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  From: Mark Newton <newton@atdot.dotat.org>
  To  : Mike Lindner <alloy@smug.adelaide.edu.au>
  Date: Tue, 23 Jan 2001 14:52:50 +1030

Re: AOL? or best ISP

On Tue, Jan 23, 2001 at 01:55:59PM +1030, Mike Lindner wrote:

 > > You do have to wonder! Then again, I guess the point of
 > > ADSL is being able to download your Mandrake patches,
 > > Mozilla sources, Star Office etc.. in a more reasonable 
 > > time frame, so using up 500Mb within a couple of days 
 > > isn't too far fetched.
 > 
 > still though, how many times a year do people download staroffice,
 > browsers etc... once, twice?

Indeed.  And, if you look at the question above, what it's really saying
is, "I expect that I'll pay extra if I download more than 500 Mbytes,
unless the those 500 Mbytes are a CD image, Mozilla or StarOffice, in
which case I still expect to be able to do it without an excess bill."
:-)

... which is fine, in that it's illustrating the expectations which
people have from ISPs, but everyone needs to understand that those 
expectations might be a bit optimistic.

The cheap ISPs of the world have managed to do one thing significant
across the entire industry:  They've created a marketplace of customers
who have unreasonably low expectations about the amount that they need
to pay for a quality Internet service.

*Why* is it rational to expect an ISP to provide a $25/month unlimited
account when it costs more than $25 per month to pay for the ISDN
B-channel that receives your phone call?  If you're online 24 hours per
day 7 days per week, you're not just costing your ISP money by (probably)
downloading lots, you're also tying up a ~$30/month phone line... So
why do you expect to be able to cost > $30 per month to an ISP, and
only pay them $25 per month for the privilege?

That's why I (and others) use the word "unsustainable" when referring to
those kinds of plans.  When you see something in the paper to say that
such an ISP has over 100,000 users, think to yourself about how that means
the ISP is losing at least $500,000 per month on those customers, BEFORE
factoring in things like the costs of supplying the data the users have
been downloading.  What value does market share have when it costs that
much to maintain?

Returning to the comments above, about "the point of ADSL":  Is that really
the point of it at all?  What factor has created that expectation, given
that bytes obtained via ADSL cost the ISP the same as bytes obtained
via any other technology, it's only the cost of the tail circuit which
differs?  And how many ISPs will attempt to gain market share by offering
unreasonably cheap loss-making price plans?

When looking at an ISP pricing plan, it pays to think about how it's
constructed.  The ISP has per-customer costs, per-port costs, per-hour
costs, and per-megabyte costs (even if the ISP is supplied by fixed-cost-
per-month links, they can still work out a cost per megabyte by dividing 
the amount they pay per month by the number of megabytes they pull over
the link);  They're wrapping them all up into a package which offers you
a fixed price-per-hour, price-per-megabyte or price-per-month which takes
those costs into account and factors in a profit margin.  The *only*
thing which is different about ADSL is that the per-port cost is
different;  everything else remains the same (for all intents and purposes -
Note that the per-port cost changes as you add more ports, but that's 
relatively normal anyway)

So why does the marketplace have the impression that "the point of ADSL"
is to provide a technology which will permit you to download CD images in
the blink of an eye for free?  Should the fact that you can use-up your
monthly megabyte allowance in a couple of hours really make any
difference?

   - mark

--------------------------------------------------------------------
I tried an internal modem,                    newton@atdot.dotat.org
     but it hurt when I walked.                          Mark Newton
----- Voice: +61-4-1620-2223 ------------- Fax: +61-8-82231777 -----

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