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An Iowa ISP's Metered Pricing: What Will the Market Bear? 479

Posted by timothy
from the prices-as-pressure-gradient dept.
An anonymous reader writes "The East Buchanan Telephone Cooperative started charging cellular prices for home DSL internet service starting on January 1st, 2014. A 5GB plan costs $24.95 a month while a 25 GB plan will run $99.95 per month. 100 GB is the most data you can get in a package for $299.95 per month. Each additional GB is $5. They argue that the price increase is justified because their costs have increased by 900% since 2009. About half of their customers use less than 5 GB a month while their largest users use around 100 GB a month. They argue that the switch to measured internet will appropriately place the cost on their heaviest users. With the landmark Net Neutrality ruling this week will larger providers try to move to similar price models?"
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An Iowa ISP's Metered Pricing: What Will the Market Bear?

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  • by Anonymous Coward on Sunday January 19, 2014 @08:05PM (#46008639)

    Every price increase is just pure profit.

  • by rolfwind (528248) on Sunday January 19, 2014 @08:07PM (#46008667)

    if there were competitors, and not just vendors screaming free market when they adjust prices but then hold up monopoly contracts with the city/state when a community tries to come together and go their own way.

  • by Anonymous Coward on Sunday January 19, 2014 @08:08PM (#46008675)

    Well as much as I don't agree with this yes it does. More data use by the end user means the ISP has to pay for bigger connections and redundant connections often at that. Yes cost goes up for everyone. However the price of the inter connections have gone down a lot since 2009 so not sure how they have seen a 900% increase other then by adding that many more customers.

  • by khasim (1285) <brandioch.conner@gmail.com> on Sunday January 19, 2014 @08:12PM (#46008713)

    It depends upon what the ISP's upstream connection is. In Alaska there were problems because the pipes were only so big but demand was bigger.

    But the larger question here is ... is there competition? If someone doesn't like the service/pricing of The East Buchanan Telephone Cooperative can they get equivalent service from a different provider?

    I, personally, like the idea of paying for what you use. Provided that there is competition. Otherwise the "average" will keep dropping as people try to limit their expenses and the price will keep creeping up.

  • by rolfwind (528248) on Sunday January 19, 2014 @08:18PM (#46008773)

    As a customer, I do mind metered internet because it's bullshit.

    This isn't electricity (minimal and always on anyway so the difference is negligible, at least for these middle men) or anything, this is about forcing limited supply when there isn't any.

    Would you like metered television too? No longer broadcast to you 24/7, now you get to watch 90 minutes a day, and after that you have to pay? Would that make sense to you?

    Bandwidth is already rationed by setting speed levels. I already pay quite a bit more a month for the highest speed level residential and businesses even more so.

    People rationing bandwidth at night by not using any isn't going to save anyone anything. It's just dark fiber.

    More so, I would argue that mindsets like yours is setting us back. The need for speed is what brings us advances, getting us forward, allowing surgeries and other amazing stuff over the net. Metering is just a setback there.

    All metered internet will do is make the Cable ISP slobber as they grab netflix and hulu by the balls and cut off their customers through draconian price increases. By some reports, they already lost some 25 million customers. You don't think they want to stem and reverse the flow? They are hurting, and they are hurting because they didn't change with the times (NO, I don't want the sports channels and every other overpriced bundle just to see the 3 channels I watch, fuck off.)

  • by beelsebob (529313) on Sunday January 19, 2014 @08:19PM (#46008779)

    Score: -1 Factually incorrect.

    It absolutely costs more to install a bigger pipe for the ISP. The fact that the ISP has to over provision, and hence a small increase in bandwidth can be absorbed without instantly needing to upgrade the pipe does not mean that that extra bandwidth is free.

    Switches, cables and admin systems all cost money, and these costs all increase with the amount of bandwidth running through the system.

    I actually applaud them for moving to a metered bandwidth model – it makes sense. What I don't applaud is the blatant gouging. The prices should be roughly 100 times lower than the ones they are offering.

  • agreed (Score:4, Insightful)

    by luther349 (645380) on Sunday January 19, 2014 @08:25PM (#46008841)
    this craps only starting due to the likes of netflicks and hulu threatening there overpriced packages people are cutting the tv cord and they don like it.
  • by Kjella (173770) on Sunday January 19, 2014 @08:28PM (#46008873) Homepage

    From TFA (heresy, I know):

    He goes on to explain that EBTC has 1,057 customers as of Dec. 31, 2013, and serves a 165- mile area. That means customer density is roughly seven customers per square mile. (...) Since 2009, he says, the FCC has decreased access charges by $285,004 and Universal Funding by $282,228, for a total of $566,232 or $531.68 per customer.

    These are people in rural areas, where it's not very profitable to deliver service in the first place. Public funding is going down, actual bandwidth going up, a little fiber laid down in the dotcom days is growing old and they're in a short squeeze. These prices smell more of desperation than gouging, it can't be easy to break even with those numbers. I doubt any competitors will move in to take over this gold nugget.

  • Re:no (Score:5, Insightful)

    by icebike (68054) on Sunday January 19, 2014 @08:30PM (#46008897)

    The free market already fixed this problem, if you don't like your provider, you're free to chose another. That's what makes capitalism and America great.

    -- Ethanol-fueled

    I don't know the details in this ares, but I doubt they would e setting up this kind of metered service tiers if they had and competition. Its a telephone coop, which suggests small town rural.

    Too often, the situation is that there is no viable competition, as the market is too small or too remote to attract competition, or it has been legislated away by cities granting right of way to exclusive contracts.

  • by DarkOx (621550) on Sunday January 19, 2014 @08:31PM (#46008907) Journal

    What they should do is throttle it at peak times, lock everyone down to 2mbt during peak hours, charge extra for everyone who does not want to be snapped

  • by rolfwind (528248) on Sunday January 19, 2014 @08:41PM (#46008985)

    What you are talking is a la cart pricing, and most people who want that still want the channels they want available 24/7 ("unlimited" in that time period) and not just individual shows. They just want to stop paying for all the bundled channels.

    The problem with your scenario is that it will make TV more expensive overall.

    Imagine a buffet where making the food, regardless of quantity, costs a set amount per dish. They could make unlimited spinach or 5 cups, it will cost the same.

    Now, is that buffet better served by charging $20 at the door for all you can eat or charging you $12 per plate? Yes, if they went the plate route, you'd have a lot of people eating less (one plate probably) but they still have the same costs and thus less profit.

    TV is exactly like that. A show generally costs the same to license or produce regardless of how many people watch it at any one time (ratings aside).

    All it would do is generally lower ratings, lowering their sales, and they'd probably have to start cutting back on the amount of dishes/shows they make.

  • by Bengie (1121981) on Sunday January 19, 2014 @08:44PM (#46008999)
    Trunk bandwidth is the cheapest part of being an ISP as long as you're not out in the middle of no-where. At $0.45/mbit for dedicated backbone connection. Bandwidth is charged by 95th percentile. That means the customer must average about 2 hours of transfer per day all month long. In order to consume 100GB, that means an average of 7mb/s for 2 hours every day, or about 2 Netflix streams. That would cost the ISP about $3.5, but they turn around and re-sell it for $300. Sounds like easy money. You just need to get your foot in the door. Once you're "that" ISP, you just print cash.
  • by Ichijo (607641) on Sunday January 19, 2014 @09:13PM (#46009189) Homepage Journal

    Bandwidth is not a limited resource in the same way.

    Sure it is. You can saturate a network switch.

  • by sjames (1099) on Sunday January 19, 2014 @09:31PM (#46009297) Homepage

    Capacity costs, but it doesn't cost THAT much. However, that doesn't translate well to transfer. If you have 1Mbps from 6-10pm, you might as well have it 24/7, it's not any more expensive to provision.

    Because of technological progress, the same connections that could do 1GBps in the '90s can do 100GBps (or more) now. The Gbps dumb switches that cost >$1000/port in the '90s cost $80 total now (or $300 -$1000 for 48 ports if you want it smarter).

    What I don't understand is people pretending bandwidth is getting more expensive when actual costs are in freefall.

  • by Anonymous Coward on Sunday January 19, 2014 @09:42PM (#46009349)

    First off, these type of charging is common in Aus / NZ. The higher volume charges are too high in the OP above. We pay around $100-120(AUD) per month from 500gb-1000gb. More data does cost more, it's simple.

    That said, there is nothing in the charging above that constitutes slowing or favoring some sites over others. Taking kickbacks from youtube or netflix. It is only a tiered pricing system.

    This sort of tiered costs can avoid having to throttle heavy users as they are actively paying for more data.

    DrE

  • by EmperorArthur (1113223) on Sunday January 19, 2014 @09:44PM (#46009361)

    The problem with that is the incumbent corporations have made it illegal to have a coop or municipal option. https://en.wikipedia.org/wiki/Municipal_broadband#Controversy [wikipedia.org]

    They've effectively bribed the states into giving them a monopoly position. Which then allows them to squeeze their customers dry and use a portion of that money to pay more bribes. Since the US uses a winner takes all election system, and it's nearly impossible to properly research local/state representative candidates they can get away with things like this pretty easily. For clarity, I consider lobbying to be a form of legalized bribery.

  • Re:no (Score:5, Insightful)

    by petermgreen (876956) <plugwash@p10MENCKENlink.net minus author> on Sunday January 19, 2014 @10:00PM (#46009471) Homepage

    This stuff gets obsolete in 5 years or less

    Which is where things get interesting.

    When you are building a completely new network or first introducing broadband onto a phone network unlimited traffic makes a lot of sense. Most of your costs at that point are per subscriber not per unit of data and when building a completely new backbone it makes sense to make sure it has plenty of spare capacity.

    Then years down the line your network starts creaking at the seams. What you thought was plenty of capacity when you built the network no longer is. You start thinking about a major upgrade to your obsolete (but still fuctional) gear but then you look at why you need that upgrade and discover that it's a relatively small proportion of users who are using most of the traffic. Do you make everyone pay for the upgrade or do you try and place it on the heavy users only?

    Having said that this case seems to have swung the balance between "charging for connections" and "charging for data" too far in the opposite direction. Having data prices high enough that people have to balance the cost of installing security updates against the risk of not installing them is almost certainly not a good thing.

  • Re:no (Score:4, Insightful)

    by BigDaveyL (1548821) on Sunday January 19, 2014 @10:15PM (#46009555) Homepage
    In other words, ISP's have not invested profits (or small price increases) back into their networks to keep ahead of the tidal wave. Wouldn't it make sense to do incremental updates over the span of several years?
  • by Anonymous Coward on Sunday January 19, 2014 @11:59PM (#46010131)

    It's because we understand that, unlike water or electricity, each additional unit of "internet" does not cost the same as the one before it. With water and electricity, your generation costs typically become your floor, fixed costs, with installation costs being minimal (over the 10/20/30/40 years that you use it). While with internet, installation and upgrade costs are everything, with generating costs pretty minimal. Also, unlike electricity and water, where the ongoing infastructure cost is born by the generators (or the public), rather than the distributors (think electrical resellers), internet is the opposite.

  • by Taco Cowboy (5327) on Monday January 20, 2014 @02:00AM (#46010733) Journal

    Why should robber barons serve their customers when they can rob them blind ?

    The problem with the United States of America is that history kept on repeating itself.

    Back then it was the railroad fellas who monopolizing the transportation, then came the petroleum fellas, and then the US government supposed to have done something to curb the power of those robber barons ...

    And when everyone is not looking, the robber barons bought up Washington D.C. and here we go again.

    How come South Korea and Japan can have ISP which provide their customers with Gbps throughput while on the United States of America the end users have to put up with all those robber barons ?

    Back in the 1980's, just when the Net was started, everyone was pulling their own cables. At that time the competition was fierce, and customers (particularly those staying in cities) get a lot of very nice choices.

    And then the telcos stepped in, bought up the politicians and changed the laws - forcing the indies (the *true* ISP) to either shut down of sell out, and look what we have here ... another round of robber barons intending to squeeze the last penny out of their customers.

    Sigh !

  • Sorry but that is quite easy to prove to be bullshit, just look at the megacities like NYC and LA and how much lower their bandwidth and much higher their costs are compared to Asia.

    The simple fact is thanks to monopolies/duopolies and cherry picking the USA is in the top 10 for ISP prices but in service we are worse than countries like Romania. This is not gonna change as long as we let the ISPs control the last mile, in fact we already paid the ISPs to the tune of 200 billion [pbs.org] to provide the USA with nationwide 50mbps broadband and all we got was a low res Goatse and bonuses for all the CEOs. If the ISPs refuse to pay back the 200 billion with interest we should take control of the lines and open them up to competition as we did during the days of dialup. If they want a monopoly? Tell them they can have 15 years exclusivity for every FTTH they provide but the current situation? Its a total scam, they are treating bits like they are a scarce commodity (Protip: they aren't, the ISPs are being allowed to massively oversell and outright lie about actual speeds) and now that Net Neutrality is dead? Watch prices soar.

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