What makes WiFi faster at home than at a coffee shop? How does Google order its search results from the trillions of webpages on the Internet? Why does Verizon charge $15 for every GB of data we use? Is it really true that we are connected in six social steps or less? These are just a few of the many intriguing questions we can ask about the social and technical networks that form integral parts of our daily lives. This course is about exploring the answers, using a language that anyone can understand. We will focus on fundamental principles like “sharing is hard”, “crowds are wise”, and “network of networks” that have guided the design and sustainability of today’s networks, and summarize the theories behind everything from the social connections we make on platforms like Facebook to the technology upon which these websites run. Unlike other networking courses, the mathematics included here are no more complicated than adding and multiplying numbers. While mathematical details are necessary to fully specify the algorithms and systems we investigate, they are not required to understand the main ideas. We use illustrations, analogies, and anecdotes about networks as pedagogical tools in lieu of detailed equations. Please note that per Princeton University policy, no certificates, credentials or reports are awarded in connection with this course.
Jobs' Inequality of Capacity
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Networks Illustrated: Principles without Calculus
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Pricing Data
Data makes up a significant part of our cell phone bills. How do cellular providers set these price points? In this lesson, we will see how so-called usage-based pricing schemes can send better signals than flat- rate, “buffet” schemes, leading to better sharing of the network.
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Christopher BrintonLecturer
Electrical Engineering
Mung ChiangProfessor
Electrical Engineering
So the problem again with all the demand that we've just seen is that networks
have a finite and limited capacity. So they can't handle everything that
we're putting on them all the time, especially if we keep increasing the
amount that we're consuming. And so what we call the jobs inequality
of capacity, the reason we do that is because it really started with the
introduction of the iPhone, which caused that 50 fold increase in demand around
2007 on mobile data devices. the Jobs' Inequality Of Capacity
basically says that the growth in demand began to outpace the growth in supply.
And it was projected to climb higher and higher every year.
Really, around the turn of the century. So, the iPhone was introduced something
around here, and that caused the growth in demand to really spike way up.
And notice, this isn't supply, itself, this is supply per dollar.
And so what do we mean by supply per dollar?
Well, it's really the amounts of incremental supply that we can add to the
network for the same amount of money. Right, so, as technology gets better and
better, naturally it's going to get cheaper, to roll out and to increase the
capacity costs that we have in the networks, as the supply per dollar will
go up, so we can have more supply for the same amount of money that we're spending.
Right. But the problem is that the demand
started to get so large and it was really growing at such a fast pace that the
supply per dollar couldn't really keep up with that anymore.
And you can see this trend right here. So the important thing is that these
aren't absolute demand and supply. This is the growth in demand, which is
beginning to outpace the growth in supply.
And so, again, the reason for this emphasis again is because smartphones
make data consumption really easy. And attractive for us to use.
And you know, we saw again that data demand is really doubling each year.
And if you look at that chart, it's, it's almost doubling, not quite doubling.
You look at that Cisco chart that we showed in the last slide you'll see that
every year it's about, it's going up like.
Basically a factor of two. And no technology can keep that up
forever. You can't keep doubling the amount of
supply per dollar forever. It's just not feasible and not possible.
I mean you're trying to squeeze the same amount of improvement out of what you
have. And that's really just becomes in
feasible after a while. So a change is really needed.
And so, that's really what caused the migration to usage based pricing, so
ISP's began switching to what we call usage based, which we introduced at the
beginning. That's for charging per unit or per
quantity of consumption. Right?
So, it's per unit rather than just paying a flat rate at the end of the month, and
consume as much as you want. You know the more you consume, the more
you're going to have to pay and the less you consume, they less you're going to
have to pay. And this has a different pricing signal.
And we saw a signal, the idea of quote unquote a signal.
Not an electrical signal, but the idea of a feedback signal.
We we looked at that in chapter one and a little bit as well in lecture two.
And when we looked at cellular we, we saw a feedback signal for being able to
correct for interference and that's kind of a similar idea here it's just with
pricing instead and correcting for the amount of data that you're going to pull
out. And we'll, we'll look exactly what we
mean by that a little later. But this is this is the idea here really,
under a flat rate pricing, which is on the left hand side, you know at at the
beginning of the month you pay some amount, right, $20, $40, whatever it is
to the network. And then for the rest of the month this
is the way, this is the way the diagram goes, you could just pull as much data as
you want Gigabytes without having to pay any extra money.
So this is, this is all basically just free, right.
It's just a buffet, you go into the buffet and you consume as much as you
want for the rest of the month. Now under usage based pricing instead,
what we do is we close this loop, right, so we create a feedback loop.
And you can look at it like this, because really it, that's what it is.
Is that every time you pull some data from the network, you're going to see
that cost at the end of the month, right? So rather than just paying a fixed amount
than using it all for the month which, of course, you don't want to use as much as
possible, every time you pull more data, you're going to have to pay.
So, it goes along again with our electric utilities.
You only use water, you only use electricity when you actually need it.
Because you don't want to have to pay for it, if you're not, needing it.
And so it's the same thing here. It's trying to put those, incentives,
aligned. And try to align, your incentives
accordingly. And so it's a, it's a more efficient we
say, it really is a more efficient pricing signal.
Usage-based pricing. Flat-rate isn't really because the signal
is really free, right? After you pay this amount, this is all
free. Let me forget the fact that you have to
cons, you have to pay this initial amount, cause every time you consume a
gigabyte, you're not paying anything extra, so in front of the cost is already
done. So, usage-based pricing was adapted in
the US by carriers like AT&T and Verizon and it began around 2010.
It started with AT&T and they announced it for their 3G users.
And then in 2011, Verizon wireless followed suits.
And then in 2012, you know, they, they just announced it and said okay, well now
we have users-based pricing. Then in 2012, or 2011, 2012, they started
to say, no actually we're not only allowing usage based pricing, but if
you're on a flat rate we're going to start to cap your usage, right.
So we're going to say if you consume above a certain amount, we're not going
to really call it unlimited anymore, we're just going to make your connections
speed really low. Then in 2012 AT&T and Verizon did
something interesting, which we can call the switching voice and data.
So what do you mean by switch? Well.
They were really saying. We really want you to be on a usage based
data plan, because that's what's really killing us right now.
And we really need people to start paying for the data they're consuming.
So they started to offer voice to be unlimited.
And they. And they said if you accept data plans
unlimited if you're an existing customer, we will give you unlimited voice, so
accept limited data or usage-based data plan and you can get your flat rate
unlimited voice in plan each month. So, this is really switching in a sense
the the idea behind a cellphone, right. So now it's, it's more data centric,
because initially we saw data as being a secondary application of voice, which is
why voice was usage based and data was flat rate.
But now that data is becoming usage based and voice is now allowing to be a flat
rate plan, you really see that switch happening.
And so you could argue, it's not necessarily the case, but you could argue
that the the fundamental purpose behind having a cell phone is switching from
voice to data.
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