New A&A Home::1 tariff

We've come up with a new tariff for home users, called Home::1.

It is always tricky coming up with any tariff for Internet usage, and a lot of customers do not realise the issues. For some things we have a straight forward cost to providing the thing we are selling, so we simply have a profit margin for selling that service. Some things create extra support work, so need a higher margin. Some things need equipment to handle lots of customers, making the cost per customer hard to work out and vary depending on how many customers we have. This sort of issue applies to many businesses.

However, the biggest issue every ISP has to consider in creating a tariff is usually the actual Internet usage element. I have to say that I am hopeful that this issue will go away in time. It has to, and the technology to supply faster and cheaper backhaul links is always advancing, so it should. But right now, the bandwidth/usage of Internet is an issue.

As a really simple example, customers will see an 80Mb/s FTTC line as something that should cost very little (we start at £30/month). But if they, as one extra customer, use 80Mb/s at our peak time of day (just for the peak 15 minutes, one day in the month), we have to have 80Mb/s extra capacity to BT (we pay BT on 100th percentile usage). That extra 80Mb/s costs us (and any other ISP) just for the BT backhaul on 21CN (which is cheaper than 20CN), around £4,700 a month. There are many other costs involved, that is just the main one. Thankfully, at that exact moment, hundreds of other customers are using much less. With enough customers it averages out sensibly. But you can see how usage is an important factor.

It is not inherently a special issue to Internet usage - the same issue happens with water supply. It has costs for supply and limited size pipes (literally!). It has contention and congestion - if everyone turns their taps on in the same street at the same time then they will go at a trickle. It is still sold at a fixed price in many places (depending on size of house), even though usage per house can massively vary.

Internet is a bit like that - the average usage at peak times for Internet, given unlimited usage and speed, is not a lot more than 100Kb/s. In our case it is nearer 120Kb/s at present, but it is a lot less than people realise. On that basis one can, in theory, dimension and price a service on that basis.

One issue is that the actual usage varies a lot. Whilst the average is low, unlike water supply, the peak users are massively higher, just there are usually only a few of them. It is possible now to get 330Mb/s FTTP links, and if someone has one of these on an uncongested network it is possible for someone to run that link flat out at that speed, something like 3000 times the average. Scary!

A big issue is competition. If one service provider has a really good deal, and no usage caps, and no fair usage policy, and no usage charging, then the people drawn to that service are the ones with way higher average usage! If there was only one provider, the pricing could indeed be based on the actual average of usage. But we all want competition, so we have this problem.

So, what of the new A&A tariff?

The current tariff system has a cut off at 6pm, before which usage is more expensive. Customers don't like that. It also has automatic charging if you use too much (beyond a degree of give and take within the tariff), and customers don't like that. Well, residential customers don't like it. The business customers pay for usage during the day, and use it, and generally are very happy.

The new tariff is just usage per month (download only) that is any time of day or night. This is simple, and easy to understand, and avoids the issues with time of day. It also stops usage at the cap, allowing top up if you want, but you don't have to. We are starting at £25/month for 25GB, but for an extra £10/month that can be 100GB. It makes the service easier to compare with other ISPs.

Whilst this is simple, it is a risk for us. It could be that we start to attract heavy users that download a lot during the day. As I explain above, as long as the averages work out, that is not a problem, but if we start attracting a lot of such users then the tariff won't work.

To try and manage this gamble we are making it residential only, and setting what we think are sensible usage levels which would discourage people that torrent 24/7. Even so, the main risk management is making this a separate and new tariff. We can try it out and see how it goes. If, say, in three months time, we find that the usage is rising too much and starting to be uneconomical, we can simply stop new supply of this tariff, and have a re-think. This also means we can make sure that the new service does not have any adverse impact on our business customers.

This is not the first time we have done this sort of tariff. We used to have unlimited usage tariffs, and a handful of people are still on those tariffs from a decade ago. We hope we have picked sensible levels and prices to appeal to sensible customers who want the lower risk and simpler tariff.

So, right now, we are trialling with some existing customers (see status pages). Hopefully we can fully launch this before Christmas.

It does require some coding, which we have been busy on over the last few days. We have to make the LNS handle a quota system so that we know when someone hits their limit without any delay. We have to have a captive portal to advise customers that their line is shut down and offer the top-up option. We have to make new billing options. It is all good fun :-)

What we have been very keen to do is ensure the service is the same high quality we always provide, with the same level of monitoring and technical support and control. And, of course, IPv6 addresses, which is one reason it is called Home::1.

P.S. Go Pauline! first on the new tariff :-)