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Typical bandwidth overage charges
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Typical bandwidth overage charges

randvegetarandvegeta Member, Host Rep

Anyone who is familiar with the HK IP transit (bandwidth) market will probably know that the concept of 95% billing, and overages charges are just not done.

I'm curious what the typical bandwidth overage policies are where such practices are fairly common.

We're looking to offer a more 'western style' service in HK, and offer some added flexibility to our customers.

My experience with most US/EU based services is actually that overage charges are pretty hefty, and considerably more than the base price. That is to say, 10TB data transfer may be $20, but each additional 1TB may also be $20. Meaning the overage costs are 10x greater.

Similarly, a 100Mbit commitment may be $100, additional bandwidth over 100Mbit may be charged at $10 /Mbit.

Is this fairly common? What is a both a common and reasonable overage charge?

Comments

  • KuJoeKuJoe Member, Host Rep

    It all depends on the market. In some areas I've seen overages at $0.25/Mbps and in others I see $30/Mbps. There are a lot of factors involved so there is no common or reasonable overage charge that you can set to fit every situation.

  • randvegetarandvegeta Member, Host Rep

    KuJoe said: It all depends on the market. In some areas I've seen overages at $0.25/Mbps and in others I see $30/Mbps. There are a lot of factors involved so there is no common or reasonable overage charge that you can set to fit every situation.

    I should then clarify, I'm looking for rough figures relative to the base price. $0.25 overage or $30 overage charges mean very little without knowing what the base rate is.

    If you buy bandwidth for $25 /mbit and the overage is $30, then it's only a 20% increase, which sounds very reasonable (too cheap even).

    So I'm not looking for absolute figures here, but the relative price differences.

  • KuJoeKuJoe Member, Host Rep

    @randvegeta said:

    KuJoe said: It all depends on the market. In some areas I've seen overages at $0.25/Mbps and in others I see $30/Mbps. There are a lot of factors involved so there is no common or reasonable overage charge that you can set to fit every situation.

    I should then clarify, I'm looking for rough figures relative to the base price. $0.25 overage or $30 overage charges mean very little without knowing what the base rate is.

    If you buy bandwidth for $25 /mbit and the overage is $30, then it's only a 20% increase, which sounds very reasonable (too cheap even).

    So I'm not looking for absolute figures here, but the relative price differences.

    I've seen it all over the place, even within the same data center. Sometimes I'll get a quote where their is no additional overage costs (i.e. on a 100Mbps commit for $400 the cost is $4/Mbps for overages) and other times the overage cost will be 4x the base cost.

    To be honest, I can't even remember where I got the VPS bandwidth overage fee figure in our TOS. I'm sure I ran some calculations in the past but luckily our software automatically suspend services before they can rack up any overages so we'll never have to deal with it. As for the colocation overage fee, we basically bill the client what our overage fees are since I didn't like the idea of profiting off of something like bandwidth overages.

    Thanked by 1inthecloudblog
  • I personally wouldn't go for providers that bill overages at anything OVER 5x the normal rate. So if I get 1TB with my 5 usd/month vps, I expect overage charges to be 5 usd per 200gb, and preferably less than that.

    Thanked by 2singhigh randvegeta
  • pikepike Veteran

    I'll use Hetzner as an example for a very customer friendly system.
    You get Traffic depending on the cost of your server. <30€/m you get 20TB, >30€/m you get 30TB etc. Also 2TB with the smallest VPS for 3,90€/m, 3TB increases for bigger VPS.

    You can use the bandwith-flat which is active by default. If you use all of your traffic (only outgoing is measured) you get limited to 10mbit until the next month.
    But you can also decide to pay 1,17€/TB for overuse and get 1gbit, this can be done in the Webinterface. If you want to re-activate again you need to write them a ticket.

    Thanked by 1singhigh
  • randvegetarandvegeta Member, Host Rep

    Okay how about this. If prepaid bandwidth = $1, would overage charges of $1.5 be considered reasonable?

  • Okay how about this. If prepaid bandwidth = $1, would overage charges of $1.5 be considered reasonable?

    Quite reasonable indeed.

    Thanked by 1Rhys
  • I might not be able to agree with that generalization, but there's also a lack of information provided.

    If it's $1 as a flat rate, that is, there is no multiplier, and you then charge $1.50, then that's fine.

    if it's $1 as a base rate, and customer engages something at a multiplier of something large like x100 or x1000, that becomes $150 or $1500, or otherwise $50 or $500 of pure profit not considering time spent reviewing/billing. That's quite a bit.

  • randvegetarandvegeta Member, Host Rep

    Damian said: if it's $1 as a base rate, and customer engages something at a multiplier of something large like x100 or x1000, that becomes $150 or $1500, or otherwise $50 or $500 of pure profit not considering time spent reviewing/billing. That's quite a bit.

    I don't think so. It's all relative.

    An overage of 1,000 units at a rate of 150% means the difference is 50%, no matter how much is used.

    So if they prepay for some amount, and use 1,000 units above the included allowance, at $1.50 overage rate, that would cost $1,500. But if they pre-pay, then it's $1,000. I do not think it matters what the absolute figures are. The overages, I think, should always be as a percentage of the base rate.

    If the client wants to limit their expenses so not to exceed $X, then they can. So overages will continue to acrue until they have reached a set amount, which would gaurantee they won't be charged more than they are willing.

    Bare in mind I am being asked about overages. Our normal policy would be to cap or suspend the server.

  • OliverOliver Member, Host Rep

    Here in AU transit is 95th% based and overages are typically 20% premium over the base rate. Depending on the provider there is often some flexibility though especially if there is a trend of continual growth.

  • randvegetarandvegeta Member, Host Rep

    Oliver said: Depending on the provider there is often some flexibility though especially if there is a trend of continual growth.

    Well yes actually I think this makes good business sense.

    If you use 50% more than you are allocated, the provider can give the option to the client to 'upgrade' the account on an ongoing basis and then charge normal rates for that month's overages. It's kind of a win win for both. Unless it was a 1-off for the client, in which case, maybe paying that 50% premium is well worth it.

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