Originally published on: December 9, 2009
Last updated: December 9, 2009 - 10:07pm
[Commentary] It used to be that no one used their broadband connections much. Broadband providers counted on this minimal usage so they could oversubscribe their networks. They also offered unlimited service to gain another competitive edge over dialup Internet access. And this all worked fine so long as no one was consuming that much bandwidth. But over the last few years the demands on these networks have risen dramatically. This increase stems from the dual factors of power users having more ways to use more bandwidth than ever--like P2P video sharing, Hulu and YouTube, hosted applications, and the use of broadband to enable telecommuting--and more people finding reasons and ways to become power users. This growth in demand is straining traditional broadband business models, forcing operators to invest in increasing capacity without necessarily adding any new revenue to offset this cost. This reality is what's leading operators to explore options like metered bandwidth, so they can recapture their investments and drive additional profits from their heaviest users. This is also what's leading operators to use things like traffic shaping and application blocking.
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It's the business model. Bandwidth should be free, and services (like VoIP telephone, TV programming, Internet access) should be priced to reflect the actual cost of delivering those services. Projects like The Wired Road and Utopia are already doing this, using a different network architecture and a business model based on services rather than bandwidth.
Once the model is changed, discussions about metered bandwidth and network neutrality disappear.
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Hmm. Wired Road... again with the public subsidies?
There are many cases for public subsidies, this might even be one of them, but to say there is a business model that should tried without mentioning the network is being built with public funding seems, well, dishonest.
One might also mention how many homes and business the network presently supplies. The website says service to residences was to begin a year ago. The fiber map appears to show only 3 city blocks are covered.
The website doesn't explain much else either. The FAQs say the customer gets 100Mb/s access free, and the provider charges the customer for services such as telephony. This, it is said, "easily pays for fiber connections to most homes and businesses, even those located in the more rural areas of Carroll and Grayson counties." Perhaps, but it would help to explain how, perhaps with some actual evidence that it works.
Eg, presumably the network provider sells the right to deliver internet access to a service provider who in turn sells it to end users (the site is explicit that the network provider does not retail). Consequently, the wholesale high-speed broadband price must be high enough to allow cost recovery when the customer uses that broadband to entirely bypass the need to pay a separate service provider for telephony and video.
Thus, at least from what is presented, we're right back where we were: how to to price across users with different types of demand where arbitrage is possible.