Devoted to hardware, software, IT issues, and information technology management

By YC from the Technocrat Soapbox,
Guest Blogger

Broadband Internet access is so accessible and affordable (well, affordability is debatable) these days that many take it for granted. Like any public utility (e.g. power, clean water, and natural gas), one would not understand the anguish of living without those modern conveniences until they become scarce or even unavailable. Just ask any teenager or businessperson these days to go one whole day without TV, cellular phone, regular phone, and internet access, and you would understand the the type of agony that I am talking about.

Before I continue, I feel it is important to clarify the term, Bandwidth. Bandwidth refers to the number of bytes (or bits) that one gets per second, e.g. my DSL connection gives me a bandwidth of 384 kilobits per second. Meaning, at any given second, I can only get 384 kilobits, no more (but it is usually less). And by the way, 1 byte is made up of 8 bits.

 

I recently stumbled onto Mr. Jack Krupansky's very thought-provoking article titled, Subsidizing and Charging for Broadband Internet Access. In the article, Mr. Krupansky mentioned that, like everybody else, he has no love for those "BIG PHONE COMPANIES" but argues that Broadband deployment must stand on "sound economic and business fundamentals." I am in total agreement with Mr. Krupansky up to this point. Who in the right mind would want to go into business if not to make a decent profit? But our views diverge as he proposed that phone companies charge bandwidth use on a volume basis, i.e. the more Megabytes (or Gigabytes) you use, the more you pay.


Just as the internet was becoming commercially popular in the late 1990's, phone companies and internet providers were scratching their collective melons to come up with a profitable and fair pricing structure. It made sense initially to charge bandwidth on a volume basis, but that strategy discouraged the cost-conscious (but internet-curious) majority from even adopting regular internet use into their daily lives, much less broadband access (which cost an arm and a leg circa 1995). Everyone was counting pennies against the bits and worrying that he/she might either be paying too much for using only a fraction of the bandwidth volume or paying a premium for going over the stipulated limit.

That all changed when Internet Providers started to provide an "All-You-Can-Eat-Internet-Usage-Buffet" for one low, fixed monthly subscription. Subscription numbers increased dramatically as a result. I apologize for not having exact figures and statistics to bolster the narrated historical events. But I am sure no one would doubt the repercussion that followed, i.e. more and more people are using broadband access today as a result of the attractive, low monthly subscription (with no volume limitation) from Internet Providers like Comcast and SBC.

It makes no sense (economically and practically speaking) to inspect every single packet that passes through the phone companies and assigning different prices to it based on its content, e.g. video data costs $X per gigabyte, voice data costs $Y per gigabyte, text data costs $Z per gigabyte.

Why should my Britney Spears video (i.e. large chunks of video data needing a high, Constant Bit-Rate bandwidth translates into higher fees) costs more than someone's multi-billion dollar stock tip (small text data requiring lower bandwidth, and hence, a smaller fee)? In real life, the video has less value than that 'Martha Stewart-esque' e-mail.

Today, Apple charge $1.99 and $0.99 for each video or music file respectively downloaded from the iTunes subscription service. How many ways can we share the $1.99? Half (and I am speculating here) of it goes to the studio that owns the rights to the creative content. Of the remaining half, half goes to Apple as commission, and the remainder as cost-of-doing-business (e.g. maintaining the servers, storage, and network infrastructures). Now the phone companies want a piece of that $1.99 because the data passed through their network? The users have already paid the internet providers/phone companies monthly subscriptions for the guarantee of a certain bandwidth, now they want to charge us more for the "value-added services" (e.g. VoIP Calls, iTunes music downloads, Googling for resources to write this article) that broadband access can provide? That is crazy talk!

Broadband Access is just another utility, the trend today is to give people more freedom and flexibility to use that utility for less. It is fair for phone companies to charge higher fees for higher bandwidth, but not on a volume basis. In closing, I would like to say this: if phone companies go back to the old business paradigm, i.e. charging more for higher bandwidth volume, they will suffer even more as most people are aversive to fluctuating prices.

Still skeptical? Look at what Cellular Phone Companies are doing for their customers these days: providing virtually unlimited "Talk Minutes" or "Text Messages" for one low monthly subscription. Whether you used only 1 or 1,000 minutes of talk time, you still pay T-Mobile $29.99 every month. The smart thing to do would be to use as many minutes as possible without going over the limit.