So - here is my opportunity to share with you some information about how the "Internet / Transit" works, versus what you purchase from your ISP (either at home,

So - here is my opportunity to share with you some information about how the "Internet / Transit" works, versus what you purchase from your ISP (either at home, or in your colo). On the internet backbone, anybody who is purchasing "Transit" - that is, the ability to send data anywhere on the internet, pays for it per megabit/second, billed at the 95th percentile. What this means, is transit provider monitors an interface, and samples the data used every five minutes. (I.E. If at time n the interface indicated that 135 gigabits had been transferred, and at time n+ 5 minutes the interface showed that 145 gigabits had been transferred, then the 5 minute average would be 10 gigabits / 300 seconds or 33 megabits/second. These samples are taken for an entire month - 8640 of them in a 30 day month. Then, the provider sorts them in order, and removes the top 5% or 432 of those samples. They then charge the customer at the speed of sample # 433. This is what's known as "billing at 95th percentile". Note, that if sample 434 through 8640 had 0 usage, it would not matter - they still pay at sample #434. Also, note that if sample 431 through 432 were all at 10 gigabits/second, and sample #433 was 0 gigabits/second - the customer pays at 0 gigabits/second. (The transit provider protects themselves from that monkey business by also charging a fixed rate for the "Port Cost", which is unrelated to actual usage) Now - we get back to what joe average customer does - let's say they download an average of 500 gigabytes of movies/itunes/etc... If they had been downloading that smoothly, over the entire month, that would be 1.5 megabits/second. Their ISP, if they didn't have settlement free peering, would have to pay for 1.5 megabits/second of transit. When I was last purchasing transit a while ago, "High" quality transit (Internap) costs about $3-$4/megabit/second, lower cost (like cogent), costs around $1/megabit/second. In the case of Comcast, they have settlement free pairing with a number of providers, including cogent - but, Netflix decided to purchase their transit to Comcast from Cogent (because they were cheap) - and maxed out all the circuits between cogent and Comcast. Cogent was willing to add more interface - but, and here is where things get interesting - Comcast did not increase their capacity to Cogent. At no point did Comcast ever preferentially de-prioritize Netflix traffic, nor did they de-prioritize Cogent traffic - they just didn't increase their capacity. What's ironic, is that as soon as Netflix just decided to purchase directly from Comcast (at a rate that is rumored to be LESS than what they were paying cogent) then those cogent interfaces to comcast likely dropped down to much less utilization. So - net-net, is that if comcast became a title II common carrier, and were restricted to charging a reasonable rate of return on their invested capital on their circuits (limiting their profit, but, oh well, such is the nature of government regulation in this situation) - then they should charge their ISP customers a markup on that rate of return, based on usage. A typical case might be charging $20/month for the circuit, but $2/100 gigabytes. This aligns everyones incentives. Comcast is highly incented to provide you REALLY fast circuits so you can download a lot. Comcast is also highly incented to provide GREAT transit access to their customers, so content providers can send a lot of data. The Mom/Dad home user comes out great - because they probably are only downloading a few hundred gigabytes of iTunes TV (that will go up as HD and streaming TV become more common) - so their initial cost drops down to around $25/month. The Heavy users, that comcast was previously rate limitting because of violating the "Reasonable Use" clause, is now considered to be a premium customer - who might even get a (negotiated with the regulator) break based on their high volume. In this new world - if you want to download 5 terabytes of data - go for it. It will just cost you a $100 + $20. Everyone comes out ahead except for Comcast shareholders and executives, who won't be able to profit on their monopoly rents any more. Anyways - if I was the regulator with a magical wand - that's the system I would be setting up.