Right, that's crucial to understand. In 1985 you could make a direct dial from England to the US but it was eye wateringly expensive. £2 per minute. An hour's call to your mum? That's over £100.
But the cost to Bell and British Telecom was not £2 per minute, or £1 per minute, or even 1p per minute, it was nothing at all. Their costs were not for the call, but for the infrastructure over which the call was delivered, a transatlantic cable. If there was one call for ten minutes, once a week essentially at random, that cable must still exist, but if there are 10 thousand call minutes per week, a thousand times more, it's the same cable.
So the big telcos all just picked a number and understood it as basically free income. If everybody agrees this call costs £2 then it costs £2 right, and those 10 thousand call minutes generate a Million pound annual income.
It's maybe easier for Americans to understand if you tell them that outside the US the local telephone calls cost money back then. Why were your calls free? Because why not, the decision to charge for the calls is arbitrary, the calls don't actually cost anything, but you will need to charge somehow to recoup the maintenance costs. In the US the long distance calls were more expensive to make up for this for a time, today it's all absorbed in a monthly access fee on most plans.
This analysis doesn't concern the limited bandwidth available for call delivery on plain old telephone networks (POTS). They did squeeze extra money out of the system with their networks as a monopoly, but the cost was zero only if you don't consider the cost of operating and maintaining the network, or the opportunity cost of having much less bandwidth than currently available. For the former, they still had to fix problems. For the latter if they had made calls pennies everyone would have had "all circuits are busy" all the time. A single line wasn't capable of carrying 10,000 calls back then. Pricing to limit usage to available bandwidth was as important as recouping infrastructure costs and ongoing maintenance. There's also a lemonade stand pricing effect. If you charge too little you don't get enough to cover costs. But if you charge too much, not enough people will do business and you won't cover costs. Also, ma bell was broken up in 1982, but regional monopolies lasted a lot longer (telecommunications act of 1996).
To lay the cables required a huge amount of capital, to make that feasible its required financial engineering. That translates to high operating expenses.
SMS was originally piggybacking off unused bytes in packets already being sent to the tower, which was being paid for by existing phone bills. The only significant expenses involved transiting between networks. That was a separate surcharge in the early days.
Competition is the thing. Prices will drop as more AI code assistants get more adoption.
Prices will probably also drop if anyone ever works out how to feasibly compete with NVIDIA. Not an expert here, but I expect they're worried about competition regulators, who will be watching them very closely.
> Prices will drop as more AI code assistants get more adoption.
No, they won't. Because "AI assistants" are mostly wrapped around a very limited number of third-party providers.
And those providers are hemorrhaging money like crazy, and will raise the prices, limit available resources and cut off external access — all at the same time. Some of it is already happening.
> Prices will drop as more AI code assistants get more adoption.
What's the reasoning behind this? They are already doing the efficient "economies of scale" thing and they are already at full capacity (hence rate limiting).
The only way forward for this AI providers is to raise prices, not lower them.
tialaramex|7 months ago
But the cost to Bell and British Telecom was not £2 per minute, or £1 per minute, or even 1p per minute, it was nothing at all. Their costs were not for the call, but for the infrastructure over which the call was delivered, a transatlantic cable. If there was one call for ten minutes, once a week essentially at random, that cable must still exist, but if there are 10 thousand call minutes per week, a thousand times more, it's the same cable.
So the big telcos all just picked a number and understood it as basically free income. If everybody agrees this call costs £2 then it costs £2 right, and those 10 thousand call minutes generate a Million pound annual income.
It's maybe easier for Americans to understand if you tell them that outside the US the local telephone calls cost money back then. Why were your calls free? Because why not, the decision to charge for the calls is arbitrary, the calls don't actually cost anything, but you will need to charge somehow to recoup the maintenance costs. In the US the long distance calls were more expensive to make up for this for a time, today it's all absorbed in a monthly access fee on most plans.
daveguy|7 months ago
tqwhite|7 months ago
In the US, ATT was just barely deregulated by then so the prices were not just 'out of thin air'.
KaiserPro|7 months ago
AlotOfReading|7 months ago
hkt|7 months ago
Prices will probably also drop if anyone ever works out how to feasibly compete with NVIDIA. Not an expert here, but I expect they're worried about competition regulators, who will be watching them very closely.
troupo|7 months ago
No, they won't. Because "AI assistants" are mostly wrapped around a very limited number of third-party providers.
And those providers are hemorrhaging money like crazy, and will raise the prices, limit available resources and cut off external access — all at the same time. Some of it is already happening.
lelanthran|7 months ago
What's the reasoning behind this? They are already doing the efficient "economies of scale" thing and they are already at full capacity (hence rate limiting).
The only way forward for this AI providers is to raise prices, not lower them.