[fjorder]

Re: Pricing Fairness

The article claims that if the Cable industry offered pricing based on what is fair, it would offer very cheap plans for little old ladies who barely use their connections. This definition of "fair" assumes that what you pay is proportional to how much you use it.

The real world almost never works this way.

Does a new car cost less if you drive it less? Perhaps a little in terms of maintenance and gas, but the initial cost is still the same. Does a banana cost less if you only eat half of it? Does a comb cost less if you're bald?

This leads us to the other definition of "fairness", which is also not often closely associated with real-world prices. i.e. What you pay is proportional to the cost of producing it. If Cable plans were priced this way, a Granny plan would be just a few dollars cheaper than the super-high-use plan. Why? Bandwidth is cheap compared to last-mile installation and maintenance costs. The cost of getting the first bit to grandma is astronomically more expensive than getting the last gigabyte to a heavy bandwidth user.

So how does the real world work? In the overwhelming majority of cases, companies charge whatever people are willing to pay. This price frequently has little or no correlation to actual cost. This is why airlines typically lose money while cable providers do pretty well for themselves. The NCTA's claims that "fairness" is the motivation behind usage-based billing is complete BS. People who use more bandwidth are willing to pay more. That's the reason for usage based billing. Fairness has nothing to do with it.