A Canadian view cost of 1 gig - new business models needed

[David Farber <dave () farber net>]

Begin forwarded message:

From: "Bill St. Arnaud" <bill.st.arnaud () canarie ca>
Date: April 15, 2009 10:41:35 AM EDT
To: <dave () farber net>, "'ip'" <ip () v2 listbox com>
Cc: <richard () bennett com>
Subject: RE: [IP] Re:   cost of 1 gig - new business models needed
Reply-To: <bill.st.arnaud () canarie ca>

While I agree with Richard that "As people migrate off traditional TV  
and
phone services to IP-only service plans the revenue void needs to be  
filled
for a time..." the traditional approaches are not going to work

Over 100 years ago the telephone industry in North America faced the  
same
problem and one of their more brilliant moves was to provide unlimited  
local
calls which stimulated demand for long distance traffic, which through  
cross
subsidy paid for the necessary local infrastructure. European PTTs, on  
the
hand, largely implemented usage charges which resulted in much lower  
telecom
usage (and overall higher costs) in Europe.

We are facing the same problem with next generation broadband.  It is
unlikely that triple play will be able to underwrite the costs of the  
next
generation broadband infrastructure, especially as over the top  
providers
provide free or low cost competitive services.  Hence we have argued for
some time that we need a creative new business model much like AT&T
developed many years ago for the telephone industry.

The one model we have been advocating (which at the end of the day may  
not
be the right one) is provide free fiber and high speed Internet  
bundled with
your energy bill.  Energy is an essential service and a customer pays
substantially more for energy than they will ever pay for broadband.  A
small incremental increase on the energy bill can easily cover the  
cost of
broadband - and the customer can also help save the planet by reducing  
their
energy consumption

http://free-fiber-to-the-home.blogspot.com/

Bill




> -----Original Message-----
> From: David Farber [mailto:dave () farber net]
> Sent: Wednesday, April 15, 2009 7:04 AM
> To: ip
> Subject: [IP] Re: cost of 1 gig GOOD POINT
>
>
>
> Begin forwarded message:
>
> From: Richard Bennett <richard () bennett com>
> Date: April 14, 2009 8:34:14 PM EDT
> To: dave () farber net
> Subject: Re: [IP] Re:  cost of 1 gig GOOD POINT
>
> This is a good point, and it goes to one of the two underlying issues
> in the usage-based pricing debate. On the one hand, we have some
> quantifiable infrastructure costs that are needed to support peak
> load, most of which have been exposed in Brett's message and the
> various critiques and clarifications of it (and kudos to Brett for
> having the nerve to show his work, BTW, which takes much more nerve
> that hand-waving.)
>
> But on the other hand, we have the fairly undeniable fact that
> services pay for infrastructure in America. If we're going to have
> FTTH or FTTN, we need to pay for a one-time upgrade in wiring. The
> least painful way to do that is to bundle triple-play services with
> Internet access, and this has been demonstrated not just in commercial
> contexts, but in muni fiber projects. Burlington, VT and Morristown,
> TN have muni fiber with bundled TV and phone service, and Burlington's
> founder has said that the uptake would have been pathetic without
> triple play. So triple play is essential to the financing of  upgraded
> cabling.
>
> As people migrate off traditional TV and phone services to IP-only
> service plans - and this certainly appears to be the inevitable
> migration path - the revenue void needs to be filled for a time (until
> fixed infrastructure costs are paid) and usage-based pricing does the
> trick. I don't think that's a big secret, or that it's especially
> nefarious.
>
> We're at the beginning of this migration right now, so we see great
> disparities in IP usage between the early adopters who watch TV via  
> IP-
> delivered video files and the traditionalists who watch TV over cable
> packages and limit their IP to browsing web sites and maybe watching a
> few cats on treadmills on YouTube. The point is simply that the
> economics of TV delivery are disrupted by the download-over-IP model,
> not to mention the economics of advertising and subscriptions.
>
> In a sense, usage pricing clears an obstacle in the path of the
> migration toward IPTV; some bandwidth cap systems simply cut off users
> who exceed the cap (Comcast) while Time Warner makes high users pay
> more up to a certain point and then lets them rip; after you pay TW
> $150/mo you can download and upload as much as you want. $150/mo is,
> not coincidentally, about what you'd pay for the top tier of triple
> play.
>
> The thing that I find most remarkable about all of this is the fact
> that the Internet is rapidly becoming the world's biggest TiVo. For
> all the rhetoric about innovation, building communities, free speech,
> and empowering the downtrodden and the neglected, it appears that the
> average American citizen wants nothing more that better entertainment
> options.
>
> The next time South Park does a show on Internet congestion, they'll
> have to replace the oversized Linksys home router they used to
> symbolize the net on the last one with a TiVo HD.
>
> RB
>
> David Farber wrote:
> > Begin forwarded message:
> >
> > From: Adam Lynch <alynch () gmail com>
> > Date: April 14, 2009 7:46:15 AM EDT
> > To: dave () farber net
> > Subject: Re: [IP] Re: cost of 1 gig
> >
> > I'm surprised nobody is up in arms about this one, yet, but:
> >
> > What about all the traffic that never goes off-net- like Akamai'd
> > content, and other distributed content? Customers will then be
> charged
> > for usage that *never actually leaves TW's network*?
> >
> > -Adam (who lives in the affected area of Rochester, NY)
> >
> >
> > On Tue, Apr 14, 2009 at 6:13 AM, David Farber <dave () farber net>
> wrote:
> > > Begin forwarded message:
> > >
> > > From: James Seng <james.seng () gmail com>
> > > Date: April 14, 2009 5:26:12 AM EDT
> > > To: Dave Farber <dave () farber net>
> > > Cc: ip <ip () v2 listbox com>
> > > Subject: Re: [IP] cost of 1 gig
> > >
> > > Ignoring the math aside, and I doubt time warner pays their
> > > bandwidth in
> > > blocks of T1, let's   use market rate of CDN as a basis, you can
> > > get about
> > > 20cent/GB. Larger players can get below 10cent. (Disney for one
> > > gets that
> > > price as far as I know).
> > >
> > > Of cos pricing varies depend how far you are from the exchanges but
> > > CDN
> > > pricing is as good estimate as you can get, bear in mind the price
> > > I quote
> > > above is US market rate, profitable to CDN operator.
> > >
> > > Sent from my iPhone
> > >
> > > On Apr 14, 2009, at 5:05 PM, David Farber <dave () farber net> wrote:
> > >
> > > > So what does it cost off peak?? djf
> > > >
> > > > Begin forwarded message:
> > > >
> > > > From: Brett Glass <brett () lariat net>
> > > > Date: April 13, 2009 10:06:43 PM EDT
> > > > To: "Dave Farber" <dave () farber net>
> > > > Subject: P.S.
> > > >
> > > > See my posting regarding the incremental cost of 1 GB at
> > > >
> > > >
> > > > http://bennett.com/blog/2009/04/pitchforks-in-austin-time-warners-
> bandwidth-cap/comment-page-1/#comment-427947
> > > > @matthew: Time-Warner (or any ISP) isn't just paying for transit,
> > > > though
> > > > that is an expensive component of their costs. They're also paying
> a
> > > > backbone provider. And since the Internet has "rush hours" (the
> > > > busiest time
> > > > of day is "prime time," when people all seem to want to start
> > > > streaming
> > > > video or browsing at once), they have to buy and provision enough
> > > > capacity
> > > > to keep up with the peaks in demand.
> > > > $1/GB is actually pretty close to the incremental cost of pumping
> > > > another
> > > > gig of data through the system during "rush hour." Think about it:
> > > > you have
> > > > an hour and a half to get that gigabyte through the pipe to the
> > > > user who's
> > > > streaming the movie. That's 8 billion bits in 90 minutes. That
> > > > means that
> > > > you have to add another 1.48 Mbps - about another T1 - of capacity.
> > > > What does this cost? On a monthly basis, this much bandwidth costs
> > > > $5.50
> > > > if you are co-located at an Internet peering point. The cost is
> > > > about $30 if
> > > > you're a well connected cable provider with a leased line into
> > > > that peering
> > > > point. It costs you$148 if (like me) you're a rural ISP paying
> > > > $100 per Mbps
> > > > for bandwidth; and $450 if you're a rural ISP in some other areas
> > > > of America
> > > > where the only way to get bandwidth is via expensive bonded T1
> > > > lines.
> > > > But back to Time Warner's case: the $30 divided by 30 days is $1
> > > > per GB -
> > > > exactly what Time Warner is charging.
> > > >
> > > >
> > > >
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