From: Mark Newton (no email)
Date: Mon Jan 21 2008 - 21:53:23 EST
On 22/01/2008, at 10:21 AM, Tom Vest wrote:
> On Jan 21, 2008, at 6:10 PM, Mark Newton wrote:
>>
>> It goes a bit deeper than that when the monopoly can compound the
>> problem my artificially constraining capacity by underspending on
>> infrastructure (e.g., only lighting one pair on a multi-pair cable)
>>
>> So infrastructure spending can (and does) affect the price.
>
> Hi Mark,
>
> So you're saying that if a cable owner/monopolist simply lit another
> fiber pair, that would cause them to reduce prices?
No, I'm saying that if another infrastructure provider launched
itself onto the marketplace, that'd immediately inspire the
incumbent who is presently using scarcity as a justification
for high prices to light another fiber pair.
It's a bit more complicated than that, but arguing that supply
has no effect on price is overly simplistic when there are
monopolistic barriers preventing new sources of supply.
> Put it this way: how would you define (much less calculate)
> "replacement cost" for an asset whose financing was predicated on a
> useful of capacity of (x), but which, with fractional additional
> investment relative to the original outlay, can be leveraged to
> deliver (x)^4-n capacity -- with n yet to be determined? Must every
> increment of the now vastly larger resource be priced as it would
> have been assuming the "original" max cap? How much must the
> "replacement cost" replace? The original (x) capacity? The as-yet
> indeterminate (x)^n capacity? The originally anticipated/full
> scarcity-based/monopoly-backed profits?
Whichever one of those comes out to the largest number.
Eventually the asset will reach its capacity -- we can't keep
upgrading things forever. Submarine cable systems also have
a useful working life, so even if they haven't reached capacity
they'll run out of legs eventually anyway (the ones installed
during the dot-com boom are approaching their half-life)
When the cable is full or EOL'ed its owner should have earned
enough to build a new one at current market rates. So if they
don't have a billion or so dollars stored away somewhere, they're
selling below replacement value.
> Once you get acquainted with the power of that ^n, you'll believe ;-)
> Unfortunately, your location gives you few opportunities to
> familiarize yourself.
Well, no, we have footprint in Australia, the USA and Japan at
the moment.
We'd have built out to Europe by now if not for the fact that
global IP transit is being sold cheaper than transatlantic
transmission, so what's the point of building a POP across the
pond? Now, given that transatlantic transmission is already
artificially cheap due to the acquisition of distressed assets
in 2001, what does that tell you about IP transit pricing?
>> Metered charging systems are, to me, evidence of a realization that
>> the business model underlying much of the Internet's last five years
>> is unsustainable. You guys might think they're a novel and
>> unwelcome arrival at the moment, but give it a few years and we'll
>> see what happens :-)
>
> If fine-grained metered pricing comes to the rest of the world,
> it'll be because people roll over for it (you guys weren't given a
> choice).
No, it won't be because people roll over for it, it'll be
because carriers and service providers just get on with
it and do it.
See my first post to this thread to see the progression which
outlines why the introduction of metering by _one_ serious player
in any given economy virtually forces every other player to
switch to metering as well.
Do you think Australian ISPs haven't tried to offer US-style
flat-rate services? Of course they have. And they get destroyed
in the marketplace.
Here's the thing that metering gives you: it stratifies the
marketplace. It gives you two classes of customer.
One class is customers who know they can live painlessly within
the boundaries of whatever quotas you're offering. They don't
complain, they just pay their flat monthly bill every month
and get on with their lives.
The other class is customers who do so much P2P that the
imposition of quotas is a painful and unwelcome experience.
They whinge and bitch loudly about how awful their ISP is,
and migrate en-masse towards whichever ISPs are providing
"unlimited" services. The only people who truly care about
"unlimited" are the ones who know they can't live within any
limits.
That means "unlimited" ISPs almost exclusively attract the
most voracious, least profitable, noisiest, most difficult
to support, loudest complaining customers. And the metered
ISPs cater for normal folks who aren't like that.
That's the dynamic some of you are missing which makes
quotas inevitable. If one moderately large player adopts
it, the rest of you are going to have to adopt it too.
> If/when that happens, I'll be lobbying my local gov to turn over the
> water infrastructure to me so I can replace it with
> household Evian vending machines;
Where I come from household water is already metered, so I'm
not sure what you're talking about :-)
> and I'd recommend you all get in on the ground floor in the air
> market ASAP.
> Better be quick though, because the revolution will be just around
> the corner...
A sensible provider will set quotas large enough that
98% of their customers will never hit any limits.
The only people they'll piss off will be the 2% of customers
they don't want in the first place.
Hardly fertile ground for a revolution.
- mark
-- Mark Newton Email: (W) Network Engineer Email: (H) Internode Systems Pty Ltd Desk: +61-8-82282999 "Network Man" - Anagram of "Mark Newton" Mobile: +61-416-202-223
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