Re: The Great Exchange

["Perry E. Metzger" <perry () piermont com>]

Tim Salo writes:
> > The business case in all telecom
> > markets is going towards distance insensitive pricing, and even flat
> > rate pricing.
>
> The cost of a phone call shows distinct changes in pricing based on
> geography: from my free local calling area to intra-state to inter-state to
> international.  You are correct that the pricing within one of these
> four "bands" (for lack of better term) is becoming less sensitive to
> distance.

Right now, I pay about $.11/minute for cellphone service in the U.S.,
regardless of where I am or where I am calling provided the call is
domestic. It is true that the price for international calls will not
fall to this level soon, but that is largely a function of
international regulation and not inherent in the system.

> It should also be noted that the phone companies have trying to eliminate
> unmetered (on the basis of time) local phone service. I believe that there
> are fewer and fewer areas with unmetered (based on time) local phone service.

NYC did not have unmetered service for a long time. It is now
available again.

> > The cost of providing service is very low, and not
> > particularly traffic or distance sensitive in reality.
> >     [...]
>
> Again, I don't know whether you are confused or confusing, but your statement
> ignores the differences between the average cost of providing a service
> and the incremental cost of providing a service.
>
> The incremental cost of forwarding a packet is obviously very small.
> However, the cost of operating a large, high-quality ISP is very high.
> We seem to expect an ISP to have, for example, a 24x7 NOC.  Someone
> has to pay for that expense.

The cost of personel is higher for most ISPs than the cost of buying
bandwidth. This leads one to question the business model you are
proposing. It is true that someone has to pay for the service, but is
the logical way to do that to double your personel costs by creating a 
complex billing system that absorbs lots of human time?

I am not saying that it makes no sense to charge customers based on
the size of the pipe they own. I am merely suggesting that the notion
of distance measured per-packet charges -- the insanity suggested at
the beginning of this thread to increase locality of access -- is
completely impractical.

Perry