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How do ISPs work? [bandwidth bill = electricity bill]

  1. May 15, 2012 #1

    After some of the information i've read and a few youtube videos, this is a rough idea of how I view a basic internet structure. However, I would like to find out how money changes hands in this industry. This is my guesstimate of who pays who:

    The individual residential households pay the ISP for access to the electric wires/cables which connect to other residential households. The ISP may pay a backbone provider for access to another set of wires that connect further into the internet, perhaps with other ISPs which connect to other residential households and websites.

    However, one thing I'm having trouble understanding is the expenses of the ISPs and backbone providers. They charge for "access," and "bandwith usage." But what does that mean? If i'm not mistaken, the only thing flowing through the wires are electrons. And when those electrons flow through my outlet to my computer, I pay my electric utility company for that electrons flow. So what is it that I am really paying my ISP for? The ISP claims I pay for internet usage, so internet usage could just be electrons flowing in some specific pattern that allows me to send email and view websites? Okay, but is it really the ISP that is involved in the technology that creates the specific electrical signals to view a webpage or is that something that the technology that exists in my internet browser? If its the ISP that creates the specific ability for those electrons to retrieve a website, then I wonder what the cost involved is? I would guess that the ISP owns and operates lots of servers that route traffic around their networks and into other ISP networks. And those servers that ISPs operate must consume a lot of electricity to operate, so ISPs must pay the utility company just like residential internet users. So when it all comes down to it, am I really just paying my ISP so that my ISP can pay it's electricity bill? If not, what other operation does an ISP perform other than laying some wire and setting up some routers and letting the internet flow autonomously? So does it boil down to when ISPs are claiming that bandwidth usage is high on their network, it is just a synonym for saying that their electric bill to the utility company is too high?
  2. jcsd
  3. May 15, 2012 #2
    So, why do you buy a computer? You could just as well modify the flow of electrons and get rid of a processor?
  4. May 15, 2012 #3
    Right, so the processor modifies the flow of electrons which make the computer perform specific operations. Is it then the processor within the computer that is modifying the electrons that are flowing out of the computer and into the internet? If so, then is the ISP's sole function to direct that flow of pre-modified electrons to its destination within the internet? So if a football stadium were a website, then the ISP can be analogous to traffic cops directing cars (modified electrons) to the correct parking spots within the stadium?

    edit: In otherwords, if its the processor that's modifying the electrons on non-internet operations, is it also the processor that's modifying the electrons for transport into and across the internet, or is it the router that is doing some modification? Or is the router just reading and following the instructions of the computers processor? Who's in charge of modifying the electrons to access and retrieve a website - the computer's processor only, the ISP network only, or a mixture of both?
    Last edited: May 15, 2012
  5. May 15, 2012 #4
    No, the modem/NIC is "modifying the flow of electrons" (a.k.a. transmitting and receiving electric signals) in your computer that come from a network.
  6. May 15, 2012 #5
    Okay, the modem in my computer modifies the flow of electrons that are sent out of my computer, into the router (which I assume begins to become ISP territory) and out into the internet (which is ISP territory). So the ISP is soley a bunch of wires that connect to traffic cops (servers/routers) that send my electrons on the right path to its destination. So when an ISP claims that Google's bandwith usage is very high and that Google should therefore pay the ISP more money, what is the ISP actually talking about? Are they saying that Google is causing too many electrons flowing through the ISP's wires and traffic servers?
    Last edited: May 15, 2012
  7. May 15, 2012 #6
    Yes, but that is not the sole purpose of the modem. See the concept of communication
    No. It facilitates communication between remote machines by providing (in part) physical connections, as well as devices working under agreed upon protocols.

    Bandwidth is a term with multiple meanings. See Bandwidth in web hosting for the particular context of your question.
  8. May 15, 2012 #7
    Okay, a bit is a basic unit of information. If a bit is represented by a voltage or current pulse. Bit rate is the measure of bits processed per unit of time. So if I give my computer a command that tells my modem to sends out some electrons in the form of a specific pulse, then I'm sending out a bit or a group of bits. This pattern of bits should be useful data whereby components within the internet can read and direct the data to their designated destination. Now here is where I am unsure: While there are almost countless electrons within a physical wire, there are only a finite amount of simultaneous impulses that can be traveling on any single wire at a time. So only a finite amount of different users can be sending data across a wire at any one time? So bandwidth is the measure of the physical capacity of a wire to support data transmissions?

    So while an electric power company is simply charging customers for electron flow they are supplying. The ISP is charging customers for amount of information, in the form of bit-rate (or current pulses) flowing through their wires. The the ISP is essentially allowing the flow of useful data across its wires, but I, the residential community internet user, am still paying the electric utility company for the actual supply of electrons. So an anology could be that the electric utility company are the lungs, the modem is my voicebox, and the air through which the information being sent is the ISP's network?
  9. May 15, 2012 #8
    You are paying the electric company for the power units plugged into the sockets into your home. The ISPs pay for electricity used in their parts of the infrastructure. These are some of the costs of their operation, and they incorporate them into the price of the service they provide.
  10. May 15, 2012 #9
    The ISP has to pay to its engineers , technicians , and employees good enough money in oder to ensure that you have latest technology of data transmission , and your virtual world remains secure.
    Then you have customer care , extra services like online storage.
    They also need to research on latest technologies of telecommunication which is very essential.
    And finally the company need to grab some profit for itself.
  11. May 16, 2012 #10

    Okay, there are a lot of very legitimate costs. At the same time, there are a lot of people saying the costs that ISPs incur continue to go down year after year while their revenue continues to rise year after year. Yet, these ISPs are trying to rearrange the entire internet into a business model in which rich companies can pay to allow internet users to experience fast internet speeds when visiting their websites and small companies who can't afford to pay the ISPs will suffer with very slow internet speeds on their websites. The ISPs are saying they need to do this to generate more money for themselves if they are expected to expand and upgrade the internet infrustructure. But it is claimed that the ISPs' balance sheets show that they are already making enough money to build up the network infrustructure and that they are purposely stalling on advancing the infrustructure to force people to believe they aren't being paid enough to satisfy customer needs. Further, it may be that ISPs purposely want to have a congested, slow network in order to create greater incentive for companies to pay for faster internet.

    So my question would be, are the ISPs costs great enough that the ISPs truley can't afford to invest into and improve their networks so our internet speeds can be on par with other countries (who claim to have much faster internet speeds than ours in the US)? Why do we have such slow internet when compared to other countries? What are our ISPs doing differently that they can't or won't keep up with the rest of the industrialized world?
    Last edited: May 16, 2012
  12. May 16, 2012 #11
    The author of that opinion article lists figures for revenue of the mentioned Cable Companies, and for operating costs for internet costs. Where did he find this data?

    The bolded terms represent a form of unreliable sources. This website does not accept such references as valid sources.

    The last bolded term is an unfounded speculation. Please refrain yourself from making such speculations without any evidence.
  13. May 16, 2012 #12
    Hsing “Kenny” Cheng and Shubho Bandyopadhyay are professors at the University of Florida, and Hong Guo is a professor at the University of Notre Dame.



    As you most likely know, and have likely known for far longer than me, these disagreements between ISPs, web content providers, and government are well documented across the internet. Congress continuously holds hearings with industry folks, academics and regulators to examine the complexities of all the sides in order to decide how much freedom ISPs should have in terms of data discrimination, teir systems, caps..etc and how much government intervention in the form of FCC "net neutrality" regulations.

    However, so many things remain unclear. For instance, on what basis do ISPs justify the fact they don't have the funds to upgrade infrustructure? Why are ISPs pushing for the ability to create a fast and slow lane for companies on the internet? What would that do to sites like physicsforums.com - a site upon which so many people can learn and exchange ideas and information? What if Comcast were allowed to create an exclusive deal with Google such that google searches could be conducted at light speed, but yahoo searches took 20 minutes for each page to load? Does that mean Comcast customers are just can't use Yahoo anymore? What if ATT supported a presidential candidate A and thus chose to slow down the speed of all sites providing information about presidential candidate B? Is the slope of too much freedom in the hands of ISPs really that slippery a slope? If these scenarios are not possible, please tell me why this is impossible when everything I read tells me that ISPs are in fact thinking along these lines.
  14. May 16, 2012 #13
    I looked up the CV of H. Guo. She is a Prof. in Management. She and the two other professors are the co-authors on all 3 of her papers on "net neutrality". They don't get any citations, and, in general, all their references have a low citation count.

    I would hardly say that is "a lot of people".

    You still had not provided a source for the revenue and costs data for ISPs claimed in the Ars Technica article.
  15. May 16, 2012 #14
    You still had not provided a source for the revenue and costs data for ISPs claimed in the Ars Technica article.[/QUOTE]

    The source is provided in the article. It clearly states the numbers came from the companies' quarterly reports.




    The numbers show that revenues increase for wireless segments. ATT's numbers show that their costs have decreased in the wireless segment. I am unsure of how to find Comcasts expenses in the wireless segment (it's probably in there and I didn't see it or don't know where to look) - those numbers could exist in the 10K.

    So, are ISPs justified in pushing for a fast & slow lane internet system? If ISPs had their way in remodelling the internet into a fast&slow lane, and physicsforums could no longer afford to be in the fast lane, thus taking 20 minutes to load each & every page, would the ISPs be completely justified in their remodelling of the internet's current structure of equal access to content?
  16. May 16, 2012 #15
    Isn't the primary business in which AT&T is a cell phone operator?!
    From your first link:

    Also, if you see the rise in revenues reported by AT&T, it is 1.8%, compared to ≈11 % claimed in Ars Technica.
  17. May 16, 2012 #16
    ATT has various segments of its business, just like most large companies. Revenues of a company can be broken down by business segment, so can costs. 1.8 figure is total revenue, not revenue for a specific segment of ATT's business. In addition, the 11 percent you are quoting is for Time Warner, not ATT.

    Total wireless segment operating revenues for ATT is March 2012 increased 5.4%. That is an increase. The net income for the wireless business segment went up did in fact coincidently increase 11%.

    The point is that all the information is available. The issue is whether ISPs should be able to reconstruct the internet to benefit themselves at the expense of web content providers and thus consumers. From the ISPs perspective, having greater control of the content that flows through its network will increase its ability to meet the consumption needs of internet consumers. My goal is to learn whether having more control over webcontent by ISPs will actually provide consumers with better overall internet experience or not.
    Last edited: May 16, 2012
  18. May 16, 2012 #17
    So, I am pretty unksilled in reading these reports. Is there a line which lists the segment of business of AT&T related to providing Internet service? If so, could you copy/paste it here?
  19. May 16, 2012 #18
    They are called quarterly reports. Every public company has to file them with the SEC. Every public company has to file an annual report, and 8ks as well. A public company is a company who sells shares to prospective investors via the stock market. Investopedia can clear this all up. I am not not skilled in reading financial statements either. The numbers referred to are Revenue, Expenses, and Income. Revenue is how much money a company takes in. Expenses are how much money a company spends. The difference (subtraction) between the two is the income a company yields. These statements happen to break these down very specifically so that you can see what part of the company is making money and what part is not.

    All this information is available. The issue I am having is whether ISPs should be able to reconstruct the internet to benefit themselves at the expense of web content providers and thus consumers. From the ISPs perspective, having greater control of the content that flows through its network will increase its ability to meet the consumption needs of internet consumers. My goal is to learn whether having more control over webcontent by ISPs will actually provide consumers with better overall internet experience or not.

    Thank you for teaching me and pointing me in the right direction for learning the difference between bandwidth and electron flow. Has made a real difference in how I view the issues concerning net neutrality. There is more flowing over a wire than electrons...it's also the organized pattern of electrons, or data. Thus, I wonder how much of that data the ISP responsible for maintaining. Does an ISP need to set up internet traffic servers at every few miles or is it more like there is one internet traffic server per state? Or is it actually the web content provider, like Google, who is responsible for setting up traffic servers? Or is it that both ISPs and Web content providers build servers? How are they distributed geographically - I mean, how many per square mile? Are there like 100 servers in the country or more like 100000000 or more? How much does it cost to maintain a server?

    Perhaps I'm intending to use the term router instead of server? How many routers, the components that direct internet traffic at points within the internet where there are network intersections, are there? How much does it cost to maintain these routers? Are they relatively cheap?

    I know ISPs have lots of expenses. But I'm trying to decide how justified ISPs are in saying they need more money in order to provide infrustructure upgrades.
  20. May 16, 2012 #19


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    Staff: Mentor

    This is the major misunderstanding being spread about services ISP's sell. The services that allow for faster delivery already exists, and has existed for years. First, the more bandwidth a content provider buys, the more users they can sustain at higher speeds. This has been true since day one. It is not unfair. ISPs sell enhanced services to content providers that want to offer bandwidth intensive services like streaming video, movie downloads, etc... Think of the big news sites, tv broadcast sites, etc... They need to pay extra for the services that give their customers a good experience viewing and downloading.

    This has no effect on a site like PF, or an other small site. We don't need these extra services, so we don't buy them.

    Also as was pointed out, the bandwidth you use from your internet connection has nothing to do with your electric bill.

    You might want to read through this site.

    Last edited: May 16, 2012
  21. May 16, 2012 #20
    It sounds like the bandwidth is like like a highway system. Suppose for a moment that there exists a 10 lane highway. Traffic flows smoothly for all drivers because there is a good highway system. Then they build a fast lane for those who want to drive fast, so the 10th lane becomes the fast lane where there is enough space for each car to travel faster and comfortably. And everyone is fine with a barely a noticable change in overall congestion. Then there are more cars who want or can afford to join the fast lane. So they open up the 9th lane for those willing to pay. And the remaining slow lanes get a little more congested and slow. Eventually, many with money pay for a fast lane, whereby the highway company opens up all 9 roads to those who want to pay for the fast lane, and the one slow lane grinds to a complete halt with never ending bumper to bumper traffic. Not because consumers are unwilling to pay, but because mom and pop content providers can't afford to pay, so they are wiped away of the internet.

    Okay, maybe that is pure capitalism at play. Fine. However that scenario is not what I'm talking about. I'm talking about an ISP's ability to deliberately slow down a competing interest's web content. I'm talking about if there is a blue car on the highway, the ISP can automatically get transferred to the slow lane for being a blue car. I also mean that if an internet user or content provider uses a lot of bandwith, then yes, by all means, pay more. But if a user uses a lot of bandwith, it would be discrimination to make that user pay a higher rate. If two men walk into a grocery store to purchase oranges; person A purchases 1 orange for a snack, but could very well have chosen an apple instead, and person B must purchase 50 oranges in order to sell because is livelyhood depends on purchasing oranges, it is discrimination to charge person B a higher price per orange due to his greater need for the product. You can't put two different prices on the same product depending on who you are selling to or why the person needs to purchase the item. According to what i've been reading, the internet has not always worked in a tier system that operates discriminatoraly. It's always worked the opposite of that, where users can visit the sites they please, not based on political views, or economic factors or exclusive agreements with competitors.

    BTW, thanks for the website. I will definately be looking into the information there. I have school in an hour so I have to get going. I will be back to respond. I am also trying to find/learn about the ISP's justification in that data discriminating will lead to greater innovation and prosperity than abiding by a net neutral policy (net neutral in terms of purposely degrading data transmissions of paying customers for ISP's and charging different prices for different types of data transmissions).
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