Volume-Based Transit Pricing: Is 95 the Right Percentile?

Abstract

The 95^th percentile billing mechanism has been an industry de facto standard for transit providers for well over a decade. While the simplicity of the scheme makes it attractive as a billing mechanism, dramatic evolution in traffic patterns, associated interconnection practices and industry structure over the last two decades motivates an obvious question: is it still appropriate? In this paper, we evaluate the 95^th percentile pricing mechanism from the perspective of transit providers, using a decade of traffic statistics from SWITCH (a large research/academic network), and more recent traffic statistics from 3 Internet Exchange Points (IXPs). We find that over time, heavy-inbound and heavy-hitter networks are able to achieve a lower 95th-to-average ratio than heavy-inbound and moderate-hitter networks, possibly due to their ability to better manage their traffic profile. The 95^th percentile traffic volume also does not necessarily reflect the cost burden to the provider, motivating our exploration of an alternative metric that better captures the costs imposed on a network. We define the provision ratio for a customer, which captures its contribution to the provider’s peak load.