Re: Net pricing (was Re: Left vs. Right? [cr-95/8/21])


Sender: "Steve Eppley" <•••@••.•••>

Kurt Guntheroth wrote:
[snipped here and there]
>Flat rate pricing is appropriate to some kinds of service, like a
>cable TV feed that is live 24 hours a day.  For services you use
>occasionally, it does not make sense.  Flat rate pricing structure
>does not account the cost to transport the data.  A flat rate
>pricing scheme ignores the reality of transport cost.  It rewards
>waste and punishes inefficiency, and in the long run leads to higher

Accounting for bytes transmitted also will raise costs.  I heard that
half the long distance phone companies' costs are attributable to the
need to account for usage in their billing.  (Sorry, I've forgotten
the source for this factoid.)

>I will be in the crowd pressuring my phone company to keep flat
>rate service because I make long modem calls.  But I know I'm
>milking the system.  I don't see flat rate as a right or as a
>fundamental requirement for freedom in cyberspace.

I was talking about flat rate as a requirement for our democratic
freedoms, not our freedom in cyberspace (whatever that means).  Folk
like Stahlman are trying to lull us into complacency, telling us that
this new medium will let us drive out bad ideas by talking back.  But
we're about to lose an important characteristic of this medium, and I
expect there will be a lot less talking back and listening to each
other when we have to pay by the byte.

I don't see that flat rate leading to waste is an issue at all.  What
could be an issue is if it leads to congestion.  Considering the hype
about using the net for video-on-demand, offering a separate flat
rate for relatively small, non-realtime-priority messages will be a
negligible factor in congestion, wouldn't it?  Well worth the
"waste" if it leads to a healthy society.

---Steve     (Steve Eppley    •••@••.•••)


Sender: •••@••.••• (Craig A. Johnson)

Kurt Guntheroth wrote:

>I called for pricing by byte to distinguish a pricing method that
>accounted the cost to carry data, rather than the value of the
>information.  Some providers would like to charge you one rate to send
>movies, and another (higher per byte) rate to send email.
>Flat rate pricing is appropriate to some kinds of service, like a cable
>TV feed that is live 24 hours a day.  For services you use occasionally,
>it does not make sense.  Flat rate pricing structure does not account
>the cost to transport the data.  A flat rate pricing scheme ignores the
>reality of transport cost.  It rewards waste and punishes inefficiency,
>and in the long run leads to higher prices.

There is a world of options between "flat rate pricing" and "pricing by
byte."  As "deregulation" proceeds, once the new legislation goes into
effect, we will experience an effort on the part of many telecom carriers to
price "by the byte" as a hedge against competition in other arenas.

Kurt, can you elaborate for us what you mean by "the reality of transport
cost?"  Transport cost for RBOCs and interexchange carriers is much less
than it is for traditional ISPs, who have to buy their access from the phone

There has been concern among ISPs, for instance, in the case of Pac Bell
entry into Internet service provision, that since Pac Bell controls the
circuits competing ISPs use, it may engage in certain uncompetitive
practices.  The competing ISP really has no choice in where it purchases its
modem and ISDN services from, and may end up subsidizing Pac Bell's Net

Now, if Pac Bell is pricing its ISDN services by the byte, who do you think
can offer a cheaper package to consumers?  Certainly not the ISP who has to
lease the ISDN services from Pac Bell.  As it turns out this is not
occuring; Pac Bell's prices are extremely high, but this does not vitiate
the point.

Take a case drawn from an event that actually occurred.  An ISP lost a bid
to AT&T for Net services to an Army base because the base has an AT&T T1 and
informed the base administrators that it would shave 2 channels off the T1
for data, with no additional telco costs.  However, AT&T would *not* allow
the base to shave a fraction off the T1 to re-route it to the ISP.

Is this an anti-competitive action?  Probably not legally, but the ISP has
no where to go except the state PUC, since the FCC does not regulate
value-added or information service provision.

So, one reason for not pricing by the byte is that it would put traditional
ISPs at greater risk of being disadvantaged as AT&T/BBN, Pac Bell, and
others enter Net service provision.

It seems counterproductive and foolish to advocate pricing by the byte in
this type of world, when the big boys control the conduits through which the
bytes pass?

Second, the FCC a few months ago changed its policy on ISDN subscriber line
charges (SLCs) and allowed Nynex to drop its SLC for providing ISDN access
to consumers.  Nynex obviously wants the business, and knows it can charge
less for ISDN in the short run since it owns the pipes.

Nynex is apparently offering local circuit-switched residential ISDN dial-up
modem calls at the same rate as POTS.  Why would we want to discourage that
kind of behavior?

Does it disadvantage ISPs?  Maybe, but that is unclear, and needs to be
investigated.  Why encourage Nynex to price by the byte to consumers *or* to

Thus, to install a volume pricing regime would not only disadvantage ISPs
but it would slam shut the door to changing the policies of carriers who
still use the SLC, as opposed to flat rate ISDN service, thus stifling ISDN
provision for consumers.

There is also a sticky problem regarding the Senate and House bills'
respective treatment of information service providers but I will leave that
for another post.

In short Kurt, your argument seems vague, lacking in facts, and advocates a
pricing scheme that will generally end up throttling consumers.


 Posted by --  Andrew Oram  --  •••@••.••• --  Cambridge, Mass., USA
                 Moderator:  CYBER-RIGHTS (CPSR)

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