How 95th Percentile Billing Reduces Bandwidth Costs: Is It Available From Your Provider?
Hi. I'm Max Clark. Let's talk about 95th percentile billing. If you've done any backbone engineering or high capacity data center based transit, So transit is the connection to the Internet as opposed to transport, which is a connection between 2 locations. Great thing about tech is we get to create endless acronyms to define things.
Speaker 1:Alright? So IP transit is a Internet connection at a data center, typically. 95th percentile is a billing structure, and what 95th percentile does is it allows you to order and install a circuit at a higher capacity than you need on a steady state. Typically, when you order a 95th percentile circuit, you are required to order a minimum commitment of 10% of the circuit capacity. So this example would be you'd have a 1 gig CIR committed information rate on a 10 gig port.
Speaker 1:That means that you are paying every month for 1 gig, but you can use up to 10 gig when you need it. We can size this math up. You can do a 10 gig on a 100 gig circuit, or maybe you want a 40 gig on a 400 gig circuit. So here's the bottom number becomes a CIR, and the top number becomes a port. The way 95th percentile billing works is every 5 minutes, the provider samples a network interface connected to you and records the bandwidth.
Speaker 1:So at the end of the month, they can take all of the recorded bandwidth, and they can order it from top to bottom, highest to lowest, and the top 5% of samples are are eliminated. Now not every month is exactly the same number of days. Some have 28. This year, we had 29, so you have 30 or 31. On average, you can assume this is about 30 hours of traffic that you get to ignore.
Speaker 1:So the top 30 hours of traffic when I say top 30, this is not random 30 hours. It is the highest capacity, highest consumption 30 hours of traffic get eliminated. If you are running backups, for instance, and you have a backup that takes on average 1 hour per night, that means your backups are free. You can completely saturate your backup and run at full capacity for 1 hour per night, and you don't pay for that backup. 90 5th percentile billing, there's some quirks to it.
Speaker 1:And part of the quirks are, does the provider system sample both the ingress and the egress and look at the highest value between the ingress and the egress, each sample collected, and then bill you for the highest of either the ingress or the egress. So if you think about it, if you're if you're just taking like, sample, sample, sample, sample, sample, working your way up the stack, you could be flowing back and forth between ingress and egress in terms of the capacity. Now that's a very atypical path traffic pattern for most circuits. If you are a eyeball network, usually well, you know, so an eyeball network is if you have an office, if you have users on your network connecting to websites. Right?
Speaker 1:So, you know, you'd say an eyeball network as it related to a, Internet service provider. But if you're an enterprise and you have a lot of users in your office, you're an eyeball network. So if you're an eyeball network, dominant traffic profile is going to be inbound. You're gonna be receiving more traffic than you're gonna be pushing out to the Internet. If you're a content network, you're hosting content and survey it to the Internet, you're gonna be the other direction.
Speaker 1:You're gonna have an egress heavy application, so ingress versus egress. There's some providers that do 90th percentile, by the way. So not only will you see somebody maybe competing based on price, but they're competing on the actual billing mechanism as well. So instead of charging 95th percentile, they're gonna charge you 90th percentile, and so now you get 60 hours of free traffic a month. This can be a huge, huge consideration for you when you're planning your bandwidth acquisition.
Speaker 1:Now it's important to note that 95th percentile, there are other types of circuits you can order that give you a variable bursting networks or dynamic bandwidth. Usually, you hear it called dynamic bandwidth. On a dynamic bandwidth circuit, you're gonna order a speed. Your speed may be let's say you order a 100 megabit or you're gonna order a 1000 megabit, 1 gigabit. And the dynamic bandwidth product is gonna allow you to selectively increase your speed up to 3 x, typically, 300%.
Speaker 1:So if you have a 100 meg circuit, it's gonna get delivered to you on a GigE port, and you can go into the portal and you can say, I actually need to have this be 300 megabit for the next however much period of time, and you actually specify it. Same thing if it's if it's a GigE circuit on 10 gig, you would go in and you configure and you could say, I need this to be 3 gig for a period of time. The reason why I don't like dynamic bandwidth products is you have to go in and you have to resize them. So you have to specify how much bandwidth you need. They charge you when you size them up.
Speaker 1:It's not always available to you, and the billing is usually not great. These are typically not fantastic price points. If you haven't done 90 5th percentile and have not gone into a metered base bandwidth product, let's actually talk about the other type of metering. The other type of metering is GB transfer, gigabytes transferred. Gigabytes transferred is very common if you're using any sort of public cloud right now.
Speaker 1:You'll see a public cloud might charge you, say, free ingress to the cloud, but 5¢ per gig on an egress from the cloud. Heights transferred is the absolute worst billing structure you can get into as a customer. It is the most expensive way to consume bandwidth. It charges you the most for that bandwidth. It is an incredible arbitrage margin generation, whatever you wanna look at it for that actual service provider because they're purchasing 95th percentile, and they're turning around, and they're selling you on a bytes transferred.
Speaker 1:So they're getting free bandwidth, and you're not. And they're aggregating across all their customers, and you're not. You know, simple math, roughly speaking, is every 1 megabit in 90 5th percentile is roughly 300 gig of data transfer. You can kind of figure this out if you're saying if you're being charged 5¢ per gig and you're running 300 gig outbound, what that comparison would be for you if you were in a 95th percentile environment. By the way, this is the single greatest cost optimization cost savings that we help companies with when they're converting from a cloud environment into a bare metal or data center environment is just correcting how they're consuming and paying for their bandwidth.
Speaker 1:Back to 95th percentile. 95th percentile is scary if you've never used it before because you don't understand how much you're gonna need, how much you're gonna actually consume, what your variability is going to be, etcetera. I'll give you an example, and this comes from our days of running a fiber optic service provider in different metro markets. We would install GigE circuits for our customers, and these are enterprise companies. Let's just use say, on average, if you had 300 people in your office and you had a GigE circuit, your 95th percentile typically worked out to be 30 to 40 megabit.
Speaker 1:So you were paying 30 to 40 megabit of usage, and you maybe had a 100 meg CIR. So the service provider is still winning in this scenario because your commitment is higher than your actual consumption, and you and at the same time, because you have a gig circuit that you can use and consume whatever you need to, and you're only gonna pay for your actual utilization. It's a fantastic thing. If you have the option to purchase 95th percentile from your network provider, absolutely 100%, you should be doing it because you're gonna get a much better deal. You're gonna get higher bandwidth speeds.
Speaker 1:You're gonna pay less money, and you're gonna be much happier. Yes. There are exceptions to these rules. These are generalities. If you're serving some sort of application where you're consuming that circuit 24 hours a day, 7 days a week at a 100%, 95th percentile maybe is not ideal for you.
Speaker 1:That really just depends on what your overage rate is. A lot of networks, you know, in the good old days would charge you a premium for your burst traffic. So if you're paying a dollar for your committed rate, maybe you were paying a dollar 50 or $2 for your burst rate, a 150 to 200% for your burst rate. Nowadays, it's pretty consistent that whatever you select for your commit rate is what your burst rate is going to be. So if you win a contract at a dollar per megabit for your commit, your burst rate is gonna be a dollar per megabit.
Speaker 1:And by the way, 10 years ago, 15 years ago, we were sizing bandwidth, and you were talking about price per megabit. Maybe you were paying $5 per megabit. Maybe you were paying $3 per megabit, you know, because you had a high consumption. Today, most premium networks are trying to charge in the dollar to a dollar 50 range, and you're going to see network options available to you in data centers in the 20 to 50¢ per megabit range. So massive price differentials based on what network you're connected to and what network you're actually consuming.
Speaker 1:So if you think about that and you say, okay, let's go get a 1 gig on a 10 gig circuit, you're paying $600, $500 for your commit rate on that 10 gig circuit, and you have 9 giga bandwidth available to you at a very low rate If you actually need it, you can profile 95th percentile yourself. You need some sort of SNMP, SNMP polling. You can do this with MRTG. We'll give you this data. Our d tool will give you this data.
Speaker 1:You can get this in, you know, a tool like Nagios, open NMS, PRTG. They'll all get you the actual broad data to act to to run and report on. You know, 20 years ago, I wrote a Perl script to actually take and pull MRTG data out of the log files and put it into a PostgreSQL database to do reporting against it with billing based on that, if you believe it or not. It worked wonderfully well. It was very efficient to actually generate billing data across thousands of interfaces.
Speaker 1:There's options available for you. You can start profiling your interfaces today if you'd like. I get an understanding of, you know, what are you actually paying for? Are you in a fixed rate port? Should you if you switch to a 95th percentile, would it work better for you?
Speaker 1:Would it not? And what does this actually play out? Other dynamic that I'm seeing a lot right now is companies are transitioning out of the bytes, you know, of cent per byte structure that are moving into data centers, coming out of environments where they're spending tons of money on their actual bandwidth or egress on their cloud and going into a data center. And we go through a sizing exercise and say, okay. Based on your GB x, you know, output, you know, tens of petabytes a month of of egress size down to, you know, expectation of about 40 gigabit per second of 95th percentile.
Speaker 1:In that case, we took that company, and we went through a sizing exercise and a pricing exercise with different network providers. And what they wanted and what they ended up selecting was a 20 gig commit on a 100 gig ports. We actually looked at going flat rate 100 gig ports for them. I advised against it because they weren't gonna use it. They were only gonna be using about 20% of the capacity, but even sizing full 100 gig flat rate ports for them was a fraction of the existing expense that they've had with their cloud provider and would have been a huge win for them financially.
Speaker 1:And, also, for their finance team, there's no variability. They have a fixed rate. There's nothing to go. That might be a good strategy for you in a transition. Come out of a public cloud, go to a flat rate port, see your actual consumption, understand what you're dealing with, you know, term that makes sense for you.
Speaker 1:And then down the road, you always have the option of re terming that circuit from a flat rate port into a percentage of your commit and finding another cost optimization. So that could be a tack on win for your budget and for your finance team when they're asked to, hey. Can we optimize or spend some more here? And that could be something you just, you know, hold in the quiver and and keep in your pocket. 90 5th percentile is, you know, we're talking a 30 year old billing construct at this point.
Speaker 1:You're not bleeding edge. This isn't something that you're coming out of and doing some esoteric strange thing. It is a very common approach. Every network provider has the ability to build 90th percentile. It's what question whether or not the product you're purchasing from them supports it or not, and that could be a segmenting.
Speaker 1:You know, the segment that you're dealing with with that provider doesn't have access to that SKU, the size of your circuit, the speed of your circuit, those sorts of things. And maybe you just need to talk to different people or have access to a different team. And if you get access to a different team or different people, then all of a sudden you can select 95th percentile and switch your CIR to something that's much lower and do it. One of my favorite things to do for high bandwidth consumption enterprises is switch from DIA product where you have fixed ports Internet delivered to the location to a transport circuit, or we can call these things all sorts of different things, point to points, transport. We don't really say MPLS here.
Speaker 1:ELine actually, excuse me. ELAN. You can correct me in the comments. I didn't make it. And the idea there is is you take and you use a private network link.
Speaker 1:You actually get 2 of them. So you size them up. Let's say you think you need 2 gig worth of bandwidth. You get 2 10 gig network links, and you can run diverse paths out of your location into a local data center. And local data center is gonna give you competitive access to IP transit as a product.
Speaker 1:You need enough colocation in that data center to house a switch or a router. Maybe you wanna put firewalls there. If you've got an SD WAN or SaaS C edge, it can go there. Things you know, it just what kind of architecture you're running for your network. And your transit links actually connect into your data center.
Speaker 1:So now you can purchase IP transit competitively because there are lots of networks competing for your business out of that facility, and you can backhaul it yourself over your transport link, over your private point to point, over your Elan, whatever the product is that you actually purchase. Let's just call it point to points, and you end up with the best of both worlds. This is something where if you are in a market where a 1000 meg is considered like geek DIA Internet access for your office location, you'll find that 10 gig circuits for private point to points are readily available, and this is a way for you to get more bandwidth without paying an egregious amount of money for it. Let's say you want 10 gig, and you can get a 100 gig transport circuits. In metro major metros, 100 gig point to point circuits are crazy inexpensive, so it's an option for you if that's something that you wanna consider.
Speaker 1:Reach out. Give us a call. Happy to walk you through this and give you a real world scenario what this actually looks like. I'm Max Clark. Hope this helps.
