Written: 2004/01/08.

It's interesting to look around at all the different internet services and how they're handling their own inflation. Simply stated, bandwidth used to be an abundant commodity and now it is not. When broadband internet services first started to take shape, many of them started advertising unlimited bandwidth at amazing speeds. The definition of just what unlimited means to these services in question seems to be diminishing as more and more people start taking full advantage of the unlimited nature of their service.

Originally, many internet services operated on a business model of overselling their internet service. Frequently, your local cable company advertises 250kps bandwidth for each of its customers. But they never originally expected a large percentage (if anyone at all) to saturate their entire allocation 90% to 100% of the time, which is becoming a growing trend among service users.

To put this in perspective, this would be like your local water utilities company advertising that they had more water than they actually did, assuming that their customers would only use a fraction of their allocation, then being run dry due to usage statistics higher than their estimates.

Unlike water, bandwidth is truly infinite. However, it costs money to generate. The companies which have oversold their service are beginning to realize that the customers who are simply using what they've been given is beginning to become dramatically less profitable. Internet services charge a flat rate for bandwidth whether it's used or not. When it goes unused, they profit ridiculously. When it goes used, they lose ridiculous amounts of money under the "oversell" business model.

To combat the profit loss yet still maintain the oversell business model, recently some ISPs have begun fining their customers insane amounts of money for consuming bandwidth beyond a certain point per month. The service remains normal until, for example, 10 gigabytes have been transferred, then extremely unfair additional charges are added to make up for the ISP's loss of profit due to the user's 'excessive' use. This is clearly legally in violation of the original contract, but ISPs have had no trouble maintaining legality, due to the wonderful vagueness of most ISP terms of service documents which essentially state that they have the right to do whatever they want with their service regardless of how unfair it is to the customer. I could at length discuss the moral and legal implications of such contracts and why they should be made illegal, but that is for another time.

This kind of treatment to the customers who use bandwidth "excessively" is causing an outrage. Some ISPs even go so far as to accuse their customers using "excessive" bandwidth as being criminals because they could potentially be using all that bandwidth to distribute software, music, movies, etc illegally, which they think justifies their decision to invoke these limits, regardless of the fact that they have no proof to support such an accusation. As a result of these unfounded accusations and unfair limits on monthly throughput, many ISPs have received bad publicity.

The only internet services that are throwing fits over bandwidth like this are the ones that are using the oversell business model. Some ISPs, notably slower ones, are committed to the real definition of unlimited. Meaning 100% bandwidth saturation is acceptable because the ISP has enough money to pay for it. The oversell business model has the potential to become far more profitable, but at the risk of all of the above-described problems.

If I were running an ISP, I would likely never use such a business model. In contrast, the "sell-what-you-have" business model is profitable in exactly the same way, except you have to advertise a slower service. While your service may be capped at a lower speed, you can also advertise that you really do provide unlimited service even when your users are running at 100% saturation.

It seems that honesty will inevitably become the best policy, because I, as a customer, would prefer a slower truly unlimited service over a faster service that claims to be unlimited but in reality charges extra (a lot extra) for throughput past a certain point.

Also, we may start to see a rise in ISPs that do not charge a flat rate for unlimited saturation, but charge more like a utility by charging only for throughput. But one thing is for sure, the oversell business model, which seems to be a sad combination of the flat-rate-unlimited and the throughput-charged business models needs to go.

I don't see a quick end to this problem materializing any time soon, but as the internet evolves, the current oversell business model will continue to become more and more a failure, and the major internet services will have to make a choice, possibly a choice forced by the hand of much needed legislation to protect the rights of the meaning of the word unlimited. Not in terms of unlimited bandwidth, but in terms of unlimited saturation of a reasonable allocation of bandwidth. We can only wait and see what happens.