Standard economic theory suggests that prices should be matched to costs. There are three main elements of network costs: the cost of connecting to the net, the cost of providing additional network capacity, and the social cost of congestion. Once capacity is in place, direct usage cost is negligible, and by itself is almost surely is not worth charging for given the accounting and billing costs (see [MacKie-Mason and Varian1995b]).
Charging for connections is conceptually straightforward: a connection requires a line, a router, and some labor effort. The line and the router are reversible investments and thus are reasonably charged for on annual lease basis (though many organizations buy their own routers). Indeed, this is essentially the current scheme for Internet connection fees.
Charging for incremental capacity requires usage information.
Ideally, we need a measure of the organization's demand during the
expected peak period of usage over some period, to determine its share
of the incremental capacity requirement. In practice, it might seem
that a reasonable approximation would be to charge a premium price for
usage during pre-determined peak periods (a positive price if the base
usage price is zero), as is routinely done for electricity. However,
casual evidence suggests that peak demand periods are much less
predictable than for other utility services. One reason is that it is
very easy to use the computer to schedule some activities for off-peak
hours, leading to a shifting peaks problem.
In addition, so much traffic traverses
long distances around the globe that time zone differences are
important. Network statistics reveal very irregular time-of-day usage
patterns [MacKie-Mason and Varian1995a].