Working in data centre sales for eight years, I have often found myself explaining the common ways of billing internet usage and the benefits of each method. Internet billing methods impact more than just the format of the invoice at the end of the month, and you need to be careful that your internet billing isn’t either stifling your connectivity or costing you way too much.
With lockdown changing how we all work and many businesses adapting how they use their data centre environments, I thought now would be a good time to share the pros and cons of three commonly available billing models found in data centres.
Types of Billing Models:
1. 95th Percentile
95th percentile works by sampling your Mbps bandwidth data in five-minute increments over the month and then arranging them from highest to lowest. The top 5% is then disregarded, and the next highest amount is the level the service is billed at. This equates to your highest 5% of usage (around 36 hours) per month being disregarded and not billed.
95th Percentile is the industry standard for Tier 1 and Tier 2 network peering so is common in a data centre environment. It is likely that your internet supplier contracts upstream on this model.
- 36 hours (5%) of the month you can burst above the amount you are billed for with no additional charges.
- You can maintain a lower Committed Data Rate (CDR) than the level you need to burst up to.
- Bandwidth is always available when needed, unlike other models that can see a cap on the maximum burst.
- It is scalable, you can commit low and then incrementally increase it based on demand without any major infrastructure overhauls.
- Can be more volatile in a month that continuously peaks. For example: turning on a new daily backup that increases the usage throughout the entire month so the 95th percentile reading is higher than your CDR resulting in additional billing.
2. Data Transfer
This works like a phone contract where you have X GB of data to use per month before additional charges.
The total of all data transferred in and out would be measured on a GB basis. You have a contracted level for the month and if you exceed it you will be billed for the additional usage – on a per GB basis.
- Good for consistent bandwidth projects with minimal fluctuation between months.
- This can be more accessible to non-technical roles as is more common with B2C technology, like phone contracts.
- Not friendly for unpredictable workloads, if you have a particularly high month you may receive over-usage charges or find yourselves over-committing.
- Unlike 95th percentile there is no averaging method giving ‘free’ usage through the month. So, you are paying for all the data you transfer.
3. “Unlimited” / Fixed Rate
Unlimited services are often found on office leased lines, where you purchase a 100Mbps internet connection with no additional billing model charging for usage across it. However, you are unable to exceed that 100Mbps committed level.
This can feel like the best option on the surface but often this is a case of ‘you get what you pay for’ and needs close attention to the fine print.
It is also common to find unlimited service to have contention, traffic management or rate-limiting to prevent a single service from hogging the available network capacity.
- No risk of over usage charges as you cannot burst over the contracted amount.
- Feels like the safer option if you don’t understand your traffic requirements.
- Can have traffic management and/or rate-limiting applied throttling usage.
- Unable to burst above commit. Taking a committed rate model like data transfer or 95th percentile typically has a higher burst limit. For example, a 1Gbps unlimited service has a max burst of 1Gbps, whereas as a 1Gbps 95th Percentile service would typically be provisioned over 10Gbps ports gaining the benefit of bursting above when needed.
- As you are often contracting for the entire port this will typically be more expensive, when compared to a committed rate model where you could have a lower commitment. If you need more capacity, you often have large cost increases to the next available option.
Which is the right choice?
Ultimately, there is no right or wrong choice. It is important to understand your bandwidth requirements to ensure you are taking the right choice for your need. Getting it wrong has the potential to see extra charges where a change in the billing model could be enough to offset them. My personal preference is the 95th percentile as I feel it strikes a fair balance and is easy to scale up as usage grows.
About the author
Alex Webb is the Head of Sales at 4D Data Centres, where he's been working since 2012. In that time he has helped a wide range of companies find the ideal infrastructure solution, providing advice and insight on every aspect of digital transformation, from internet speeds to hardware requirements.
4D has been operating data centres since 2007. We've won multiple awards and proven our reliability by never having a power outage and guaranteeing 99.999% network uptime. If you want to talk to Alex or a member of his team about using our services and utilising our super-fast internet connection, then get in touch.