[ppml] ARIN member in good standing?

[Peter Sherbin]

> Are you suggesting that incremental cost of service delivery should  
> the basis for pricing inter-provider network services?
> Would that rule also apply to provider-to-end customer pricing?

The model only states that a packet originator has to cover transfer costs, at any
level an individual or a provider. Pricing is determined by the market.

> Should costs define the upper as well as lower limit for pricing?
> Who calculates what costs "really" are?

The cost is a fundamental business variable but not the only determinant of the
price. It is assumed that business entities understand their costs.

> You proposal suggests to me that you don't think the market is taking  
> care of at least some elements of this equation now -- i.e., that  
> pricing is "irrational" in the economic sense. 

Models from a few Tier 2 ISPs that I have seen indicated a vague understanding of
the Internet costs. IMO the Internet from its start has been and still continues to
be subsidized by a local telephony and/or a local cable. Pure-play ISPs exist
because they pay for the access below cost.

> Put another way, doesn't your proposal entail the elimination of  
> bypass and the restoration of closed territorial markets (aka "local  
> circumstance sovereignty") that only exchange traffic at the border?  
> Do you think that markets like that -- there are still many many  
> around the world -- are more rational, and should be emulated?

On the Internet a territory is determined by AS boundary rather than geography. The
model suggests that a provider charges a "fair" price covering the transit of
originators' packets. Based on costs/traffic patterns a provider negotiates a deal
with a bordering AS(s). Geography where AS is located could influence costs. 

> Your proposed goal of exposing cost drivers is redundant if local costs  
> continue to be subject to extra-local competition, and your proposed  
> mechanism for exposing costs would almost certainly devolve into a  
> mechanism for eliminating such competition.
> Or am I missing some element that might forestall this outcome?

Here is the model:
1. Bob is willing to send a packet to Alice
2. Bob must cover the cost
3. Cost unit/driver = 1GB upload

The above applies at all levels: node, network, AS. Providers compete freely with no
requirement or need to expose costs.

Peter


--- Tom Vest <tvest at pch.net> wrote:

> 
> On Oct 12, 2006, at 1:31 PM, Peter Sherbin wrote:
> 
> >> Or, put another way, I don't understand the problem
> >
> > The model aims at identifying a fundamental *cost driver*  on the  
> > Internet, e.g. a
> > certain amount of electrons carrying data from the origination  
> > point to its
> > destination. Subsequent arrangements will follow naturally shaped  
> > by whichever local
> > circumstances.
> 
> *(emphasis mine)*
> 
> Are you suggesting that incremental cost of service delivery should  
> the basis for pricing inter-provider network services?
> Would that rule also apply to provider-to-end customer pricing?
> Should costs define the upper as well as lower limit for pricing?
> Who calculates what costs "really" are?
> 
> You proposal suggests to me that you don't think the market is taking  
> care of at least some elements of this equation now -- i.e., that  
> pricing is "irrational" in the economic sense. Could this perception  
> be based on the fact that some pricing and "arrangements" are based  
> on regional/global rather than locally bounded circumstances?
> 
> Put another way, doesn't your proposal entail the elimination of  
> bypass and the restoration of closed territorial markets (aka "local  
> circumstance sovereignty") that only exchange traffic at the border?  
> Do you think that markets like that -- there are still many many  
> around the world -- are more rational, and should be emulated?
> 
> Forgive my cognitive dissonance, but we got to where we are today  
> because globalization (erosion of local market sovereignty) exposed  
> places with different prices and cost structures to pressure from the  
> prices and cost structures of other places, i.e., "competition." Your  
> proposed goal of exposing cost drivers is redundant if local costs  
> continue to be subject to extra-local competition, and your proposed  
> mechanism for exposing costs would almost certainly devolve into a  
> mechanism for eliminating such competition.
> 
> Or am I missing some element that might forestall this outcome?
> 
> TV
> 
> 
> 
> 
> 
>   
>    
> 


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