>> Date: Thu, 11 Jul 2002 08:37:01 -0700
>> From: JC Dill
>
>> It is my opinion that eventually the Internet will be mostly
>> funded by those who send packets, and will be mostly free for
>> those receiving said packets, much in the way that 800
>> numbers are funded in the telephone system. In order for
>> that to work, we will need a settlement system. I predict
>> that something like this will start happening before
>> 12/2005.
>
>Agreed, except is any fancy settlement really needed? I predict
>asymmetric pricing.
The problem with asymmetric pricing is that the cost of passing the packets is equally born by both ends. Take 2 networks that peer, one with mostly content, one with mostly eyeballs. The content providers pay a higher price *per MB* for bandwidth to their provider than the end user does, but both networks have equal costs in transiting the packets from the server to the end user.
>>From a political standpoint, it's easier to get a business to pay
>an extra <x> per month to deliver their content than it is to get
>Joe Public to pay an extra $10/mo for premium access.
Joe's ISP needs to pay for fat pipes to get the data (from wherever Joe's ISP peers with the content provider's network) to Joe's eyeballs. That cost has to be borne by someone. Either Joe pays an equally high rate (per MB) for incoming packets as the content provider pays for sending them, or the content provider pays and there are settlements between the content provider's network and the Joe's network.
My premise is that in the end, content providers want to send lots of packets more than end users want to pay to receive them. Joe is not willing to pay an equally high rate to get the packets that content providers are willing to pay to send them. Thus, settlements.
>I think 12/2005 is conservative. Industry fallout begins
>settling, and we see interesting tactics from "new breed"
>upstarts run by laid-off engineers with a bit of money and a
>bunch of clue. Beginning of 2005, significant presence by the
>end of the year.
I was hedging my bet. 
I wouldn't be at all surprised to see it much sooner, even by the end of 2002.
jc
This might be true per Mbps of capacity, but is simply not true per average
user's MB/month. The typical cable/dsl subscriber still only uses about
5-10 Kbps, averaged over a month. If lots of people start watching video
streams for much of the day, current cable/dsl rates will not survive.
>>
>> The problem with asymmetric pricing is that the cost of passing the packets
>> is equally born by both ends. Take 2 networks that peer, one with mostly
>> content, one with mostly eyeballs. The content providers pay a higher
>> price *per MB* for bandwidth to their provider than the end user does, but
>> both networks have equal costs in transiting the packets from the server to
>> the end user.
>
>This might be true per Mbps of capacity, but is simply not true per average
>user's MB/month. The typical cable/dsl subscriber still only uses about
>5-10 Kbps, averaged over a month.
Of course it's not true if you compare "one user" to "one content provider". That comparison is useless.
What you need to compare is $100,000/month (or more) worth of customers, either all content providers, or all end users. Which group requires more total bandwidth, and more resilient (redundant) connections? Which group is more resistant to price increases, more likely to just turn off their services (or switch to a lower cost provider) rather than pay more if prices go up (or service goes down)? Which group is more concerned with Five Nines?
Clearly, one group has a greater interest in ensuring that their packets are sent as fast as possible, as reliably as possible. Yet, both groups are equally important for the network (as a whole) to work. My prediction is that over time, this one group will be willing to foot more and more of the total cost of the network (from end to end).
>If lots of people start watching video
>streams for much of the day, current cable/dsl rates will not survive.
Current cable/dsl rates will survive (or even decrease), *if* there are settlements that subsidize the increased bandwidth use/cost from the content providers to the "eyeball" networks that feed the end users.
jc
In the end, I think the cost must be borne by the end user in some
way, shape or form. The first Internet boom is over. People providing
content realise it isn't cheap and in the current financial climate
are no longer willing to throw money away. Bandwidth is getting
cheaper but employees are not. I think your ISP subscription will take
care of it in the future. They will buy in content or access for their
users. Perhaps AOLs model of value added services was a little
premature?
As a telco we see a number of these services, based around premium rate dialup
access.
I have to say that so far none appears to have worked even ones we have done
that were advertised as part of the largest TV shows at the time.
For most applications, eg sports, porn it can only work if the information is
i) unique to this site
ii) worth paying for
.. point (i) seems to be the biggest issue stopping success thus far.
For value add to really work you have to be offering a product/service that
cannot be obtained for free anywhere else on the Internet, as most services on
offer are just one of a number of competitors doing the same thing then most of
the competitors need to go down the value add road if they are to succeed.
Steve