Virulent Word of Mouse

July 6, 2012

Tiered Broadband Pricing

Filed under: Broadband,Internet economics and communications policy — Shane Greenstein @ 5:21 pm
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Kellogg Insight’s Editor, Tim De Chant, and I sat down to discuss tiered pricing for broadband. It was a pretty interesting conversation, and Tim distilled it into a blog post. If you are curious to see the original post and other posts by Tim, see his blog, Expertly Wrapped. With Tim’s permission, here is a reposting:

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Consumers and startups to be affected by metered broadband, By Tim De Chant

As more people are looking forward to a future overflowing with data—Facebook, Twitter, Netflix, YouTube, a seemingly limitless number of websites, and more—broadband providers are looking to limit the amount of data they provide. And with those limits will come new—and most likely higher—prices.

Data caps aren’t new—they have been widely implemented by wireless providers—but they haven’t been widely implemented among traditional broadband providers. Now, that seems to be changing. Many providers complain that their network is overloaded, and that the costs of upgrading it to handle the added traffic are prohibitive. To maintain a quality service for their customers, providers say they have to raise prices.

Unfortunately, it’s not that clear cut, said Shane Greenstein, a professor of management and strategy and expert on internet economics. There are a number of issues clouding the matter, one of which is time of day. Overuse “usually does not matter most of the day. It generally only matters between 7 PM and 10 PM, when use is highest,” he said. “The usual justification for usage based pricing (or caps, for that matter) appear quite weak outside the 7 to 10 PM window.” (more…)

December 13, 2010

Building Broadband ahead of Digital Demand

Many governments today, especially outside the US, are considering making large subsidies for broadband. Some governments, such as South Korea’s, have already done so, making next-generation broadband widely available.

In the US, debates about subsidizing broadband touch two sets of overlapping issues. One set considers the benefits and costs of an expensive action: building wire-line broadband in low-density areas. A second set considers stretching the frontier for broadband far beyond its present capabilities to enable next-generation Internet applications (typically video).

In the US today, those favoring building ahead of demand are the most dissatisfied, as are those who want to subsidize rural broadband. This column considers the economic origins behind that dissatisfaction.

(more…)

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