The Internet and oversubscribing

The backbone of the Internet is connected networks of high capacity communication lines. A dedicated connection to the Internet backbone that operates all the time, at the full capacity of the connection technology, is extremely expensive. Since end users rarely require 100% of the available bandwidth all the time, ISPs will purchase these expensive dedicated connections and use them to run multiple connections of various sizes to their end users. This is called "over-subscribing", and is a technique used by the Internet Service Provider Industry to realize a profit margin when providing dedicated connectivity to consumer users. Over-subscription is usually based on a bandwidth ratio and typically ranges from 4:1 to 20:1 depending on the service being provided. Over-subscription may actually occur several times before it reaches the end user.

Internet providers are measured in "Tiers". A Tier 1 provider maintains their own national network and provides their customers a 1:1 bandwidth ratio. The major Tier 1 service providers are in a "peer" relationship allowing traffic from users on separate networks to communicate seamlessly. As you move down in Tier levels of providers you encounter over-subscription rates at a higher degree as the ISP's resell the bandwidth from a higher Tier. The lower tiered ISP's have to have some sort of limit in place for their non-committed or consumer dedicated product or there would be no economical way they could provide service to thousands of end users.

Some companies require a guaranteed minimum bandwidth at pay for that at a premium. For instance a 2mb/s (Megabits per second) DSL connection may cost $500 a month while a Fractional T3 with a committed bandwidth of 2mb/s will likely cost over $2000 a month. While that 2mb/s DSL line is capable of operating at 2mb/s, if all the DSL users of that ISP were downloading at once everyone's connection would slow down. This is often observed with residential connections at "peak hours" like the early evening, also referred to as the "Internet rush hour".