Usage-based pricing in Net's future

LAS VEGAS--A switch from flat-rate to usage-based pricing will be required to sustain the rapid growth of the Internet, a bandwidth expert told Comdex attendees today.

Speaking at a seminar dubbed "Next Generation Internets," John Wheeler, manager at Andersen Consulting, said the increased use of pictures and sound only makes matters worse, because it gobbles up more bandwidth and causes users to stay online longer. This makes the flat-rate pricing model potentially less economical.

"The current fixed-rate pricing scheme cannot sustain the growth and performance demands of the Internet," Wheeler said. His comments echo a growing sentiment in the ISP industry.

Many telcos and ISPs are lobbying for a switch to usage-based pricing--more akin to the way phone charges are calculated--to help pay for network upgrades. But competition and, to some extent, fear that any change would dampen demand, is keeping the "all you can eat" pricing alive, at least for now.

Wheeler said cracks are starting to appear in the current pricing model, however. Some ISPs monitor their customers' sites and average the bandwidth used in 15-minute increments, while others measure usage in five-minute increments and charge for the highest level of service, he said.

Wheeler also outlined other growing concerns about the Net. Among them:

An upgraded infrastructure is needed to support increased traffic. The projected surge in e-commerce heightens the need.

Congestion is occurring at network access points because these upgrades are falling behind.

Quality of service is essential, especially with the rollout of voice, audio, and video on the Net.

"While the average consumer may tolerate the poor quality found on the Internet today, business use won't be widespread unless these issues are resolved," Wheeler said.

He remained optimistic, however, that existing infrastructure and quality problems will be alleviated with new technologies such as high-speed frame relay and gigabit routers, as well as Internet protocols.

Wheeler's comments underscore a mounting concern about the Net's ability to handle increased traffic loads. Some analysts worry that new high-speed access technologies, such as cable modems and DSL, will be hampered by strained network capacity--kind of like a Ferrari stuck on a two-lane highway.