The explosive growth of the Internet as a computerized network has been driven to large extent by the emergence of commercial Internet Service Providers (ISPs). Commercial ISPs provide users with access to the Internet in the same way that telephone companies provide customers with access to the international telephone network. The vast majority of commercial ISPs charge for this access in ways similar to the ways in which telephone companies charge their customers. Originally, it was customary for an ISP to charge its users based on the time they were connected, just as telephone companies charge for long distance services. Now, most ISPs have adopted a flat monthly access rate that is similar to the way in which telephone companies charge for local telephone service. All of these charges are essentially metered charges where a fee is charged for access for a given period of time, i.e. so many cents per minute or so many dollars per month.
There are many reasons for the similarities between the metered billing practices of ISPs and telephone companies. Both the computerized Internet network and international telephone network utilize the same backbone of high-speed, high bandwidth communication channels to carry voice and data traffic over long distances. A significant portion of the data traffic between users and ISPs also occurs over local telephone networks using dial-up modems. Many of the larger ISPs are divisions of, or affiliates of, telephone companies. Like telephone companies, ISPs may be subject to governmental regulation as common carriers or utilities. Perhaps most importantly, there are only a handful of firms that provide the backbone network connections required by an ISP and all of these firms utilize metered billing practices in charging for these carriage costs. Backbone network connection costs constitute a significant portion of the typical cost profile of an ISP, and, in the case of the non-North American ISP can constitute the vast majority of the cost profile of that provider. The details of how such metered billing arrangements for telephonic and network connections are accomplished have been the subject, for example, of U.S. Pat. Nos. 3,764,747, 5,187,710, 5,303,297, 5,351,286, 5,745,884, 5,828,737, 5,946,670, 5,956,391 and 5,956,697.
For ISPs, numerous software billing packages are available to account and bill for these metered charges, such as XaCCT from rens.com and ISP Power from inovaware.com. Other software programs have been developed to aid in the management of ISP networks, such as IP Magic from lightspeedsystems.com, Internet Services Management from resonate.com and MAMBA from luminate.com. The management and operation of an ISP also has been the subject of numerous articles and seminars, such as Hursti, Jani, “Management of the Access Network and Service Provisioning,” Seminar in Internetworking, Apr. 19, 1999. An example of the offerings of a typical ISP at a given monthly rate in terms of available configurations of hardware, software, maintenance and support for providing commercial levels of Internet access and website hosting can be found at rackspace.com.
The various factors involved in establishing pricing strategies for ISPs are discussed in detail by Geoff Huston in ISP Survival Guide: Strategies For Running A Competitive ISP, Chap. 13, pp. 497-535 (1999). He identifies five major attributes of the access service of an ISP that are folded into the retail tariff to be charged by that ISP, including access, time, volume, distance and quality. Where cost of service operations are greater than the carriage costs, it is typical to use a monthly flat rate access pricing because of the ease of implementation, simplicity, scalability and competitive environment for these providers. Where the carriage costs dominate, a monthly flat rate tariff may present an unacceptable business risk, and some form of incremental tariff structure based on more closely monitored metered usage may be preferred. Although Mr. Huston expects the ISP industry to stabilize and consolidate as larger players begin to dominate the industry, he notes that predictions of market stability within the Internet continue to be confounded by the experience of constant robust growth and evolution in service models.
One such point of evolution has been the emergence of a small number of ISPs, such as netzero.com and freeInet.com which are providing their service for free to individual end users. Instead of charging an access fee or tariff, the business model for these ISPs relies on advertising revenue generated by banner ads that are constantly displayed on a user's screen during the time when the user is connected to the service. In many ways, this business model is similar to the business model of commercial broadcast television where the revenue generated by advertisements underwrites the costs of providing the service.
Another offshoot from the services provided by conventional ISPs has been the growth of Application Systems Providers (ASPs) such as applicast.com and usi.net, as well as Enhanced or Enterprise Solution Providers (ESPs) such as cwusa.com and hostpro.net. Although there is no clear definition of the precise set of services provided by ASPs and ESPs, the business model is similar to the mainframe service bureau model practiced by Electronic Data Systems and others in which a defined portion of a companies computer processing needs are outsourced to a third party. ASPs and ESPs provide services tailored to meet some, most or all of a customer's needs with respect to application hosting, site development, e-commerce management and server deployment in exchange for a periodic fee. In the context of server deployment, the fees are customarily based on the particular hardware and software configurations that a customer will specify for hosting the customer's applications or web site. As with conventional ISPs, the more powerful the hardware and software and the more support services that are provided, the higher the monthly fee.
Most of the patents to date related to Internet billing and ISPs have focused on providing a secure way of conducting transactions over the Internet by involving the ISP in the payment chain between an e-commerce merchant and a purchaser that is a user of the ISP. Examples of these secured payment systems involving an ISP are shown in U.S. Pat. Nos. 5,794,221, 5,845,267 and 5,899,980. While these kinds of payment systems may be used in a limited capacity, the widespread acceptance of transacting purchases over the Internet using credit card information provided over a secured server link has surpassed most of the need for these kind of systems.
U.S. Pat. No. 5,819,092 describes an online development software tool with fee setting capabilities that allows the developer of a web site, for example, to develop a fee structure for an online service where fees can be levied against both users and third parties in response to logging onto an online service, performing searches or downloading information. U.S. Pat. No. 6,035,281 describes a system for multiparty billing for Internet access where participating parties are allocated a share of the billing based on a predetermined function of the content accessed and the bandwidth used during the access. While there continues to be a subset of Internet access that operates on a “pay-per-view” basis, much of the need for these kind of accounting tools has diminished as the trend is to make the vast majority of information accessed over the Internet available free of such pay-per-view charges.
European Patent Appl. No. 0 844 577 A3 describes a multi-level marketing computer network server where upon the completion of a transaction at the server, the server generates multi-level marketing commission payments due to “participants” in the multi-level marketing program as a result of the sale. While this application describes the use of a network server, the focus of this application is not on the way in which an ISP would be operated, but rather represents the automation of a conventional multi-level marketing arrangement where commissions are paid to a series of individuals within the multi-level marketing organization for each sale.
Although numerous enhancements and improvements have been made in terms of the way that ISPs are managed and many programs and tools have been developed to aid in the operation of ISP networks, the basic way in which ISPs charge for their services has not changed since the Internet become a predominantly commercial network.
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