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RE: 95th Percentile = Lame

  • From: David Schwartz
  • Date: Sun Jun 03 23:49:01 2001

> Why not simply quantify the cost of a transimitted bit, either generally,
> or based on point of egress, and pass that cost on equally to all
> customers?

	Why doesn't UPS just figure out the average cost of sending a package and
charge that for every package? The answer is obvious, it won't encourage
customers to make best use of existing capabilities and will encourage those
people whose packages cost above average to use UPS and those whose packages
cost below average to use other carriers. Billing based upon this type of
statistical sampling is awful.

> Do bits have value?

	Value and cost are not the same thing. Providers don't bill based upon

> The responses I have seen so far indicate:
> Bits have value sometimes depending on .....
> 	a. if they are included in the average.
> 	b. if they increase or decrease the theoretical cost to the
>            provider.

> But do not all bits have value all of the time?  Are there free bits?

	Yes, there are free bits. My network traffic at off-peak time could triple
and it wouldn't cost me an extra penny. Triple my traffic on-peak and either
my performance would fall to unacceptable levels, my bandwidth costs would
go up, I'd have to provision new circuits and upgrade hardware, or all of
these things.

> Perhaps it was initially very difficult for a provider to quantify this
> cost - perhaps it still is.  I am sure that assuming equal costs among
> providers that exchange traffic "freely" only contributes to this
> problem.

	Providers could try to use a very simple way to bill, like total bits, but
accept that it won't correlate well with the actual cost to provide the
service, or providers could do a very good job of figuring out exactly how
much each bit costs them, but the billing method will be complex and will be
based upon factors beyond your control such as whether your peak times
happen to align with other customers peak times.

	Neither of these extremes seems to work too well. So compromises start to
make sense.

> What seems to be truely fair to me, is to have each and every customer pay
> a fair and reasonable price for the delivery of the actual bits they
> transmit and receive.  I think this applies to carriers too.

	In other words, those who move cheaper bits should pay to subsidize those
who move more expensive bits? Airmail and ground should be the same price so
those who pick the least expensive possible delivery they can live with
subsidize those who want everything sent the fastest possible way?

	Rational, efficient use of existing resources should be encouraged. Those
who smooth out their load or move bulk transfers to off-peak times should be
rewarded. If you want to tap into the lucractive VPN market, it helps if you
can discount traffic between your own customers -- that way if you get the
New York branch of FOO, you have leverage to get the San Francisco branch.

	Ideally, the price should match as closely as possible the actual cost to
provide the service. You can make exceptions to keep the billing scheme
comprehensible. As a practical matter, it is simply amazing how well 95%
billing matches the actual costs associated with providing a circuit. I have
found no better method that doesn't start to become incomprehensible.

	We've been talking about having 'half-price' times where your traffic is
halved before going into the 95 percentile algorithm. We'd have a server
that would tell you which times were half-price and we'd guarantee at least
two such hours a day. Customers who do automated bulk data transfers could
code to query this server and find the best times to move their data. But
this tends to fall under the 'too complicated' or 'too much work for too
little effect' category.


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