I’ll say it: on a retail level, maximizing profit should be how broadband prices are set.
Why is profit a dirty word?
Look at the messaging from the “Stop the Cap” group protesting plans by AT&T to introduce a new usage sensitive component to its pricing for broadband.
Stop the Cap! has been reviewing AT&T’s financial reports looking for justification for imposing usage controls on the company’s customers. Most providers who enact these kinds of pricing schemes claim they are about controlling heavy users, reducing congestion, and covering the costs to provide the service.
But after reviewing some of AT&T’s financial reports, the only explanation apparent for these limits is a quest for additional revenue and profits from subscribers.
Whew. I am glad to hear that. I was worried that AT&T was raising prices in order to quash demand and scare away customers. Instead, they seem to be doing it in order to have more money, which is what businesses are supposed to do. Money that lets AT&T pay salaries to its nearly 300,000 employees, pay $10B in dividends to the pension plans and individual shareholders who invested in the company and pay billions in taxes to the government. Oh, and let’s not forget that AT&T is using $20B of its cash to invest in more capacity.
The so-called investigation by Stop the Cap! appears to be a witch hunt against corporations doing what they are supposed to be doing: making money. Of course, as consumers we all prefer to pay less. Shop around. If you think the big carriers are making too much profit, buy their shares.
Wholesale is a completely different matter. But as far as retail is concerned, what is wrong with profit?
there is a difference between companies trying to maximize their profits in a competitive market and companies using monopoly/duopoly power to gouge their customers and using lobbying/legislation for anti-competitive practices in order to squash all sources of competition to gain the ability to gouge even more and to push their own services as the only possible option. The former benefits society and the company still makes profits. The latter results in excessive profits for the company while leaving society in a worse off position. If you can’t even distinguish between the two (I am sure you can. It just doesn’t pay to distinguish in your line of work), perhaps you need to not speak on the subject.
What’s so bad about profit? I’d say nothing (in fact, I have said so right here in the past). But the passage you quote makes a slightly different argument than “profit is bad.” I think they’re actually saying that AT&T is claiming a motive other than profit to justify actions that are clearly all about profit.
The companies themselves reinforce the idea that profit is bad by refusing to acknowledge that’s their goal. For example, Bell’s claim that their interest in wholesale UBB is based on “fairness” is laughable. In fact, I’m laughing about it again right now. 😉
Thanks for participating in the dialog – and I’ll give you a pass on the unnecessary personal attack.
There is a competitive marketplace on the retail level and we have legal regulatory processes to ensure “just and reasonable” rates for wholesale services that are determined to be essential for competitors. You might want to ask the alternate ISPs why they have not been more aggressive in their marketing, pricing and network development. Very, very few Canadians have no choice.
Nothing. Profit is the only reason for a business to exist in our society. However, there exists an expectation that consumers will not be gouged. And long-term, stable profits – as opposed to the 20th century concept of ‘maximizing shareholder value’ that even Jack Welch has now disavowed – require that there be a relationship of trust between the company, its employees, vendors, and customers.
Right now, customers do not have any faith or trust in these firms. They have posted multi-billion dollar profits while continuing to build out their infrastructure – all while delivering the product under terms that the customers were comfortable with. Now the firms are attempting to change to the arrangements for product delivery in a way that appears to be entirely in the favour of the corporation. They have provided no evidence that the customer stands to gain in any material way whatsoever.
The ISP’s are making a unilateral move to further enrich themselves. Nothing at all wrong with profits, but at what cost.
Geoff, great comment.