
Pricing Your Services
Part 2 - Basic Operations Costing
Having detailed outsourced PPP costs and user-to-modem ratios
in our first pricing column, today, we'll
examine a number of other basic ISP operational costs.
Equipment costs
Depreciation schedules are an important factor in determining monthly
equipment costs per user. Unfortunately, unlike some unnamed telcos, ISPs
can not depreciate their equipment over a 30 year schedule. Check with
your accountant about the finer points of depreciation schedules and their
effect on taxes and the like. For purposes of this discussion, we'll assume
a moderately conservative schedule of two years (24 months).
Using a 2 year depreciation schedule, and assuming a per-port cost of
$240 and a 10:1 modem-to-user ratio, your basic equipment cost per user
would be $1 per month.
Here's the math:
- 2 years * 12 months = 24 months.
- $240 per port /24 months = $10/port/month
- $10/port /month /10 users/port = $1/user/month
Access line
Next question is on the access line, CT1, or PRI. If your cost per CT1
is $480/month., and there are 24 lines (ports) in a CT1, and a user to
modem ratio of 10:1, your cost per user would be $2 per month.
Here's the math:
- $480/mo/CT1 /24 lines/CT1 = $20/line/month
- $20/line/mo /10 users/port = $2/user/month
If you are paying rent or co-location cost on your equipment, you would
use the same equation as above.
Access costs
When figuring the cost for internet access (from your provider) per user,
the math is interesting. A lot of people have tried to figure out exactly
how many dial-up users you can have per T-1, but it is a gamble and changes
depending on what speed the users connect at, what speed they sustain,
and how much traffic they sustain. I'll show you the equation, but your
best bet is to look at your MRTG graphs and decide for yourself.
A T-1 can transmit data at 1.536 Megabits per second. This doesn't take
in account overhead or packet loss, however. For absolute accuracy, you'll
need to calculate the exact packet loss and overhead. I'll leave this
to you techs; for purposes of this discussion, I'm going to pretend they
don't exist.
If you are only doing dial-up (i.e. no frame customers), you need to figure
out how many ports/users it takes to saturate a T-1 during peak times. If you
figure on users actually using their full bandwidth (let's assume average throughput
of 33 Kbps) then you would get 46 users/ T-1/ second.
The problem with the equation is that they do not actually sustain that bandwidth.
If the users average using the full 33 Kbps 10 minutes out of an hour, you get
a 6:1 bandwidth ratio. That gives you 6 users per hour of full usage. 46 streams
times 6 users per hour gives you 276 users using full streams per hour. Since
there are 4 peak hours per day, and 276 users using full streams per hour, 1104
users can have full streams in every peak period. Since there are 30 peak periods
per month, and 30 days in the month, the cost for the T-1 per month is split
among 1104 users. Figuring a cost of $2,000/month for a T-1 (including local
loop) then each user is responsible for $1.82 of that T-1 per month.
Here' the math:
- 1,536 Mbps * 1,000 = 1,536 Kbps.
- 1,536 Kbps / 33Kbps = 46 concurrent 33 Kbps streams/second.
- 60 minutes/hour / 10 minutes of full usage/user/hour = 6 users/hour
of full usage.
- 46 streams * 6 users/hour = 276 users/hour/T-1
- 4 peak hours * 276 users/hour/T-1 = 1104 users/peak period
- 1104 users/peak period * 30 peak periods/month / 30 days/month =
1104 users
- $2000/month/T-1 /1104 users = $1.82/month/user
So, using our assumptions, your cost for PPP access is $1.82 per user
per month.(This does not include setup costs or maintenance.)
go to page 2: Ancillary services costs
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