Saul Hansell has done some good analysis of the broadband market (as I noted here), and I’m generally a big fan of the NYT’s Bits blog. But this item mixes cable TV apples with switched Internet oranges. And beyond that just misses the whole concept of products and prices.
Questioning whether Time Warner will be successful in its attempt to cap bandwidth usage on its broadband cable modem service — effectively raising the bandwidth pricing issue — Hansell writes:
I tried to explore the marginal costs with [Time Warner’s] Mr. Hobbs. When someone decides to spend a day doing nothing but downloading every Jerry Lewis movie from BitTorrent, Time Warner doesn’t have to write a bigger check to anyone. Rather, as best as I can figure it, the costs are all about building the network equipment and buying long-haul bandwidth for peak capacity.
If that is true, the question of what is “fair” is somewhat more abstract than just saying someone who uses more should pay more. After all, people who watch more hours of cable television don’t pay more than those who don’t.
It’s also true that a restaurant patron who finishes his meal doesn’t pay more than someone who leaves half the same menu item on his plate. If he orders two bowls of soup, he gets more soup. He can’t order one bowl of soup and demand each of his five dining partners also be served for free. Pricing decisions depend upon the product and the granularity that is being offered. Read the rest of this entry »