There are usually two different billing methods for traffic billing in colocation or cloud services.
One is the well-known and quite simple calculation of the actual data consumption. Often a commitment is set here, which can be consumed monthly, before the data that exceeds the commitment is actually charged. In individual cases, there may also be flatrates, as is familiar from cell phone contracts, for example.
However, the standard method for billing traffic at data centers is different. Namely, the billing of traffic according to the so-called 95/5 method. We would like to take a closer look at this method here, because we are often asked how this billing method actually works.
What is the 95/5 method?
The 95/5 method is one of the fairest billing methods for the customer. It is based on the assumption that the incoming and outgoing traffic is never constant, but that there can always be deviations from the standard consumption. However, the customer should not be "punished" for these data peaks. Therefore, "traffic outliers" that could lead to high costs for the customer in the traditional calculation are simply left out and not calculated.
How does this work in practice?
During the billing period (in most cases a month), measurements of incoming and outgoing traffic are recorded continuously. As a rule, these measurements are taken every 5 minutes. The measurement results are considered at the end of the month and 5% of the highest measurements, are ignored. With 12 measurements per hour and 288 measurements per day. These are 8640 measurements per month. 5% means that the 432 highest measurements are not taken into account. For a month this means that a customer could produce almost two days of high measurement results that do not go into the calculation. The rest is then a clean average calculated according to the agreed Mbit price.
Good for the customer... and for the provider?
This type of billing could quickly be exploited by the customer. Imagine the following scenario: A customer signs contracts with 15 colocation or cloud providers. And with each provider he lets the line really glow for two days a month and the rest of the time virtually unused. Even though this would probably be a big effort and not really realistic, you quickly realize that you could save a lot of money and the data center providers would be left sitting on their costs. To avoid this, there is usually the CDR.
What is a CDR?
CDR stands for Commmited Data Rate. It means nothing more than a traffic commitment, i.e. an obligation to use or pay at least this agreed traffic budget during the billing period. Such a CDR is agreed for each 95/5 billing. The size of the CDR is discussed individually, but at aixit it is usually at least 10% of the available bandwidth. The CDR is important to prevent attempts to exploit the system. If the customer has to pay 10% of the bandwidth, it is better for him to generate at least moderate traffic during the whole month, i.e. to load the line only in the two "free" days.
The 95/5 method is a very fair and clean solution for billing the average traffic consumption and has therefore become the standard in the data center industry. Nevertheless, not all customers know the exact meaning. If this blog article didn't clear up all your questions, feel free to contact our sales team, who will be happy to answer further questions and concerns. Otherwise, we look forward to not charging you for 5% of the highest traffic in the future.