5 comments

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  MikeT

  11 months ago

  The common sense solution to the demand issue is metered bandwidth. Metered bandwidth can save everyone money because it would be based primarily on what you do actually use, not what you might use. Therefore, if someone is too busy to download a lot of content one month, their bill may end up actually being lower that month than it would be under an all-you-can-eat plan.
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  Gary McGath

  11 months ago

  In economics, the opposite of "scarce" isn't "abundant," but "unlimited." Anyone who's every downloaded a large file knows that bandwidth is hardly unlimited.
  
  The key is explaining what is meant economically by a "scarce resource" and why it matters. Food is abundant in the United States, too, but it would be senseless to have a "food neutrality" requirement in which everything you eat comes at the same per-pound price.
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  Berin Szoka

  11 months ago

  Quite right, Gary. Thank you for providing that additional terminological clarification!
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  Chadlee

  11 months ago

  Consumer acceptance will be the primary hurdle to the implementation of metered bandwidth.
  
  When it comes to monthly bills, consumers don't like to think about them. To the extent that they must think about them, they prefer to think about a regular fixed expense - even if this means that for some months they may get less value out of that fixed monthly expense.
  
  What concerns me about the “Ramsey two-part tariff” pricing model is the potential for the initial demarcation point to remain the eternal demarcation point.
  
  If a demarcation point is set just above the usage patterns of 95% of customers today, but then either those usage patterns substantially increase or the provider's bandwidth costs substantially decrease - there will be little incentive to increase the demarcation point. Why would providers ever want to reduce the amount of metered bandwidth they sell? Especially if consumers have finally been trained to accept that particular point as the demarcation point.
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  Berin Szoka

  11 months ago

  I appreciate your concerns, Chadlee. But there are a number of online services that feature caps that increase at a certain rate over time--most obviously, the amount of server space you get on Gmail. I would think that this provides something of a model for how to set a demarcation point that evolves with changing use patterns.
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