The 95th percentile is a widely used mathematical calculation to evaluate the regular and sustained utilization of a network connection. The 95th percentile method more closely reflects the needed capacity of the link in question than tracking by other methods such as mean or maximum rate. The bytes that make up the packets themselves do not actually cost money, but the link and the infrastructure on either end of the link cost money to set up and support. As a result, 95th percentile is commonly used among all major internet transit and peering networks, as well as datacenters and ISPs for both capacity planning and/or calculating usage.
Since most networks are oversubscribed, there is often some room for some bursting without advanced planning (hence "Burstable billing"). Ignoring the top 5% of the samples is a reasonable compromise in most cases (hence 95th percentile).
Many sites have the majority of their traffic on Mondays, so the Monday traffic determines the rate for the whole month. Some providers offer billing on the 90th percentile as an incentive to attract customers with irregular bandwidth patterns.
The 95th percentile is allows a customer to have a short (less than 36 hours total for the month) burst in traffic without overage charges. Basically the 95th percentile says that 95% of the time, the usage is at or below this amount. Conversely, 5% of the samples are bursting above this rate.
There are important factors to percentile calculation:
Sampling interval, or how often samples are taken (called also "data points").
A percentile is calculated on some set of data points.
Every data point represents the average bandwidth used during the sampling interval (e.g., five minutes) and is calculated as the number of bits transferred throughout the interval divided by the duration of the interval (e.g., 300 seconds). The resulting value represents the average utilization rate for a single sampling interval and is expressed as bits per second (kbit/s/Mbit/s/Gbit/s). See data transfer rate.
Another option is average usage billing. While most datacenters and hosting providers use the "95th percentile" or burstable billing, others may use average usage billing. This is easier to implement since implementations can function similar to gas or electric utility meter readings (however, they are usually sampled more often to avoid losing data if systems lose power or reboot).
It could be argued that average use billing is more fair to customers, since the real cost to ISPs is somewhere between average use and 95th percentile due to oversubscription. Average use ignores the natural peaks and valleys that occur from day to day bandwidth usage.
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