What does an 'Internet Service Provider' actually do?

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Krisando

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#67645 5-Sep-2010 15:55

This is something which has been on my mind for a very long time, once you call your ISP, setup your connection, and browse the inter-webs. It can be years before you have any more contact with your ISP, while they make a profit on your monthly payments.

So what does an ISP actually do? Is it really necessary there are so many of them, sharing the same lines? (Xtra DSL)

If they are all running the same sort of thing, off Xtra's lines, what do the rest of them do?

You can see the sort of enigma which has me wondering, are they needed, or is it one big easy way to make money just having a few subscribers and paying the big company to have some net share.

Anyone from an ISP would be really helpful in clearing this up,

Thanks [=

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#376913 5-Sep-2010 16:26

Disclaimer: I work for an ISP, and have worked for several others (including Xtra) but these opinions do not represent my current or former employers.

I dont know what you think Xtra are, but they're not simply a wholesale ISP that other ISP brands buy services from.

An ISP has to commission a reasonably substantial network backbone, with in many cases hundreds of thousands of dollars worth of network kit just in their core environment, has to provide or lease network links between their various physical office/datacentre locations, has to provide or lease circuits that let them talk to other ISPs (connections to peering exchanges, or to other ISPs, all of which has a cost attached) - and thats just to provide a network infrastructure for you to have the option of talking with folks on other isps. Then theres a circuit to a provider who are connected to international locations which is more expensive again.

In terms of delivering internet to your front door there has to be some sort of relationship with the physical infrastructure providers, in the residential world this usually means dialup, dsl, cable, 3g, licensed spectrum wireless or unlicesenced spectrum.

Dialup is pretty ubiquitous but it requires the ISP to buy or lease a massive number of phone lines or primary rate connections or - as is common now - to lease capability from Telecom which is dedicated to just them. When leased, theres the cost of yet another network circuit to get from the Telecom dialup equipment to your own ISP network.

DSL is also pretty common and theres a few ways this works,, either you wholesale the Telecom service or you are in an unbundled area where other ISPs have got their own equipment in the cabinets in your neighbourhood, their own backhaul to their networks, etc - again lots of costs associated in either case.

Cable is only offerable by players when theres cable service in the ground, this is pretty much limited to TelstraClear in places such as Wellington and Christchurch.

3G requires you to be a cellular network provider or to resell someone elses version of this.

Licensed spectrum wireless is where the radio frequencies cost money to obtain and use.
Unlicensed usually refers to wifi (802.11) or similar which being fully public-access are usually less reliable (though cheaper as theres no seperate license fees to pay).

In the corporate world there are players like Vector, Citylink, Telecom and TelstraClear providing fibre connectivity, also FX Networks, thats just physical cable and a very low level network link - if you want to actually use the internet across this there has to be a network link from your ISP of choice to the local loop provider (again cost).

Another major thing ISPs can do is offer hosting services, either for your own server or for a variety of different customers on a shared server - Geekzone is an example of a colocated server sitting in racks provided by an ISP (of sorts). They just moved from ICONZ who provide both colocation and residential/business customer connectivity.

In ALL of the above examples there are costs in delivering Physical layer; Network Layer, TCP/IP layer services to your place of connectivity; there are service levels to maintain requiring degrees of resilience (meaning effectively having two of everything to protect you against the failure of one), theres the overheads in staffing, engineering and supporting all of these...
Theres real-estate (rent/mortgage/rates) for wherever their office is located, plus any other sites they need (remote datacentres) to make connections to other places.

Do you think the $50/month you contribute on your DSL account makes any significant headway into covering the costs of much of the above?

Plenty of smaller providers have started by essentially reselling the stuff provided by bigger outfits, but theres a significant number of independent ISPs out there and theyve all got proportionately similar amounts of money to spend on their own backbones if they want to actually provide a good service to their customers.

Havnt even thought about things like the costs to maintain a mail server that has 20,000 mailboxes on it, a weberver that provides the free webhosting that many internet providers ship wth their internet access, the costs of adequately providing power, air conditioning, ups to all of those, backups onsite or offsite? Maintenance contracts on important hardware... it all adds up quickly enough.

Another consideration; 0800 numbers for tech support effectively reverse the cost of all inbound phonecalls. Wonder what an ISP pays for running one of those on a monthly basis?

BJ.

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freitasm

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#376916 5-Sep-2010 16:35

Krisando: This is something which has been on my mind for a very long time, once you call your ISP, setup your connection, and browse the inter-webs. It can be years before you have any more contact with your ISP, while they make a profit on your monthly payments.

So what does an ISP actually do? Is it really necessary there are so many of them, sharing the same lines? (Xtra DSL)

If they are all running the same sort of thing, off Xtra's lines, what do the rest of them do?

You can see the sort of enigma which has me wondering, are they needed, or is it one big easy way to make money just having a few subscribers and paying the big company to have some net share.

Anyone from an ISP would be really helpful in clearing this up,

Thanks [=

As per above. Also ISPs make the "logical" connection between your PC/router and the Internet. The line you see leaving your home is just a physical connection, nothing more than cables and some "intelligence" that allows those cables to be connected to your preferred ISP.

Once the ISP has the connection established they will receive the requests from your PC over that physical line, forward it using their national network (or someone else's network if they don't have one) to their other providers, and so on until they reach the server you're trying to get something from.

Those providers can be other ISPs, or companies that work only in moving those bits from one point to another, like the Southern Cross cable for example and providers that offer service over that cable.

It's not as simple as PC-> ISP -> server...

PenultimateHop

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#376921 5-Sep-2010 16:42

BlakJak's thorough reply covers the technical side, but from the profit and money perspective I'll butcher an old saying about airlines: "the only way to end up with a small fortune in the ISP industry is to start with a large one".

While somewhat flippant, it isn't too far from the truth...

Krisando

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#376983 5-Sep-2010 20:39

@BlakJak - Is this part of the reason why upload is so cherished by all the isps in the country, doubling or even multiplying the prices more than the download/bandwidth ratio. My question is, do isps have to fork out heavily world-wide, on the data sent to various companies/locations world wide?

And couldn't they just get unlimited email addresses for a domain with gmail for a small yearly price, they do that often for free with some domains. And Xtra has some deal going with Yahoo for that.

@Freitasm - You cover another nice topic about the wider infrastructure making up the link for the inter-webs. Considering amount of data centers, isps, different nodes throughout the world where data pases through.. Is this actually calculated and payed, for all the tiny bits to each country? And if so, how does the US and various other countries allow unlimited downloading? (Since most data goes through US, special deals in return?

@PenultimateHop - Makes me wonder what all of the many isps try to provide over one another (Telstra aside), it seems rather restrictive for all the little companies not being able to invest in infrastructure as much due to high rentals coming from all directions.

Thanks, for your responses. Have been really helpful. :)

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#376988 5-Sep-2010 20:52

Krisando: @Freitasm - You cover another nice topic about the wider infrastructure making up the link for the inter-webs. Considering amount of data centers, isps, different nodes throughout the world where data pases through.. Is this actually calculated and payed, for all the tiny bits to each country? And if so, how does the US and various other countries allow unlimited downloading? (Since most data goes through US, special deals in return?

You will find out that more and more ISPs in the US are moving away from the "unlimited" plans. Mobile operators have all prtty much removed this from their offerings now, and most cable operators are testing metered broadband, exactly like we have here in New Zealand...

PenultimateHop

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#376992 5-Sep-2010 20:56

Krisando: @BlakJak - Is this part of the reason why upload is so cherished by all the isps in the country, doubling or even multiplying the prices more than the download/bandwidth ratio. My question is, do isps have to fork out heavily world-wide, on the data sent to various companies/locations world wide?

They fork out to their connectivity providers, who in turn fork out to their connectivity providers, who in turn... Just like pretty much any other business or industry.

Krisando: And couldn't they just get unlimited email addresses for a domain with gmail for a small yearly price, they do that often for free with some domains. And Xtra has some deal going with Yahoo for that.

So what would their differentiator be? Y! or Google will be charging the ISP for it, so there is still a cost in providing that service.

Krisando: @Freitasm - You cover another nice topic about the wider infrastructure making up the link for the inter-webs. Considering amount of data centers, isps, different nodes throughout the world where data pases through.. Is this actually calculated and payed, for all the tiny bits to each country? And if so, how does the US and various other countries allow unlimited downloading? (Since most data goes through US, special deals in return?

Not sure what you're asking here. ISPs in NZ (or Australia or where-ever) pay their upstream providers for connectivity. US and other countries that offer unlimited downloading can do it on the basis of scale (a small ISP in USA is probably larger than most medium or large ISPs in NZ), and the fact that their connectivity costs are typically lower due to not having 11000km of ocean between their largest city and the rest of the world - bearing that Internet is a 90% imported product in New Zealand, whereas it's largely a domestic product in USA.

Krisando: @PenultimateHop - Makes me wonder what all of the many isps try to provide over one another (Telstra aside), it seems rather restrictive for all the little companies not being able to invest in infrastructure as much due to high rentals coming from all directions.

It's just like any other business - people think they can make money or carve a niche for themselves, usually through some kind of differentiation (price, service, quality, targetted market, whatever). Why does an independant bookseller compete with Whitcoulls? Why does the local green grocer compete with Foodstuffs or Progressive? Why does an independant gas station compete with BP? Why does Air2There compete with Air NZ?

Krisando

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#376993 5-Sep-2010 21:01

=( But metered is limiting, I don't watch any TV. Instead I watch it online, on demand.

The typical plans offered range from 1,3-5-10-20,25gb a month. We use around 80gb, it goes so rapidly.
Last month I used 10.61gb DL, 318mb UL in my web browser alone (no downloading files, just Youtubing/browsing, on just my lappy). Multiply that by 4 people = 43.71gb.

Don't see how it would work in the US, with things like Itunes, Youtube, various TV services. Having all that infrastructure and not even using it to its fullest potential. =( That's extremely fortunate.

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Krisando

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#376998 5-Sep-2010 21:12

@PenultimateHop - "Bearing that Internet is a 90% imported product in New Zealand"

There's been no initiative to expand our inter-nationwide broadband bundle, it's interesting that in-order for someone to host content for New Zealander's they have to spend overseas to get a great price and extremely fast connectivity. Un-capping, and allowing near infinite usage (much like calling someone locally) would be brilliant. Heck, wouldn't need the inter-webs.

@PenultimateHop - "Why does the local green grocer compete with Foodstuffs or Progressive? Why does an independant gas station compete with BP? Why does Air2There compete with Air NZ?"

Heh, I see your point. Communism is the only way around that IMO.

PenultimateHop

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#377001 5-Sep-2010 21:19

Krisando: Don't see how it would work in the US, with things like Itunes, Youtube, various TV services. Having all that infrastructure and not even using it to its fullest potential. =( That's extremely fortunate.

The caps in the US are set (or will be set) relatively high - in the hundreds of Gigabytes. For the average consumer including those of Internet delivered content it should be fine.

Like you I don't watch TV - it's all streamed. I have no idea what my consumption level is (unmetered) but it would be unlikely to be more than 200-300GB a month. I probably wouldn't even notice if my ISP set a 200GB quota.

(In the past when I was living in quotaland, I used around 120GB a month but rarely thought about the quota issue. Equally I don't tend to think about the price of gas and "oh it will cost me $X to go to my friend's place". Mindset, I guess).

Krisando: @PenultimateHop - "Bearing that Internet is a 90% imported product in New Zealand"

There's been no initiative to expand our inter-nationwide broadband bundle, it's interesting that in-order for someone to host content for New Zealander's they have to spend overseas to get a great price and extremely fast connectivity. Un-capping, and allowing near infinite usage (much like calling someone locally) would be brilliant. Heck, wouldn't need the inter-webs.

I'm not sure I agree. There are relatively cost-competitive hosting packages available domestically in New Zealand and they will always be faster than hosting off-shore. I don't begrudge the fact my trousers cost less in USA vs. New Zealand (they do), nor do I particularly begrudge the fact hosting in NZ is slightly more expensive. It also supports the domestic economy, and does start to sway the import vs. domestic product percentages of the Internet. More of that would be good, and I applaud Mauricio's efforts to keep Geekzone domestically hosted.

Chippo

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#377002 5-Sep-2010 21:23

The local / offshore content thing is always going to be difficult. it's not helped that getting traffic from the small providers to the big two (Telecom/Telstra) is only marginally cheaper than getting it all the way to the US and beyond. Playing these costs and providing to specific target audiences is the most important reason for a selection of providers.

People expect their transit rates to be equivalent to their local rates. Almost like a phone call to your neighbor being the same cost as a phone call to Europe. I'd personally like to see internet providers move to a similar model; I'd prefer to have "Unlimited" local traffic and pay a premium for the traffic that costs more to get to me.

Problem is that explaining that to most customers would be an impossible task, so the current model stands. As long as small providers are paying significant amounts to transit traffic offshore or to Telecom/Telstra we'll be stuck with data caps that discriminate equally, to both international and domestic traffic.

I work for a global Data Protection Software company - But my opinions are my own.

PenultimateHop

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#377004 5-Sep-2010 21:28

Chippo: People expect their transit rates to be equivalent to their local rates. Almost like a phone call to your neighbor being the same cost as a phone call to Europe. I'd personally like to see internet providers move to a similar model; I'd prefer to have "Unlimited" local traffic and pay a premium for the traffic that costs more to get to me.

Be careful what you wish for. The ITU-T would love to have this PSTN-esque model for Internet traffic payments between operators - it has been proposed a couple of times.

It would be a disaster.

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#377006 5-Sep-2010 21:31

Krisando: @PenultimateHop - "Bearing that Internet is a 90% imported product in New Zealand"

There's been no initiative to expand our inter-nationwide broadband bundle, it's interesting that in-order for someone to host content for New Zealander's they have to spend overseas to get a great price and extremely fast connectivity. Un-capping, and allowing near infinite usage (much like calling someone locally) would be brilliant. Heck, wouldn't need the inter-webs.

PenultimateHop's comment that "Internet is a 90% imported product in New Zealand" is not related to local content providers hosting overseas, but the fact that most of the content consumed in New Zealand comes from overseas content providers - BBC, CNN, YouTube, Apple iTunes, Microsoft Updates, Apple Updates. Even torrents are mostly sourced from overseas. Nothing to do with local content providers going overseas to host.

International hosting of local content would add a lot of latency and user experience would be bad.

There's a good amount of national infrastructure for locally hosted content - just look at local companies using it, such as APN, Fairfax (both Stuff and Trade Me), even ourselves. There's some good peering and our national networks are quite good in terms of traffic.

We host in Auckland because 75% of our New Zealand readership is from there. Smart content providers should know where to locate their hosts. We could of course host in the U.S. for 10% of the price... But then you wouldn't get the speed we can provide. The same goes for others. There's a balance of cost and user experience.

Note that our New Zealand unique visits is only 45% of our total, but New Zealanders tend to view six to ten times more page than overseas visitors, so most of our page views are served locally. Those 75% of New Zealand page views come from Auckland, so it wouldn't make sense to host anywhere else in the country. Auckland is also good because it allows one or two hops before getting overseas to the U.S., where most of our overseas readers come from.

And we are talking over 600,000 unique visits per month. Of course Trade Me would be closer to 100% national traffic, and Trade Me alone is responsible for 60% of New Zealand web traffic every month.

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#377007 5-Sep-2010 21:38

PenultimateHop:
Chippo: People expect their transit rates to be equivalent to their local rates. Almost like a phone call to your neighbor being the same cost as a phone call to Europe. I'd personally like to see internet providers move to a similar model; I'd prefer to have "Unlimited" local traffic and pay a premium for the traffic that costs more to get to me.

Be careful what you wish for. The ITU-T would love to have this PSTN-esque model for Internet traffic payments between operators - it has been proposed a couple of times.

It would be a disaster.

And obviously you'd see Google growing even more, since they could deploy servers around the world for nothing.

Chippo, you do know that Google charges ISPs who want to host a Google YouTube cache, Google does all the administration, and the ISPs must provide sustainable connections - because of its volume pretty much Google gets all that traffic for free?

Would you like to live in a world where only a handful of companies would dominate the content provider landscape, while ISPs could charge you what they want, like mobile operators?

No, please don't go there.

Chippo

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#377011 5-Sep-2010 21:51

PenultimateHop: It would be a disaster.

In NZ we only really need 3 zones. Domestic Peered, Domestic Transit and International Transit. The idea would be to move local content providers back locally.

Domestic Peered: Traffic to all the ISPs that peer with each other at "Zero" cost. Essentially Free to customers, cost included in monthly subscription. This is the 200-300GB "Fair Use" type section that you see in the US.

Domestic Transit: Traffic to TelstraClear, Telecom and any other provider that refuses to peer. This is by far hardest to draw a pretty box around. If we were a mobile phone industry that would be regulated by now :D

International Transit: Discouraged traffic, this is where our classic 20-30GB datacaps would apply. Transit costs go down, datacaps go up.

I don't see how splitting traffic like this would be a bad thing? I don't have numbers on how much of my traffic goes where, but I'd love to see an NZ where we can stream tv or radio all day without worrying about the $1,000 bill at the end of the month. Of course, we still have to worry about how to get data from that last mile provider like telecom. We have to rely on the ultra high speed broadband scheme for that I guess.

Room for a niche provider anyone?

I work for a global Data Protection Software company - But my opinions are my own.

PenultimateHop

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#377018 5-Sep-2010 22:18

Chippo:
PenultimateHop:?It would be a disaster.

In NZ we only really need 3 zones. Domestic Peered, Domestic Transit and International Transit. The idea would be to move local content providers back locally.

Domestic Peered: Traffic to all the ISPs that peer with each other at "Zero" cost. Essentially Free to customers, cost included in monthly subscription. This is the 200-300GB "Fair Use" type section that you see in the US.

Domestic Transit: Traffic to TelstraClear, Telecom and any other provider that refuses to peer. This is by far hardest to draw a pretty box around. If we were a mobile phone industry that would be regulated by now :D

International Transit:?Discouraged?traffic, this is where our classic 20-30GB datacaps would apply. Transit costs go down, datacaps go up.

I don't see how splitting traffic like this would be a bad thing? I don't have numbers on how much of my traffic goes where, but I'd love to see an NZ where we can stream tv or radio all day without worrying about the $1,000 bill at the end of the month.?Of course, we still have to worry about how to get data from that last mile provider like telecom. We have to rely on the ultra high speed broadband scheme for that I guess.

Room for a?niche?provider anyone??

The model you proposed initially reminded me of the ITU proposal, which is to make the Internet charging model look closer to PSTN call based charging. E.g. You browse a website in, say, Tanzania then you'll need to pay $3 per megabyte, but if it is local then free, domestic then 20c per megabyte, etc. The costs would vary based on the terminating carrier and the destination. They even went so far as to propose the protocol extensions required to make it wok. Part of the reasoning was to reduce the burden on Least Developed Countries (LDCs) for connecting to the network. You could argue that even NZ is in this position as it must bear the cost of connecting to the rest ofeorld while receiving no income if e.g. Someone in Canada is consuming content originated from NZ. Idea may have some merit but it completely destroys the current Internet architecture and builds ridiculous amounts of complexity into it. We should also be very cautious to avoid encouraging this sort of methodology as it gives the ITU some defacto support. The proposal was heavily shot down by internet operators but unsurprisingly was supported by telcos.

Your clarification is fine and I believe this model exists in the NZ market today (at least I have been billed in that manner), which is a bit different from pricing it as "say a phone call to Europe". Of course the drawback to it is how do you educate users on what content is free vs. isn't?

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