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This paper explores the relationship between certainty of bandwidth and certainty of price
for Internet services over a statistically shared network. Both are important policy
objectives. Certainty of bandwidth is necessary if the Internet is to serve as a platform for
advanced communications, information and entertainment services, or even for
telephony. Certainty of price is important for universal service. More specifically, we
illustrate that certainty of bandwidth and certainty of price are mutually exclusive in a
statistically shared network (of which the Internet is the canonical example).
Section 2 of this paper outlines the importance of certainty of price and how it might be
achieved.
Section 3 explains the importance of certainty in bandwidth and how different
QoS protocols impact variations in bandwidth. Here, we use standard queuing models to
show that increasing certainty in bandwidth results in decreased certainty in price.
Conversely, setting a constant price with cost-based pricing in a statistically shared
network results in delay. This is followed by a discussion of market evidence for this
inverse relationship between certainty of price and certainty of bandwidth. Finally, we
present conclusions and implications to be considered by policy makers. |
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