North American Network Operators Group

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Re: An Attempt at Economically Rational Pricing: Time Warner Trial

  • From: Matthew Palmer
  • Date: Sun Jan 20 15:58:16 2008

On Sun, Jan 20, 2008 at 03:02:15PM -0500, Alex Rubenstein wrote:
> > > As long as the companies convince people that the "cap" is large
> > > enough to be essentially the same as unmetered then most people
> won't
> > > care and will take the savings.    
> I don't agree.
> When we sold boatloads of dialup in the mid to late 90's, people did not
> like caps, no matter how high they were. We sold a product early on for
> $20/month which gave you 240 hours/month -- that was an average of 8
> hours/day. However, most users never used more than 20 to 30 minutes a
> day -- but we often got told they were moving to other providers because
> they were 'unlimited.'
> So, we adapted.
> In any event, I've been watching this thread, and I'd have to say that
> going down the road of metered pricing will only cause other providers
> not to do this, and then market against TW. In fact, I'd bet on it. 
> Am I the only one here who thinks that the major portion of the cost of
> having a customer is *not* the bandwidth they use?

If we define "customer" to be an average user of the provided service, and
bandwidth to be transit pipe cost, then no, bandwidth is not the major cost
of their service.  However, if you're advertising an 'unlimited' service and
want to keep your promises, you can't plan your network around the average
user -- there will be people who will want to hold you to your 'unlimited'
promise.  If you also call 'bandwidth cost' to include all the
infrastructure costs required to provide that unlimited service, then yes,
"bandwidth cost" would be a pretty major part of that customer's cost.

(My point of view is Australia rather than the US, but I don't think 14Mbps
of dedicated transit is $50/month even in the US).

- Matt