The return of distance-based pricing (for wholesale ISPs)?

Remember when it cost more to call across the country than it did to call a neighboring state? Service providers have largely moved away from distance-based pricing. But several Georgia Tech researchers are arguing for the return of that pricing methodology—at least for some wholesale Internet service providers that sell transit services to smaller ISPs.

Using just three or four service tiers could improve a wholesale ISP’s profit substantially, the researchers argue in a paper to be presented at the SIGCOMM conference in Toronto today.

The paper titled “How Many Tiers? Pricing in the Internet Transit Market” is based on data collected using a model developed by the research team. The researchers say their creation is the first economic model that takes real traffic data as an input to understand the impact of tiered, destination-based pricing on an ISP’s profit.

An area for future research might be to examine the impact of tiered Internet service pricing on consumers, the researchers said.

The researchers argue that wholesale ISPs’ service provider customers should have no trouble understanding bills based on just three or four service tiers. But I question how well that approach would be received in the consumer market.

Ironically, another paper to be presented at SIGCOMM focuses on a potential “nutrition label” for retail ISPs—an idea previously floated by the FCC. (CP: FCC’s broadband speed labeling idea is misguided) With three or four service tiers, it seems like that label could get mighty complicated.

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