95th Percentile Bandwidth billing explained

What Is 95th Percentile Bandwidth Billing?

The 95th percentile bandwidth billing method is designed to measure and charge for data usage based on peak demand. Rather than billing for every unit of data transferred, it focuses on your highest usage periods while excluding occasional spikes. Here’s how it works:

1. Data Collection: Throughout the billing cycle (typically a month), the data centre collects bandwidth usage data at regular intervals, usually every five minutes.
2. Sorting the Data: These usage records are sorted in ascending order.
3. Excluding the Top 5%: The highest 5% of data points are discarded, equivalent to about 36 hours in a 30-day month.
4. Determining the 95th Percentile: The value at the 95th percentile is used as the basis for your bill. This represents your peak usage while ignoring infrequent surges.

Why Is the 95th Percentile Method Popular?

This method is preferred for its practicality and fairness:

• Avoiding Spike Charges: By disregarding the top 5% of usage data, short-term spikes caused by unusual events are excluded, resulting in a fairer billing system.
• Incentivising Efficiency: Customers are encouraged to optimise their bandwidth usage, as consistent high usage will increase costs.
• Predictable Costs: It offers greater cost predictability compared to flat-rate or total-transfer billing models.

How Is the 95th Percentile Calculated?

Here’s an example to illustrate the calculation process:

1. Data Points Collection: A 30-day month with measurements taken every five minutes yields 8,640 data points (24 hours × 60 minutes ÷ 5 minutes × 30 days).
2. Top 5% Exclusion: The highest 432 data points (8,640 × 0.05) are discarded.
3. 95th Percentile Value: The next highest value from the remaining 8,208 data points is considered the 95th percentile.
4. Billing: If the 95th percentile value is 100 Mbps and the rate is £1 per Mbps, your monthly bill would be £100.

Benefits of 95th Percentile Billing

This billing model offers several advantages:

• Cost Efficiency: By excluding peak spikes, it often results in lower costs compared to alternative billing methods.
• Adaptability: It accommodates fluctuating usage patterns, making it ideal for businesses with variable bandwidth demands.
• Performance Insights: The 95th percentile value provides a useful metric for monitoring network performance and planning future capacity.

Tips for Managing 95th Percentile Billing

1. Monitor Your Usage: Use monitoring tools to track your bandwidth and identify periods of peak demand.
2. Optimise Traffic: Employ strategies such as load balancing and traffic shaping to distribute bandwidth usage more evenly.
3. Plan for Growth: Anticipate future needs and adjust your bandwidth plan to accommodate increased usage without incurring steep costs.

The 95th percentile bandwidth billing method strikes a balance between fairness and practicality, offering a cost-effective solution for businesses with variable data usage. By understanding how it works and adopting proactive strategies, you can optimise your bandwidth usage and manage costs effectively.