why Netflix might have a problem with that...

In any case, they're absolutely right. These plans are clear cash grabs, and
they wouldn't exist if we had proper competition.

~~~
acangiano
In Canada many people won't get Netflix[1] because of ridiculously low
bandwidth caps. It's amazing how much lack of competition and corrupt
regulatory bodies can stifle innovation.

[1] And of course, Netflix' catalog in Canada is very limited due to similar
politics.

~~~
wildmXranat
Indeed. I moved in with by g/f and soon after that, her Rogers Internet
service went up in price and monthly cap got slashed to 60 GB/month. I
subscribed to Netflix service for the 30 day free trail, but promptly canceled
after I saw the horrid selection and b/w usage. Needless to say, we are
switching to Teksavvy since I've been a customer of theirs since 2001

~~~
acangiano
I use Teksavvy as well. Slower internet, but no caps (for the time being).

~~~
acangiano
Spoke too soon. With UBB, they are capping it at 25 GB starting in March. :(

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forkrulassail
This has been the status quo in South Africa from 1997. In 2009 I lost a legal
battle via the Advertising Complaints Commission.

It boiled down to the wording. Uncapped means that they can shape your line to
s __*, and still sell it as a 4meg ADSL service.

~~~
Devilboy
Australia has the same thing. 'Unlimited' = full speed up to X gigs each
month, after that you get dial-up speed only until the start of the next
month.

Most plans are advertised by GB/month though.

~~~
forkrulassail
Sad, really.

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dlsspy
It's fun to look around at the limits in terms of how long it'd take you to do
it with a 56k modem.

250GB, which they consider pretty high, would actually take a while:

<http://www.wolframalpha.com/input/?i=250GB+%2F+56Kbps>

But smaller values are less impressive. 10GB is only half a modem month.

Looking at the $1/GB thing gets more interesting. How much would it cost me to
run a 54Kbps modem 24/7 for a month at $1/GB:

[http://www.wolframalpha.com/input/?i=%2856Kbps+*+1+month%29+...](http://www.wolframalpha.com/input/?i=%2856Kbps+*+1+month%29+*+%241%2FGB)

~~~
coderdude
You're forgetting, or maybe just never used a modem (some people ask what the
hell a floppy is), but the max speed you could squeeze out of a 56k was like
3/4kbps for any single download. That's if you were _lucky_. You would never,
ever have transfered so much as 10gb in a month.

Things sure have changed. I remember praying to the modem gods that the
connection wouldn't simply drop when downloading something as small as 200kb.
The good ol' days -- you made every moment on the net count.

<http://www.wolframalpha.com/input/?i=10GB+/+3Kbps> 10 months.

Edit: What I just linked to above was incorrect. I should have used kilobytes
per second, not kilobits per second.

~~~
pilif
the 56k stands for 56KBit/s. What you were seeing was 3.5 KByte/s which of
course is still way off the theoretical 7 KByte/s you could achieve with
56KBit/s.

If you only got 3 KBit/s over a 56K modem, your download-rate would have been
375 bytes/s - a third of a Kilobyte per second. That's a bit more than what
you could have reached with a 2400 baud modem from the eighties.

You get to your 10 months result by dividing the 10 Gigs by 3Kbit/s, while you
would probably have ment to divide by Kbyte/s

<http://www.wolframalpha.com/input/?i=10GB+%2F+3KBps>

38 days.

~~~
coderdude
Thanks for the clarification on my points. I was conflating the two.

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CWuestefeld
I hate the idea of paying per GB.

However, the foundation of this argument is baseless. All that discussion of
how much it _costs_ to provide the bandwidth really is irrelevant.

I've said it before and I guess I have to keep repeating: the price of a
product is unrelated to its cost!

The price of a product is the point at which a producer is willing to make
another unit of it, and at which a consumer is willing to buy that unit. Costs
don't come into the discussion at all. Everything based on the perceived value
of the product from each party's perspective.

~~~
Retric
You are ignoring competition. If the cost to produce X is 1$ and someone is
charging 10$ then there is an opportunity for someone else to step up and
charge 5$.

In an open and free market the cost generally works out to around 1.1x the
cost of producing the quantity of product that customers want to buy. Which is
why most large companies hate free markets and do everything they can to
create monopolies either natural or legislative. Cable companies would love to
charge 1$ for something it costs them 1c to make and they are trying
everything in their power to make that happen.

~~~
roc
And that's ultimately the discussion we should be having:

Pay-as-you-go, Unlimited, Monthly caps -- all are potentially reasonable ways
to charge for network access. Provided there's competition.

And without competition, there's really no advantage to any of them. You're
just picking a poison at that point. The monopolist(s) will get their profit
out of you.

------
cletus
I'm from Australia where fixed quotas on wired (typically DSL) are _de rigeur_
[1].

Several years ago the ACCC (Australian Competition and Consumer Commission)
banned the use of the word unlimited on Internet plans unless they were truly
unlimited meaning no overage fees and no traffic shaping after hitting a soft
cap.

Compare that to the UK where they've de died that unlimited means what 90% of
users use, which is as little as 5GB/month!

In the US you typically still have caps (hidden behind terms like "fair use").
So the only difference in Australia is the ISPs are upfront about it.

So in Australia the net effect has been:

1\. You buy the plan most suited to your usage. In other words you pay for
what you use.

2\. You get what you pay for. If you pay for 1TB/month you get 1TB/month.

Both of these situations are much better than say Comcasf or Time Warner
really only giving you 250GB/month or UK providers declaring you're a
downloaded and moving you to a network that in the evenings is utterly
unusable.

The fact is that bandwidth still has a marginal cost so it's not unreasonable
to expect users to pay for that. Nor is tiered pricing based on usage a bad
thing.

In New York I have one choice for high speed Internet: Time Warner (some areas
have Verizon FiOS; not mine). There are two plans for $65 and $99 (iirc).

In Australia I have typically a dozen choices or more ranging from $20 to
¢150+ pe month based on the features I want. How can that possibly be a bad
thing?

[1]: <http://www.iinet.net.au/broadband/plans.html>

~~~
Retric
Australia has a terrible broadband network.

I live in the US and pay 45$ a month for a 35mbps up/5mbps down on a fiber
connection with no cap. The actual cost of me downloading 1TB works out to
around 10$, but like most customers I don't break 200GB/month which is a small
fraction of my bill, and the company is wise enough to realize overcharging
for bandwidth is just going to piss me off.

~~~
cletus
Yes and how much of the US by population has the option you have?

~~~
Retric
I don't know the percentage, but more people than live in Australia. I game
with people in Australia and even in major city's they don't have reasonably
priced high speed internet. Granted, laying undersea cables is expensive but
compared to other countries in the reign Australian internet sucks.

PS: I am not saying that people living in the middle of the country need to
have high speed internet just that you could wire up the major city's at
reasonable cost because that's where most people live.
[http://www.environment.gov.au/soe/2001/publications/theme-
re...](http://www.environment.gov.au/soe/2001/publications/theme-
reports/settlements/settlements01.html)

------
cal5k
The real problem isn't even that they're charging by the gigabyte (although
they are, and I strongly dislike it).

No, the REAL problem is that they preferentially exclude their own services
from these charges/caps.

For example: If you get Bell's IPTV offering (in Canada), do you really think
they're going to cap your consumption? What about Rogers on Demand? Is that
subject to the same caps?

The answer is no, making their services more attractive than competitors like
Netflix.

Ergo, the only solution is separation of concerns. Providers of pipe should
not be providers of content. Ever.

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otterley
Now they know how I feel about text messaging rates. Captive consumption
sucks.

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te_chris
I know, I know I say this every time, but man, I would love someone in New
Zealand to come and tell my broadband provider that their top-of-the-line plan
that I pay $80 NZD a month for that only gives me 40 gigs is BS.

Oh and we've already prioritised traffic too..If i was to buy tivo, then all
my on demand data would be "free". I don't think Net Neutrality is even a
remote consideration here - though there are many of us who passionately
believe in it.

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newsisan
Welcome to Australia...

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Swizec
At the risk of sounding trollish, this is one of the reasons I absolutely love
living in Slovenia.

30 euro a month for unlimited and unshaped 20/20 FTTH. :)

From what I understand it's like this in a lot of Europe actually, especially
those scandinavian countries.

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MichaelGG
If charging by the gigabyte is ridiculous, what is AT&T data roaming on Rogers
for $15/MB?

