PSound
04-20-09, 11:00 AM
This is a MUST READ for understanding how ISPs business work, and why tiered pricing is nothing but anti-competitive.
Internet service providers want to end the all-you-can-eat plans and get their customers paying ŕ la carte.
But they are having a hard time closing the buffet line.
Faced with rising consumer protest and calls from members of Congress for new regulations, Time Warner Cable backed down last week from a plan to impose new fees on heavy users of its Road Runner Internet service.
The debate over the price of Internet use is far from over. Critics say cable and phone companies are already charging far more than Internet providers in other countries. Some also wonder whether the new price plans are meant to prevent online video sites from cutting into the lucrative revenue from cable TV service.
They point out that providers’ profit margins are stable, and that investment in network equipment is generally falling.
These plans to charge for above-average Internet use “are unjustifiable for almost everywhere in the country except for rural America,” Richard F. Doherty, the research director of the Envisioneering Group, a consulting firm that studies cable technology.
Cable or telephone networks have little in common with a restaurant, the critics say, because there is no electronic equivalent of food to buy. If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company’s costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.
That is because their networks are constantly being expanded to handle ever-greater peak periods. It is the modern equivalent of how the old AT&T was said to have built the long-distance network to handle the number of calls expected on Mother’s Day.
“All of our economics are based on engineering for the peak hour,” said Tony Werner, the chief technical officer of Comcast. “Just because someone consumes more data doesn’t mean they drive more cost.”
Yet even as the providers continually upgrade their networks, the cost of the equipment needed to do so is shrinking steadily, reflecting the well-worn economics of computing.
Indeed, the equipment needed to add capacity to any household costs a fraction of one month’s Internet service bill. Comcast, the nation’s largest cable provider, has told investors that doubling the Internet capacity of a neighborhood costs an average of $6.85 a home.
The cost of providing Internet service is about to fall even more, as cable companies install new technology, called Docsis 3, that will both increase their capacity and allow them to offer much faster download speeds.
Cable systems in the United States use the same technology and have roughly the same costs. Comcast told investors that the hardware to provide 50-megabits-per-second service costs less than it had been paying for the equipment for 6 megabits per second.
Questions about the speed, availability and affordability of Internet service in the United States will be central to the study Congress has required from the Federal Communications Commission next year. And cable and phone executives are worried that the commission may call for more regulation of Internet service, which currently is free from any government price controls.
http://www.nytimes.com/2009/04/20/business/20isp.html?_r=2&partner=rss&emc=rss
Internet service providers want to end the all-you-can-eat plans and get their customers paying ŕ la carte.
But they are having a hard time closing the buffet line.
Faced with rising consumer protest and calls from members of Congress for new regulations, Time Warner Cable backed down last week from a plan to impose new fees on heavy users of its Road Runner Internet service.
The debate over the price of Internet use is far from over. Critics say cable and phone companies are already charging far more than Internet providers in other countries. Some also wonder whether the new price plans are meant to prevent online video sites from cutting into the lucrative revenue from cable TV service.
They point out that providers’ profit margins are stable, and that investment in network equipment is generally falling.
These plans to charge for above-average Internet use “are unjustifiable for almost everywhere in the country except for rural America,” Richard F. Doherty, the research director of the Envisioneering Group, a consulting firm that studies cable technology.
Cable or telephone networks have little in common with a restaurant, the critics say, because there is no electronic equivalent of food to buy. If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company’s costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.
That is because their networks are constantly being expanded to handle ever-greater peak periods. It is the modern equivalent of how the old AT&T was said to have built the long-distance network to handle the number of calls expected on Mother’s Day.
“All of our economics are based on engineering for the peak hour,” said Tony Werner, the chief technical officer of Comcast. “Just because someone consumes more data doesn’t mean they drive more cost.”
Yet even as the providers continually upgrade their networks, the cost of the equipment needed to do so is shrinking steadily, reflecting the well-worn economics of computing.
Indeed, the equipment needed to add capacity to any household costs a fraction of one month’s Internet service bill. Comcast, the nation’s largest cable provider, has told investors that doubling the Internet capacity of a neighborhood costs an average of $6.85 a home.
The cost of providing Internet service is about to fall even more, as cable companies install new technology, called Docsis 3, that will both increase their capacity and allow them to offer much faster download speeds.
Cable systems in the United States use the same technology and have roughly the same costs. Comcast told investors that the hardware to provide 50-megabits-per-second service costs less than it had been paying for the equipment for 6 megabits per second.
Questions about the speed, availability and affordability of Internet service in the United States will be central to the study Congress has required from the Federal Communications Commission next year. And cable and phone executives are worried that the commission may call for more regulation of Internet service, which currently is free from any government price controls.
http://www.nytimes.com/2009/04/20/business/20isp.html?_r=2&partner=rss&emc=rss