Re: ISP phone ratio's and Interoffice trunkage for voice

["Fred R. Goldstein" <fgoldstein@bbn.com>]

  At 08:19 AM 7/14/96 -0400, James Love wrote:
  
  >     If an ISP has rather predictable traffic, and lots of lines, isn't 
  >that cheaper to deliever that lots of two wire copper wires?  There would 
  >seem to be huge economies of scale... particularly if fiber is deployed.
  >Doesn't the new higher levels of demand drive down unit costs?
  
  Generally yes.  Of course it's up to telco to multiplex delivery of service
  as they see fit.  If an ISP wants to suffer the hassle of hundreds of analog
  lines, telco can still use fiber optic or T1s and a mux.  Larger ISPs know
  better and don't take delivery on analog lines.
  
  If you say the magic word Centrex, as Mike Bilow noted, then telco suddently
  becomes your friend.  However, they dislike ISPs and that dislike is
  intensifying.  At some point the ISP-ness overcomes the Centrex-ness and you
  again become the enemy.  In some places Centrex tariffs can apply to PRI,
  but whether that is cheaper or costlier than ordinary PRI is again a local
  variable.  It's hard to generalize.  Until 1995, for instance, PacBell had
  an $800/month or so surcharge on PRIs that were part of Centrex.  That's
  history; PacBell PRI is now rather competitive, though like everybody else
  they tend to be sold out (and waiting for Lucent and Nortel to deliver more
  parts), so delivery often isn't exactly speedy.
  
  John Secrist notes,
  >	If you have a pricing scheme that balances the load, these
  >	numbers will vary dramatically. IE. if my pricing is 
  >	$10/month for 10 hours with $1/hour afterwards, 
  >	then you will get a different user use profile than
  >	if your pricing is 19.95 flat rate with no hourly charge.
  
  Exactly.  Average usage varies widely among ISPs.  My suspicion is that the
  flat rate ones tend to deliver more busies, too.  If there's any kind of
  pay-per-time component, the ISP has an extra incentive to add capacity.  Now
  this is potentially one reason telcos don't like flat rates, but in practice
  they're obligated to provide good grades of service, so they view heavy
  users as a burden, not as good customers.  (Remember, monopoly telcos don't
  have customers, just subscribers on a good day and ratepayers on a bad day.)
  
  >	(BTW, we charge $17.50 for 120 hours and $.20/hr afterwards)
  >	This keeps the people how want to leave things on all the time
  >	thinking a bit and hanging up the modem when they don't use it.)
  
  And this is a very reasonable structure; it is "free use" to all but the
  heaviest users.  If you don't expect to hit 120 hours you don't even think
  about it.  That is also the charm of "flat rate" local telephone service.
  And the ones who never hang up are the ones who are discouraged by threshold
  pricing.   I consider threshold pricing to be a good alternative to measured
  service, and that's NOT the same as BA's Telpak pricing.  I'm trying to
  convince NYNEX of the same.  The "I want to sell ISDN but the boss hates
  flat rates" faction is interested in threshold rates, and understands that a
  200 hour threshold does not mean that the price is 200 times the hourly
  measured rate or even the hourly incremental cost.  Average usage is way
  below that, and the price, to be profitable, need merely exceed the average
  cost.  Of coruse the more senior people are in the "we want all service
  measured so we're gonna start with this hokey computer hacker stuff".
  
  Of course the ISP business is very competitive so Mr. Sechrist's business
  has evolved to balance profit margins against customer satisfaction.  Telcos
  are still stuck in the rut of monopoly thinking, carrier versus ratepayer.
  ---
  Fred R. Goldstein     k1io    fgoldstein@bbn.com   +1 617 873 3850
  Opinions are mine alone.  Sharing requires permission.