Re: 95th Percentile != Lame

[James Thomason <james () divide org>]

> let's say that you've sold 1Gb/s of connectivity to each of 50 customers.
> if you don't do anything fancy in your backbone provisioning, two things
> will happen: (1) you will need 50Gb/s of peering connectivity to EVERY PEER
> and on EVERY BACKBONE LINK (just in case all five customers send full blast
> to the same destination at the same time, as in a DDoS or flash crowd
> scenario); (2) when you try to pass the costs of this provisioned capacity
> to all of your customers (equally), you will have noncompetitive rates.
>
> what actually happens is that you provision as much capacity (including
> whatever headroom your business plan calls for) as is actually needed, and
> then try to upgrade it fast enough so that your customers always get their
> bits through.  it is not actually possible to get 50Gb/s worth of peering
> connectivity to most peers -- and if you could then they'd be dropping most
> of your traffic one hop inbound on their network anyway.

This is very true.  You have also in this example, defined your basis of
cost and could effectively say "Today, every bit that crosses my network
costs me X".  This is a hard, quantified and total cost that includes all
of your provisioned capacity.

> charging for 95th percentile (highest of in or out, not additive) is a way
> to get those customers whose traffic puts the most strain on the
> provisioning plan to pay more.  but consider another model for a moment.
> the power companies hereabouts use the monthly peak to set the rate (per
> KwH) for the month.  so if you never hit them very hard then every KwH you
> buy from them is cheaper.  this model correctly passes the provisioning
> (especially headroom) costs to commercial customers who put the most stress
> on the system, but also correctly rewards customers with lower costs based
> on them keeping their actual usage down.  i'm not suggesting that this
> would apply perfectly to the IP transit situation, but it takes more of the
> relevant factors into account.

The logic I am attempting to pontificate here is that this basis cost
(defined above) should be passed on equally to all customers since:  
        --                                      --

If bits have value, and if you bill on a percentile basis you end up: 

1. Destroying some real bits. 
2. Creating some make-believe bits. 

This has the net-effect of: 

1. Punishing some customers who "deserve" it. 
2. Punishing some customers who do not. 

But since any customer, at any time, can become worthy of punishment -
does it not make sense to punish all customers equally all of the time,
and create service tiers to create incentives?

And should you not punish other providers too since they create costs on
your network that you can never recouperate?