Understanding How Internet Services Are Priced

We dive into dedicated internet and best effort internet services to make sense of internet pricing.

What is the difference? 

When using the internet at home for shopping on Amazon, searching for a recipe, scrolling on Facebook, or binging on Netflix, chances are you are using best effort internet services. Best effort internet services share bandwidth among a group of customers.  

The downside of best effort internet services is that if a customer and their neighbors are using the internet simultaneously, there can be a bandwidth shortage and slower internet speeds than advertised. 

With dedicated internet access, the bandwidth is for each customer alone. Dedicated internet is also known as dedicated fiber, dedicated ethernet, and fast ethernet amid other names. Dedicated internet access serves up higher speeds at all times.  

If a company uses voice-over-internet protocol (VoIP) and unified communications as a service (UCaaS), dedicated internet access is essential to consistent performance and connectivity. 

Dedicated internet access is the optimal choice when working from home, operating a growing business, sharing large files or a large number of files, streaming content without internet, or needing guaranteed uptime.

The main difference lies in sharing bandwidth with other neighbors instead of having a personal bandwidth. That’s the primary reason best effort internet services are less expensive than dedicated internet access. 

Dedicated internet access (DIA) pricing

Each of these factors can affect dedicated internet pricing data and telecom pricing data:

• The contract length
• The DIA price per Mbps
• The off-net DIA price

Most ISPs give their DIA customers individual quotes, so there isn’t the internet pricing transparency needed to know whether each business is getting a good price.  

When obtaining DIA service, a carrier will provide a service level agreement (SLA) guaranteeing quality, network uptime, and more. If the carrier does not live up to its SLA, everybody is guaranteed a refund or service credits. 

Here are some other factors that influence DIA pricing. 

DIA pricing by bandwidth 

Generally, higher bandwidth translates into a higher internet bill. Bandwidth comes as either fixed bandwidth or burstable bandwidth. If a company attempts to transmit past its fixed limit, their data packets are dropped when using fixed bandwidth. Burstable bandwidth offers regular data usage. However, if a company needs a larger capacity, their bandwidth can burst as needed to serve everybody’s needs.  

Burstable bandwidth usually is less expensive than fixed, but it carries with it monthly variations in cost. 

Speed 

The time between when a device sends a signal to a server and when that signal is answered by the server and sent to each person’s device is their internet speed or latency. Higher speeds add up to higher costs.  

Quality 

Connection quality includes speed and whether there is jitter or packet loss. Jitter, or when data packets arrive at different times, results in delays in audio or video. Packet loss is when data packets don’t arrive or arrive out of order or late. All of this adds up to low-quality connections.  

Competition 

How much local competition there is in business internet service providers can influence the price each customer will pay for dedicated internet access.  

On-net or off-net 

If DIA for a company requires a build, it is off-net and will be more expensive each month. On-net DIA, which does not require a connection to be built, is less expensive. 

If an ISP has to make a capital expenditure to provide each business with dedicated internet access, that cost will either come as a non-recurring cost or a percentage of the cost will recur each month with each company’s internet bill. 

Transparency

Some companies offer pricing data from among their customer base including more than 15,000 quotes delivered over the past two years. For example, Lightyear partners with hundreds of ISPs to provide quotes from all major carriers and many regional carriers.

Conclusion

Speed, quality, and competition all influence best effort internet and dedicated internet pricing. There is more transparency in pricing for best effort internet, which is less expensive, but it comes with the downsides of connectivity being at the mercy of bandwidth traffic. DIA prices can differ widely among regions and cities and ISPs. The choices made – fixed or burstable bandwidth, speed, connection quality, and more – also factor into the price each company will pay for dedicated internet access.

With DIA essential for doing business, understanding how dedicated internet pricing works is vital for controlling costs.