Pricing Internet Services: Proposed Improvements

Flat-rate pricing appeals to Internet users and service providers because of its simplicity and predictability. However, congestion is the inevitable consequence of flat-rate pricing because Internet users who pay a fixed access fee have no incentive to limit their network usage. Future applications that require timely delivery of data will require mechanisms for allocating network resources that give consumers choices in services and prices while allowing service providers to recover their costs. We examine the proposed improvements in Internet pricing that are designed to increase its economic efficiency and support the deployment of new applications that require a better quality of service than the Internet currently offers.