# Understanding 95th Percentile Bandwidth Billing
The 95th percentile method is a common way for data centers and ISPs to bill for bandwidth usage. It charges based on the bandwidth you use most of the time, while ignoring occasional spikes. This approach is fairer than billing for the absolute maximum or imposing strict bandwidth caps, as it allows for brief periods of high usage without penalty.
## How 95th Percentile is Calculated
At ColoByTheU, bandwidth usage is measured in 5-minute intervals throughout the month. Here’s how the 95th percentile is determined:
1. **Record Usage:** Every 5 minutes, your average bandwidth usage is recorded. Over a month, this results in about 525,949 data points.
2. **Sort the Data:** All the recorded values are sorted from lowest to highest.
3. **Discard the Top 5%:** The highest 5% of readings (about 26,000) are discarded. These represent brief spikes in usage.
4. **Find the 95th Percentile:** The highest value remaining after discarding the top 5% is your 95th percentile bandwidth.
**Example:**
If you run at 300Mb/s for about a day and a half (which is roughly 5% of the month), and the rest of the time your usage is 10Mb/s, your 95th percentile will be 10Mb/s. However, if you exceed that 5% threshold by even one 5-minute interval, your 95th percentile could jump to 300Mb/s.
## Real-World Example
One ColoByTheU client leases a quarter rack (10U) with 6 physical servers, including two hypervisors hosting about a dozen virtual machines. These servers support 75 employees across multiple remote sites and host active web services for clients. At least one office operates 24/7.
Employees frequently download and upload project files (10–100 MB each), and one remote office automatically syncs part of the file server to a local edge server.
Although the client set a 100Mb/s cap and often reaches 80–90Mb/s during peak hours, their 95th percentile usage for the most recent month was only 12Mb/s. Occasionally, it has reached 23Mb/s in rare months.
## Comparison with Consumer ISPs
Many consumer ISPs (like AT&T or Spectrum) advertise “Gigabit Internet.” While you can reach 1Gb/s if you’re the only user at that moment, simultaneous usage by multiple customers can result in brief slowdowns. ISPs themselves are often billed by their upstream providers using the 95th percentile method, so they manage their networks to avoid exceeding their own 95th percentile limits. Most users never notice these brief slowdowns.
## Bottom Line
The 95th percentile billing method is slightly more complex than simply averaging or taking the maximum bandwidth used, but it is fairer for most users. Occasional bursts of high usage won’t result in higher charges, but consistently high usage will. This approach benefits companies with sporadic large transfers, as they pay less than organizations with constant heavy traffic (like streaming video sites).