UBC pricing proposals - who are they good for?
UBC pricing, or Usage Based Pricing is meant to complement the Capacity Based Pricing (CBC) that has allowed some ISPs to start to offer 1Mbps services at 0.5Mbps service pricing. It is expected that the standard based pricing BT use for the BT Central products that link every IPStream based ISP to the BT Wholesale network will be withdrawn a few months after the introduction of UBC pricing.
UBC pricing apparently will work by BT Wholesale billing an ISP based on the 95% percentile of the peak bandwidth usage. So if a 34Mbps BT Central has a calculated peak of 26Mbps during a monthly billing period, BT will charge for 26Mbps of bandwidth. This means that an ISPs bill will vary from month to month, and things like the release of a service pack or security patch by Microsoft could push the cost to the ISP up vastly. At present three indicative prices per kbps are been touted, 33p per kbps, 45p per kbps or 58p per kbps. In our example this would produce a monthly bill of between £8,580 and £15,080. It is not clear why BT has such a wide variation in pricing, it would almost suggest they are picking numbers from thin air, rather than the figures been based on true costs. Currently BT Wholesale charge providers £21,000 per year for a 34Mbps BT Central, and £45,000 per year for a 155Mbps BT Central.
When one looks the current BT Central prices, one can see that UBC appears to be a large rise in cost to the ISP. This is slightly offset by the reduction in monthly fees which put all Home products at £8.40 per month, and Office products at ~£12 per month. This does mean though that the smaller the ISP the harder it will be to balance things like quality of service versus a reasonable price of service.
Currently a smaller ISP with just one 34Mbps Central, and perhaps 1200 users on the the connection would pay BT Wholesale around £17,350 a month (assuming they are all Home 500 users), under the UBC pricing and a chargeable peak of 26Mbps it would be between £18,660 and £25,160. The lower end price is not too bad, but at the upper end it represents a large price change. It should be noted that 1200 0.5Mbps users on a 34Mbps connection is pretty crowded, and in the past performance has suffered with this number of users. It is also not uncommon for a provider to install a new BT Central and have relatively few users on it, 200 users on a 34Mbps BT Central are still well capable of generating traffic peaks of over 26Mbps and costing an ISP a massive £10,260 versus the current price of £4350.
The crux of the new pricing is that for the figures published to be cost neutral to an ISP, they will have to cram more people into the same amount of bandwidth. This would appear to be precisely the reason BT Wholesale is increasing the session limits on 155Mbps BT Centrals from 8,000 sessions (users) to 16,000 sessions. The vast majority of ISPs have offered exceptional performance for the last four years, it is looking questionable whether the same performance will be maintained in the next four years.
It would be great if we could see BT Wholesale actually innovating in pushing forward the technology used to connect people to the exchange rather than concentrating on keeping its accountants busy, and finding new ways to squeeze the last pound or two from existing customers. How much of the new pricing is BT maneuvering to fit the current regulatory model, or to try and reduce the number of small providers it deals with only time will tell.