Monday, May 21, 2012

Use More, Pay More

by Deborah Taylor Tate

Several years ago, I wrote about the need for people to pay for "what they eat" in terms of Internet bytes just like we do when we eat out at a restaurant. Eat more, pay more.

None of us wants to pay the same that someone in a much larger home pays for using more electricity or gas or water. And we can think of hundreds of examples of "use more, pay more."

That's why I don't have a problem with Comcast's announcement that it plans to conduct trials on new usage-sensitive plans for its broadband Internet services, while abandoning the current 250 GB monthly usage cap. In fact, I applaud the move.

 Indeed, I was disappointed a few years ago when Time Warner Cable abandoned plans to implement a proposed "tiered" pricing experiment in the face of opposition from a few "consumer advocacy groups."  Those advocates weren't concerned about light-using grandmothers who check email once or twice a day, or who occasionally share a few baby photographs.  These grandmas certainly should not be paying the same Internet fees as heavy-using bandwidth-hogs.

The consumer groups were concerned about a political hot potato called "net neutrality" which gives them an opportunity to slam Internet providers for almost any business practice or term of service they don't like.

Interestingly, despite the negative connotation associated with the word “discrimination,” price discrimination is a very efficient way of allocating scarce resources and satisfying consumer demand. 

Comcast - like every other provider in the ecosystem - is right to be trying to utilize its facilities in a more economically efficiently manner to the overall benefit of all of its customers. 

The concept of the “tiered” Internet is not something to be feared. On the contrary, it could be a means of enhancing services to broadband customers and providing revenue for Internet providers to be invested in accommodating increasing demand for bandwidth-intensive and delay-sensitive applications.

And usage-based pricing could be a means of increasing fairness by ensuring that content providers and consumers who are responsible for the most Internet congestion pay their fair share for the higher costs they cause. Choking off this potential revenue stream through net neutrality mandates or other regulatory restrictions will only ensure that instead of an Internet with regular lanes and “fast lanes,” all consumers will be stuck in the slow lane.