Pricing Your Services    Part 3  - continued

(GigaBytes-transferred costing, continued)
In most cases, you will have peak times of web page viewing. If your curve is very steep, you need to keep this in mind and adjust your cost calculations appropriately. If, for example, most of your traffic were concentrated in a peak period of 4 hours, then your cost would be a much higher $24/GB of data transferred.

Here's the math:

• 691.2 MB/hour x 4 peak hours/day =2.765 GB/peak period/day
• 2.765 GB/peak period x 30 days = 82.944 GB/Month
• $2000/month/T1 / 82.944 GB/Month = $24/GB of data transferred.

Mbps costing
Mbps is usually calculated by the 95th percentile rule. Using a tool, such as MRTG (Multi Router Traffic Grapher), readings of bandwidth utilization are polled every 5 minutes. Polling is easier to do with dedicated servers/ports, but can be done by IP address. All of the samples that were pulled throughout the month are then ordered from highest to lowest. The top 5 percent of readings are then discarded, and the customer is billed based on the next highest reading.

A word of caution::
There are 8,640 5-minute samples in an average month. The 95th percentile rule allows users to peak (at whatever the limitation you set is) for 432 5-minute periods, or 2160 minutes (36 hours) per month. You need to have a network design and pricing plan to accommodate these peaks. It is also possible to do 90th percentile or lower, but if you make your percentile too low, and don't put a cap on the peaks, users will get enough time and free bandwidth to cover all of their peaks.

Mbps costing is usually done with a committed rate and a burst rate. The burst rate is usually a $20-25 increase over the committed rate. If your T1 costs $2000/month including local loop (always include loop charges), then your Mbps cost is $1,302.08/month. So, how do you make money? By oversubscribing your pipes. With oversubscription, you are betting that even though someone is committing to 1 Mbps, they will not use the full 1 Mbps continuously. If they do, you'll loose money. That is why some companies charge a resell rate for people they think will actually use the bandwidth. The typical oversubscription rate is 4 times, which—using our arbitrary numbers—makes your cost per Mbps $325.50/month.

Here's the math:

• $2,000/month/T1 / 1.536 Mbps/T1 = $1,302.08/month/Mbps
• $1,302.08/month/Mbps / 4x oversubscription rate = $325.50/month/Mbps (oversubscribed)

In the end, remember, let your costs determine your pricing—before you let your competition determine it.

—End

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Part 1 - Dial Access Basics
Part 2 - Basic Operations Costs
Part 4 - Dedicated Access

Questions? Comments? Contact the author or the editors.