1. AARNet Copyright 2008 1 Internet Charging and Traffic Management Workshop QUT, Brisbane February 4 th & 5 th, 2008

2. AARNet Copyright 2008 2 Internet Charging and Traffic Management 11:00-12:30 AARNet discuss the charging model – Presenter: Rob Ewin (AARNet) – Rob will discuss the charging model and speculate on the separation of On Net and Off Net services, and on hypothetical future innovative billing strategies (e.g. unlimited, subscription based On Net, and capped, port based Off Net) 3:30-5:00 Chargeable Services to Students, colleges – discuss possibilities through UQconnect, AARNet – Presenters: Simon Rose (UQconnect), Rob Ewin (AARNet) – this session will discuss the possibilities for provision of services directly to students by AARNet, and will provide actual examples of what is being done by UQ’s own ISP, UQconnect. The session will explore how universities provide services to students, and how they cost recover, are external services offered, wholesale and commercial services, how wireless services are provided and managed.

3. AARNet Copyright 2008 3 Internet Charging and Traffic Management Agenda 1.Two Slides! 2.2007 Traffic Statistics 3.New Charging Model (2008) 4.Outstanding Issues 5.Future Charging Strategies (2009) 6.Services for Students

4. AARNet Copyright 2008 4 1. Two Slides – Charging Model for 2009 Subscription based customers (Shareholders/Members, Associates) 1.Membership Fee –What rate? –Does this need to be simpler, but still equitable? –Currently On Net subscription + Off Net subscription base 2.Commodity Internet Traffic Charge –What rate? –Usage and Fixed Options? –Capacity and/or port based pricing? 3.Access Charge –What rate?

5. AARNet Copyright 2008 5 1. Two Slides – Student Services Internet Services to Student Residences Internet services to student residences is an issue Many universities are outsourcing services to student residences and/or capping usage AARNet is a potential service provider Distinguishing On Net and Off Net is an issue, otherwise a capacity or port based service would be an option It’s not currently easy to distinguish these, but the introduction of MPLS to AARNet3 will provide a solution: ie. unrestricted On Net and port or capacity based Off Net

6. AARNet Copyright 2008 6 2. 2007 Traffic Statistics Total Traffic in Terabytes (TB) and Annual Growth (2006 – 2007) End of GrangeNet in October 2006 Growth slowed significantly in the last quarter of 2007 YearOn NetOff Net (Total)DomesticInternationalTotalDomesticInternationalTotalOtherTotal 20061781633413941,2111,605221,968 20076042418456481,9862,63403,479 240%48%148%64% N/A77% 2008 (YTD)41%103%60%58%44%48%N/A51%

7. AARNet Copyright 2008 7 2. 2007 Traffic Statistics All Customers

8. AARNet Copyright 2008 8 2. 2007 Traffic Statistics QLD Traffic in Terabytes (TB) and Annual Growth (2006 – 2007) YearOn NetOff Net (QLD)DomesticInternationalTotalDomesticInternationalTotalOtherTotal 20069933132892213100442 2007341483891433364790868 242%47%194%61%52%54%N/A96%

9. AARNet Copyright 2008 9 2. 2007 Traffic Statistics Queensland Customers

10. AARNet Copyright 2008 10 3. New Charging Model (2008) Subscription based customers (Shareholders/Members, Associates) 1. Membership Fee The sum of the 2007 On Net subscription and the “base” of the 2007 Off Net subscription. The “base” is that part of the 2007 Off Net subscription that remained after commodity Internet traffic charged at $7 per gigabyte (GB) had been subtracted. 2. Commodity Internet Traffic Charge Usage Option ($5 per GB) Off Net Subscription – Actual commodity Internet traffic for Q4, Q1, Q2, Q3. Excess Traffic Charge – Any additional commodity Internet traffic. Fixed Option ($6 per GB) Total projected commodity Internet traffic. 3. Access Charge An annual fee for each connection to AARNet3 (the same as at present).

11. AARNet Copyright 2008 11 3. New Charging Model (2008) Subscription based customers – Usage and Fixed Options Option 1 – Usage (default) = 25 Option 2 – Usage with 2.5% discount = 11 Option 3 – Fixed = 1 Option 4 – Fixed with 2.5% discount = 2

12. AARNet Copyright 2008 12 3. New Charging Model (2008) Volume based customers (Affiliates) 1. Download Traffic Charge All download traffic charged at $10 per GB 2. Access Charge An annual fee for each connection to AARNet3 (the same as at present).

13. AARNet Copyright 2008 13 3. New Charging Model (2008) Average University Current Charging Model Quantity (GB/year) Charge ($/year) On Net Subscription $100,000 Off Net Subscription50,000 $600,000 Excess Traffic (estimated)40,000 $280,000 Access Charge $12,000 Total$912,000 Old Charging Model

14. AARNet Copyright 2008 14 3. New Charging Model (2008) Average University New Charging Model Quantity (GB/year) Charge ($/year) Comments On Net Subscription$100,000 Off Net Subscription “base”$250,000$600,000 – 50,000 * $7 Membership Fee$350,000 Off Net Subscription50,000 Excess Traffic (estimated)40,000(60% growth) Commodity Internet Traffic 90,000 $450,000 (@$5/GB) $540,000 (@$6/GB) Access Charge$12,000 Usage Option$812,000 (estimated) Fixed Option$902,000 (actual) Example – New Charging model

15. AARNet Copyright 2008 15 3. New Charging Model (2008) Average University Usage Option – 2008 Quantity (GB) Charge ($) Membership Fee $350,000 Off Net Subscription 50,000$250,000 Excess Traffic (40,000)($200,000) Access Charge $12,000 Total (before excess traffic) Option 1 $612,000 (with 2.5% discount)Option 2 $596,700 Example – Usage Option

16. AARNet Copyright 2008 16 3. New Charging Model (2008) Average University Fixed Option – 2008 Quantity (GB) Charge ($) Membership Fee $350,000 Commodity Internet Traffic 90,000$540,000 Access Charge $12,000 Total (before excess traffic) Option 3 $902,000 (with 2.5% discount)Option 4 $879,450 Example – Fixed Option

17. AARNet Copyright 2008 17 3. New Charging Model (2008) Example – Usage Option versus Fixed Option

18. AARNet Copyright 2008 18 3. New Charging Model (2008) Costs and Revenue Commodity200620072008 Internet(72%)(40%)(50%)(60%)(70%) Traffic (TB)1,6102,7703,8804,1604,4304,710 50% of Shared Costs$13.4M$16.8M$20.8M Cost per GB$8.30$6.10$5.40$5.00$4.70$4.40 Revenue at $7/GB$11.3M$19.4M$28.7M$30.8M$32.8M$34.9M Revenue at $6/GB$9.7M$16.6M$24.4M$26.2M$27.9M$29.7M Revenue at $5/GB$8.0M$13.8M$20.4M$21.8M$23.3M$24.7M NB. $1M revenue from other customers

19. AARNet Copyright 2008 19 3. New Charging Model (2008) Outstanding Issues Formula for the annual Membership Fee Unbundling On Net and Off Net Future of the Usage and Fixed options Capacity and port based pricing Domestic peers and On Net

20. AARNet Copyright 2008 20 4. Outstanding Issues 1. Formula for the Annual Membership Fee What rate? Does this need to be simpler, but still equitable? Currently On Net subscription + Off Net subscription base On Net is a function of research income, staff, students, connections This data is two or three years “out of date” Off Net base is fixed Options: –Use On Net formula for all of the Membership Fee –Fixed percentage based on current On Net subscriptions –Fixed percentage based on “size” –Let the customers decide There will always be winners and losers

21. AARNet Copyright 2008 21 4. Outstanding Issues 2. Unbundling On Net and Off Net Currently, On Net and Off Net are “bundled” The new charging model ensures that both cover respective costs Does this mean they can be “unbundled”? “Off Net only” is essentially what Affiliates have (but at a higher price) “On Net only” is what some R&E organisations want If unbundling occurs, it has to be simple, equitable and consistent The jury is still out

22. AARNet Copyright 2008 22 4. Outstanding Issues 3. Future of the Usage and Fixed Options The Fixed option was introduced in response to demand To cover risk, the price was set at 20% higher than the Usage option 2007 growth was higher than the long term average, so estimating usage in 2008 produced quite high numbers for some customers Take up has been very low (Only 3 of 40 customers = 7.5%) Should there be greater encouragement (lower risk, lower estimates)? Would capacity and port based options be a acceptable alternative?

23. AARNet Copyright 2008 23 4. Outstanding Issues 4a. Capacity Based Pricing Available bandwidth (ie. the size of the “pipe”) remains effectively unlimited Bandwidth usage is measured regularly (eg. every 5 minutes) This is used to determine usage for the billing period (eg. monthly) Usage can be average, 95 th percentile, or whatever The charge is then $ per unit per period (eg. $/mbps/month) The customer does not know in advance what they will pay But there are no bottlenecks or caps We can’t offer this at the moment because we can’t easily distinguish On Net and Off Net

24. AARNet Copyright 2008 24 4. Outstanding Issues 4a. Capacity Based Pricing A good rule of thumb for 95 th percentile is: bandwidth (mbps) = annual traffic (TB) This is confirmed by CorVu data For average bandwidth, the figure could be 20% – 50% lower If we want to collect the same revenue as at present: $10 per GB (Associates): price = $800/mbps/month $5 per GB (Shareholders): price = $400/mbps/month These prices would be higher if based upon average bandwidth Usage is effectively only 25% of charged capacity

25. AARNet Copyright 2008 25 4. Outstanding Issues 4b. Port Based Pricing Available bandwidth (ie. the size of the “pipe”) is fixed for the billing period (eg. monthly) The charge is then $ per unit per period (eg. $/mbps/month) The customer knows what they will pay in advance But there may be bottlenecks We can offer this at the moment, especially for non subscription customers where there is no distinction between On Net and Off Net

26. AARNet Copyright 2008 26 4. Outstanding Issues 4b. Port Based Pricing The price depends on % use of the available bandwidth For a given price, the higher the % usage the cheaper the per GB rate We are seeing prices of $500/mbps/month: 25% usage = $6 per GB 50% usage = $3 per GB 75% usage = $2 per GB Our $400/mbps/month is 25% usage = $5 per GB It’s really the cost that drives the price

27. AARNet Copyright 2008 27 4. Outstanding Issues

28. AARNet Copyright 2008 28 4. Outstanding Issues 5. Domestic Peers and On Net AARNet sources traffic from customers, peers and transit service providers, both domestically and internationally Traffic from customers, and peers engaged in R&E, is classified as On Net for charging purposes All other peer and transit traffic is currently classified as Off Net The marginal cost of domestic peer traffic is very low; whereas the cost of international peer traffic is relatively expensive We are exploring the possibility of including all domestic peering traffic in the Membership Fee (ie. as On Net)

29. AARNet Copyright 2008 29 4. Outstanding Issues 5. Domestic Peers and On Net – Traffic Sources DomesticInternational Customers R&E Peer Transit On Net Off Net

30. AARNet Copyright 2008 30 4. Outstanding Issues 5. Domestic Peers and On Net – Traffic Sources DomesticInternational Customers R&E Peer Transit On Net Off Net

31. AARNet Copyright 2008 31 4. Outstanding Issues 5. Domestic Peers and On Net – Peer and Transit Traffic (2007, $7 per GB) DomesticInternationalTotal Peer 220 TB 1,420 TB1,640 TB Transit 230 TB780 TB1,010 TB Total 450 TB2,200 TB2,650 TB PeerAnnual Traffic Annual Revenue ABC60 TB$420K Internode30 TB$210K Powertel25 TB$175K Primus5 TB$35K WAIX100 TB$0K Total220 TB$840K

32. AARNet Copyright 2008 32 4. Outstanding Issues 5. Domestic Peers and On Net – Peer and Transit Sources DomesticInternationalTotal Peer 8% 54%62% Transit 9%29%38% Total 17%83%100% PeerShare of Traffic ABC2.3% Internode1.1% Powertel0.9% Primus0.2% WAIX3.8% Total8.0%

33. AARNet Copyright 2008 33 4. Outstanding Issues 5. Domestic Peers and On Net – Conclusion Domestic peers account for about 5% of current revenue The marginal cost of domestic peer traffic is very low Making domestic peers “On Net” will provide significant value for subscription based customers with little risk to AARNet

34. AARNet Copyright 2008 34 5. Future Charging Strategies (2009) Introduction AARNet currently uses volume based charging for commodity Internet traffic Volume based charging requires byte counting There is strong interest in non volume based charging Capacity and port based charging are two options These both require bandwidth measurement Many customers would like a cap on usage A port based service provides a cap, but a capacity based service does not And the distinction between On Net and Off Net traffic must be maintained

35. AARNet Copyright 2008 35 6. Services for Students The provision of Internet services to university student residences is problematic Many universities are outsourcing Internet services to student residences and capping usage AARNet is a potential service provider If the service did not distinguish On Net and Off Net, then a port based service would be an immediate option While it’s not currently possible to distinguish these, the introduction of MPLS to AARNet3 will provide a solution: ie. unrestricted On Net and port based Off Net

36. AARNet Copyright 2008 36 Internet Charging and Traffic Management End