95th percentile billing is a fair way to pay for your connectivity. It allows customers to burst over their allocated connectivity amount, without having to pay for their peak usage. It also means carriers can work out how much they need to provision to account for bursting customers. In fact, the 95th percentile billing model is standard across the industry. This is because it helps carriers keep control of their costs and in turn provide a cheaper service to customers.

Fit to burst

Some customers might not care if they can burst or not, which is fair enough, and service providers can rate-limit their connections with no extra charge. But for wherever there's a user experience involved a bit of burst is a good thing – it means there's no slowdown at peak times when all your users are logging on at once. A bit of burst here can save a lot of aggro there.

So how does it work?

A service provider takes regular samples of your network usage, say every 5 minutes1, and ignores the top 5% of them. The customer is then billed for the next highest amount. What this means in practice is that you can burst for up to 36 hours every month for free.

For example: If you've bought a 20 mbps commit, but use up to 50 mbps (or 100 or even 10 Gbps) for no more than 36 hours per month, you'll only be billed for your 20 mbps commitment.

A mean average

You might think that calculating and billing for the mean average data rate might be a better solution. But all is not as it seems here, as using the mean value leads carriers to over-provision their network. This is a costly exercise for all and would lead to carriers charging a higher cost per megabyte. It’s not all about the carriers either – believe it or not, using a mean value results in customers with flatter traffic profiles paying more. So 95th percentile billing actually works out cheaper for you a lot of the time.

Advantages

  • You get to burst to 5% for free
  • Not as expensive as actual-usage charging as it involves an averaging calculation
  • Cheaper for smoother traffic profiles
  • Doesn’t involve capping connections
  • Industry-standard, meaning everyone gets billed the same way.
  • Carriers can manage their provisioning

Disadvantages

In some cases, it might not work out for the best. For operations where peak transfer rate isn’t a necessity, such as overnight backups, peaks of high burst in an otherwise very low data rate can push up the average by a long way. Rather than face a high 95th percentile bill, in these situations we’d recommend capping your connection to the amount you’ve paid for, such as 20 mbps. It might not matter if backups take an extra few hours overnight: a few extra hours sacrificed here could save you money.

Summing up

The point of 95th percentile billing is to find a compromise between cost, scalability and volatile bills – and this applies to the carrier as much as the customer. No model is ever going to be perfect, but 95th percentile comes close, as evidenced by it being the de-facto standard across the industry.


Further Reading
See here for an illustrated example of how a mean value can be higher a 95th percentile value with typical traffic. For information on percentiles vs means, check out this in-depth article.



1 Our Senior Network Engineer reckons that for the sake of technical clarity I should say “five-minutely samples”.

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