From: Andrew Odlyzko (no email)
Date: Sat Jan 13 2007 - 17:22:49 EST
Extensive evidence of the phenomenon Mike describes (inexpensive,
frequently used things moving towards flat rate, expensive and
rare ones towards sophisticated schemes a la "Saturday night
stop-over fares") is presented in my paper "nternet pricing and
the history of communications," Computer Networks 36 (2001),
pp. 493-517, available at
http://www.dtc.umn.edu/~odlyzko/doc/history.communications1b.pdf
It also explains some of the mechanisms behind this tendency, drawn
both from conventional economics (bundling, etc.) and behavioral
economics (willingness to pay more for flat rates).
This tendency can indeed reverse in cases of extreme asymmetry of
usage. But one has to be careful there. Heavy users are often
the most valuable. (In today's environment they are often the
ones who provide the P2P material that attracts other uses to the
network. And yes, there is a problem there, in that you don't
need such heavy users to be on YOUR network for them to be an
attraction in signing up new subscribers.)
Andrew
> On Sat Jan 13, Mike Leber wrote:
On Sat, 13 Jan 2007, Sean Donelan wrote:
> On Fri, 12 Jan 2007, Stephen Sprunk wrote:
> > There is no technical challenge here; what the pirates are already doing
> > works pretty well, and with a little UI work it'd even be ready for the mass
> > market. The challenges are figuring out how to pay for the pipes needed to
> > deliver all these bits at consumer rates, and how to collect revenue from all
> > the viewers to fairly compensate the producers -- both business problems,
> > though for different folks.
>
> Will the North American market change from using speed to volume for
> pricing Internet connections? Web hosting and other markets around the
> world already use GB/transferred packages instead of the port speed.
The North American market started with charging per GB transfered and went
away from it because the drop in cost per Mbps for both circuits and
transit made costs low enough so that providers could statistically
multiplex their user base and offer "unlimited" service (unlimited for
marketing departments is being able to offer something to 99 percent of
your customer base, which explains all residential service clauses that
state unlimited doesn't really mean unlimited).
You can see this repeatedly for all sorts of products as costs have come
down in the long view. For example, consumer Internet dialup, long
distance calling plans, local phone service plans, some aspects of cell
phone service, it might be happening with online storage right now (i.e.
google gmail/gfs and the browser plugins that let you store files in your
gmail account).
What might or might not be trending is a digression, the "unlimited"
service is a marketing condition that seems to occur when 99 percent of
your customer base uses less than the cost equal to the benefit of
offering "unlimited" service.
Mike.
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