I know we're getting in to more detail than is entirely necessary, but I think it's important to explain to you guys who are tech-savvy enough to understand. Note that the following example is hypothetical in every sense, but costings are market related:
Let's use a hypothetical ISP X. Ordinarily ISP X would work on a profit margin, and forecast for specific usage across the user base overall, and purchase enough capacity to cater for this using the difference after other input costs. You run close to your capacity to properly utilise your investment without sweating the asset too much, therefore providing your users with a great overall experience while attempting to turn a profit. Then you have a massive, but temporary usage spike as a 50GB game and IOS update hits. You now need, in order to keep service levels where they are, an additional, let's say 500Mbps capacity to cater for this. ISP X pays R1500/Mbps for IPC (these sorts of prices are no longer industry secrets). This is an annual increase in costs of R9m. The only way to justify this, is if you expect to fill that additional capacity after the temporary usage increase, pretty much immediately. Just one month of that sitting spare and every ounce of profit you made for the year is gone, or your business goes bust. So in terms of business sustainability, does this make sense? I think anyone with business savvy will agree that it doesn't. If you want your ISP to remain in business, you need to accept that these sorts of events will happen - what the ISP needs to ensure is that it does try to cater for this, and its network is resilient enough from the core aspects to handle the increased load without falling over and degrading the experience for everyone.
But what if IPC prices come down? Surely then we can increase without a hassle? Unfortunately not, because when IPC cuts are made, people expect those price drops to be passed on, so your margins remain the same and in fact you risk lower revenue then as well. Why? Because price-wars are not always a good thing - often they are detrimental to the industry. So end-users should be demanding better quality internet rather than forever cheaper internet these days. Cheaper is not always better, and as some large ISPs have discovered, cheaper can cause massive network troubles.
