Re: [p2pi] For those who think "User Fairness/Cost Fairness" is unacceptable...

["Stanislav Shalunov" <shalunov at bittorrent.com>]

Henning,

The topic, is, indeed, not related to engineering, and your analysis
is quite right.

One small point while we're on the subject:

      ISPs charge flat rates not by coincidence or charity, but
because they expect to make the most money this way.

Uneven consumption within flat plans existed before P2P.  Light and
heavy users existed since mail systems were first built in your
favorite ancient empire.  (I once wrote a script to find and quantify
this in dialup days and found what I didn't expect to find: the modem
pool spent most of its time negotiating the speed, and so disabling
the most high-speed option shortened the negotiation and removed the
congestion before I had to decide what to do with the heavy users.)

Users are prepared to pay a premium for consistent month-to-month
pricing.  ISPs are happy to take this premium.  If usage mix changes,
they can change the pricing plans, but consumers will continue to be
prepared to pay a premium for consistent month-to-month spending, and
many ISPs will likely choose to continue to take this premium,
offering different plans to different types of users.

-- Stas


On Sun, Jun 8, 2008 at 3:34 PM, Henning Schulzrinne <hgs at cs.columbia.edu> wrote:
> This is straying somewhat outside the technical, but, as I've said
> before, this is largely an economics problem.
>
> For simplicity, let's assume for a moment that Internet access was a
> regulated monopoly as opposed to an unregulated monopoly, as it is
> now, or a classical competitive market. A fictitious public utility
> commission or competitive business now has three choices, given the
> mix of users of today (95% "light", 5% "heavy"):
>
> (1) Light users and heavy users pay the same, but light users pay more
> than they would without the heavy users, since the network capacity
> has to be much larger.
>
> (2) Heavy users are kicked off the network. They now have a choice:
> run their own fiber or only get service below what they are interested
> in. They are lost as customers to the provider and the cost of the own
> fiber is prohibitive, so nobody earns any extra money (but the
> provider and 95% of the customers save some money; the division of the
> spoils between the two is a matter of market power or choices made by
> the regulator).
>
> (3) Heavy users are charged more, but significantly less than it would
> cost to lay a separate fiber. Assuming that heavy users value the
> service sufficiently to pay the extra charge, everybody gains: the
> provider gets additional revenue with modest additional infrastructure
> investment, the light user doesn't subsidize the heavy user and the
> heavy user gets extra bandwidth.
>
> There is one core economics assumption here: The heavy user actually
> values bandwidth more than the incremental charge. (This is the
> classical problem in discussions of pirating: Many users would forego
> the movie rather than pay full fare. It could well be that heavy users
> don't value the extra bandwidth they use at what it costs to provide
> it, but that's just a version of "there is no free lunch".)
>
> This is under the assumption that separating or charging heavy users
> is feasible and worthwhile. At an "all you can eat" buffet, finite
> stomach capacity and the prohibition against doggy-bagging make
> counting trips to the salad bar not worth the hassle. With high-speed
> Internet access, the consumption ratio between light and heavy users
> is much larger than for other "flat-rate" services. Measuring isn't
> much of an issue, but the fear of $1000 bill surprises might be.
>
> In an unregulated monopoly, the calculations are different since the
> provider can potentially practice perfect market segmentation and
> capture all the surplus. That's a discussion for a different day.
>
> Henning
>
> On Jun 8, 2008, at 5:29 PM, Robb Topolski wrote:
>>
>> And on that point, I only can say "I'm not sure."  There certainly
>> is an unmet demand, but I'm not sure if it rises to the status of
>> unmet need.  And perhaps these are Economics 101 terms that I do not
>> fully understand.
>>
>> When I was gigging, I could spend every weekend doing birthday and
>> anniversary parties for free. We weren't that good, but we decided
>> to charge a small fee.  When the price of getting four performers
>> tuxedoed across town for an hour became $50-$100, things quickly
>> struck a happy balance.  In that case, it wasn't that there was an
>> unmet need for barbershop quartet singers, it was more true that
>> "free" was a very good price.
>>
>> In your opinion, or perhaps in the Econ. vernacular, is that an
>> "unmet need" or something less?   And is it important IETF business
>> either way?
>>
>> --
>> Robb Topolski (robb at funchords.com)
>> Hillsboro, Oregon USA
>> http://www.funchords.com/
>
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>



-- 
Stanislav Shalunov
http://shlang.com/
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