Mark Goldberg


www.mhgoldberg.com





Fox Group Dispatch

Restricting trade

Columbia law professor Tim Wu doesn’t like usage based pricing for internet services. In his article in yesterday’s Globe and Mail, he provides a clever soundbite: “A nation that spends its time worrying about bandwidth caps is not a nation that leads.”

Different people do use the Internet in different amounts. And there are, in fact, perfectly reasonable ways to deal with variable demand. Operators can offer faster connections for those who want more and offer discount plans for light users. An ongoing bandwidth limit is much preferable to a monthly cap.

Implicit is a view that usage based billing should be banned. Professor Wu is credited with coining the term net neutrality and he has recently been named as a senior advisor to the US Federal Trade Commission. His perspectives on usage-based billing seem to be at odds with the US Federal Communications Commission. In its landmark Order on Net Neutrality issued late last year [pdf, 1.0MB] the FCC wrote:

prohibiting tiered or usage-based pricing and requiring all subscribers to pay the same amount for broadband service, regardless of the performance or usage of the service, would force lighter end users of the network to subsidize heavier end users. It would also foreclose practices that may appropriately align incentives to encourage efficient use of networks.

Professor Wu’s solution restricts the types of offers that could be made to target light volume users or perhaps lower income broadband users. He says that budget offerings should only be low bandwidth, rather than restricting volume of use. I suppose dial-up service would be his idea of the ideal low-bandwidth budget offering.

His proposal for a budget priced product offering is one suggestion, but it isn’t the only one. And we should heed the warnings of the FCC before imposing any constraints on the flexibility of operators to develop commercial offers.

It is difficult to understand how consumers can benefit from restrictions in the types of offers available to them.

How can it possibly be in the interest of end-users to have only one price structure in the marketplace? Why would we say to someone seeking a low price internet solution that they should not even be able to consider trying out a high bandwidth application? Not every high bandwidth customer has a need for their applications the same way; shouldn’t we let the internet service providers develop their own market plans and let users make informed purchase decisions?

Restricting light volume or low income internet users to dial-up speeds doesn’t sound very reasonable to me. I don’t think we want the government restricting internet pricing models.

7 comments to Restricting trade

  • Jason White

    “How can it possibly be in the interest of end-users to have only one price structure in the marketplace?”

    Hear, hear! This is exactly the problem with the latest UBB ruling. It is clear that the CRTC is intent on preventing ‘subsidization’ of the heavy users by the light users at the retail level, when this is beyond their mandate.

  • sid32

    “How can it possibly be in the interest of end-users to have only one price structure in the marketplace?”

    There should be lots of different plans and ISPs for canadians to choose from. The problem with the last UBB ruling is that it forced indie ISP to have the same low bandwidth plans as Bell.

    The solution is for the CRTC to find out what a cost of a gig is to deliver and to allow ISP to buy at wholesale costs and LET THEM MAKE THEIR OWN PLANS!!!

  • […] This post was mentioned on Twitter by Mark Goldberg, Mark Goldberg. Mark Goldberg said: Restricting trade: Columbia law professor Tim Wu doesn’t like usage based pricing for internet services. In his … http://bit.ly/hp84g6 […]

  • Alasdair

    This is either the driest wit you’ve shown on your blog to date, or you don’t actually see the irony of what you’re saying.

    The UBB-on-wholesale ruling, which you appear to support, falls squarely within the same logic of the argument you’re making here.

    The worst part is this: “I suppose dial-up service would be his idea of the ideal low-bandwidth budget offering.”

    This is the very definition of hyperbole. He never said that and I think your readers would be better served by a rebuttal of the points he actually did make.

  • He did say precisely what I attributed to him (and I provided the quote). “An ongoing bandwidth limit is much preferable to a monthly cap.”

    How did you interpret the quote: “Operators can offer faster connections for those who want more and offer discount plans for light users. An ongoing bandwidth limit is much preferable to a monthly cap.”

    The phrase “ongoing bandwidth limit” means low speed for low price. Wu says vary bandwidth, not consumption.

  • Alasdair

    Yes but how do you know what he means by “an ongoing bandwidth limit”? Where did you get “dial-up speeds” from? What if he means 5Mbps as the budget speed and 50Mbps as the top speed?

    Maybe we should just agree to disagree on that point. I’d much rather hear why your reasoning doesn’t apply to wholesale UBB.

  • CraigB

    How can it possibly be in the interest of end-users to have only one price structure in the marketplace?

    Because monopolistic price discrimination is terrible and shows that you have a broken market?

    We aren’t talking about coke/pepsi monopolistic competition here. Internet service is a commodity, one where you provide a certain speed of access to the network for a certain price per month. Commodities, in a healthy market, are going to get bid down to a pretty similar price. (Which is usually to the sort of razor-thin margin that you see in, say, computer assemblers.)

    But, of course, we aren’t talking about healthy markets. We’re talking about regional natural duopolies, where people who live in Quebec pay more for an identical service to people who live in Ontario, and where monopolists react to potential competition by reducing the service they provide. They aren’t making things better, beyond rolling out DOCSIS 3 and charging premium prices for what amounts to a software upgrade. They’re just segmenting us in order to extract as much cash as they can.