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Comment by kd5bjo | Hacker News Reader

Consumer ISPs are effectively bandwidth resellers: they buy in bulk at wholesale rates, split it up, and sell retail quantities to individuals. Wholesale bandwidth is generally billed based on the peak transfer rate during the billing period, and not a fixed price.(1) You also can’t assume a fixed network capacity- ISPs will buy enough equipment to maintain service to their customers instead of having brownouts. This capex cost is directly caused by higher aggregate usage from new and existing customers, so it makes sense to charge them by usage as well.

(1) This is overly simplistic; these are individually-negotiated B2B contracts, so details vary widely.

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I would think that would mostly apply to DSL ISPs that are just using a telcos infrastructure. I suppose AT&T Fiber may be charged by AT&Ts backbone for traffic transiting their network or something like that. The major ISPs AT&T, Verizon, Comcast, etc... are building their own networks at least in part.

Yes, the truly big backbone ISPs aren’t generally paying for interconnection to the others. Instead, they have the capital expenses of maintaining and extending that backbone to handle growing internet traffic in general. If they don’t keep up with demand, they’ll lose customers and potentially their settlement free agreements with the other backbone providers.

Where I live there are no competitors for the one cable internet ISP (DSL is not available and satellite is n competitive). As such they have not need to worry about losing customers to _competitors_.

Based on this article, I suspect that ISPs like Comcast and Charter are not extending their backbone to handle growing internet traffic. It seems they are charging exorbitant fees to discourage increased usage instead (in this article, the subscriber canceled their Hulu account and lowered the resolution of video supplied by Netflix).

Having only one ISP locally is typically either caused by market size or local regulation. Comcast does offer a national backbone and sells transit, cdn and other similar services through a subsidiary called Comcast Technology Solutions. The backbone at a national level has definitely received upgrades and they are advertising multiple terabits of capacity. Of course upgrading the transit network does not help if your local link is saturated, which is a problem in some areas.

If there is truly demand for unmetered internet someone will step in and fill the void. Some ISPs also use total transfer as a way to discriminate between business internet and residential internet.

Those are both consumer ISPs, and thus not subject to the same market pressure as I described for Tier 1 ISPs (without naming them as such). Similarly, consumer divisions of Tier 1 ISPs are driven more by local market forces than anything else.

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