4 ms·

Sounds like the price of this resource is just finally getting in line with its actual cost. Bandwidth has never been free, and just hoping and praying that you

by pkulak 16y ago

Sounds like the price of this resource is just finally getting in line with its actual cost. Bandwidth has never been free, and just hoping and praying that your customers don't use too much is stupid. When there was one real smart phone, and it could only use edge, with no custom apps and not many other services set up to use it, you could get away with "unlimited". Not now. I mean, this is capitalism, right? How is one company going to charge too much more than the cost of the bandwidth without another company undercutting them? I don't pay monthly for unlimited breakfast cereal, or gasoline, and yet somehow capitalism has managed to keep those prices in check. I have no idea why this guy thinks that bandwidth is so different from every other good or service.

w1ntermute 16y ago
You can't compare breakfast cereal or gasoline to a cellular connection. The cellular industry, due to its high barriers to entry (stemming from the enormous initial infrastructure costs), tends towards a natural monopoly. In this case, it hasn't quite reached a monopoly - instead, we have 4 main companies (AT&T, Verizon, Sprint, and T-Mobile), also known as an oligopoly. I know there are smaller carriers, but since they don't provide coverage everywhere, their product is not the same as the one provided by the 4 major carriers. The problem is that when there is a disparity between the value of a product to the buyer and the cost of production to a seller, if there is natural competition (cereal, gasoline, etc. are relatively close to natural competition), the actual price will tend towards the cost for the sellers, since companies will keep undercutting each other until the price drops to the lowest they can accept without losing money on each sale. OTOH, if there is a natural monopoly (or something close to it), the actual price will tend towards the value for the buyers, since the lack of competition allows the price to rise as high as the buyer will tolerate. In the case of bandwidth, the marginal cost for the telecom companies for each byte transferred is miniscule compared to the value it provides to us. If we had an industry with natural competition (like they do in other countries where the government owns the pipes and the telecom companies simply lease it out), then we would only be paying that miniscule cost (which essentially rounds off to a flat monthly fee for unlimited access). But since we have an industry that tends towards a natural monopoly, the companies will milk us for every penny we're willing to give them.
- pkulak 16y ago
  An oligopoly is fine as long as there's no collusion. If there is in the cell business, then yes, we have a huge problem. But if there isn't, then whatever ends up happening will be fair to all parties. I don't really think the marginal costs for cell bandwidth will approach zero for a long time now, but, if it does, then we'll see unlimited plans pop up again just like they have for wired connections.
  - w1ntermute 16y ago
    You completely missed the point of my post. The issue is that when you have a monopoly or near-monopoly (oligopoly), the prices are primarily determined not by the cost for the sellers, but by the value for the buyers. Therefore, unless the amount of value that each byte of cellular data transfer provides decreases significantly for a significant portion of the telecom companies' customers, the prices won't decrease, regardless of what changes occur in the costs to the companies. That is, of course, unless the government steps in as it has in other countries and artificially fosters competition, so that the cost to the companies plays a more significant role in determining the prices.
- gxti 16y ago
  There are certainly huge roadblocks to a market as liquid as gasoline (ahem) but the first step is getting the prices out in the open. "Unlimited" doesn't have a price tag because there's no way of knowing exactly when they'll cut you off, and they most assuredly will, but if they charge by the gigabyte then they don't have any grounds on which to terminate a contract when the customer is already obligated to pay for what they use. I'm embracing this change and hope to see more of it in the future.

by pkulak 16y ago

w1ntermute 16y ago

You can't compare breakfast cereal or gasoline to a cellular connection. The cellular industry, due to its high barriers to entry (stemming from the enormous initial infrastructure costs), tends towards a natural monopoly. In this case, it hasn't quite reached a monopoly - instead, we have 4 main companies (AT&T, Verizon, Sprint, and T-Mobile), also known as an oligopoly. I know there are smaller carriers, but since they don't provide coverage everywhere, their product is not the same as the one provided by the 4 major carriers. The problem is that when there is a disparity between the value of a product to the buyer and the cost of production to a seller, if there is natural competition (cereal, gasoline, etc. are relatively close to natural competition), the actual price will tend towards the cost for the sellers, since companies will keep undercutting each other until the price drops to the lowest they can accept without losing money on each sale. OTOH, if there is a natural monopoly (or something close to it), the actual price will tend towards the value for the buyers, since the lack of competition allows the price to rise as high as the buyer will tolerate. In the case of bandwidth, the marginal cost for the telecom companies for each byte transferred is miniscule compared to the value it provides to us. If we had an industry with natural competition (like they do in other countries where the government owns the pipes and the telecom companies simply lease it out), then we would only be paying that miniscule cost (which essentially rounds off to a flat monthly fee for unlimited access). But since we have an industry that tends towards a natural monopoly, the companies will milk us for every penny we're willing to give them.

pkulak 16y ago
An oligopoly is fine as long as there's no collusion. If there is in the cell business, then yes, we have a huge problem. But if there isn't, then whatever ends up happening will be fair to all parties. I don't really think the marginal costs for cell bandwidth will approach zero for a long time now, but, if it does, then we'll see unlimited plans pop up again just like they have for wired connections.
- w1ntermute 16y ago
  You completely missed the point of my post. The issue is that when you have a monopoly or near-monopoly (oligopoly), the prices are primarily determined not by the cost for the sellers, but by the value for the buyers. Therefore, unless the amount of value that each byte of cellular data transfer provides decreases significantly for a significant portion of the telecom companies' customers, the prices won't decrease, regardless of what changes occur in the costs to the companies. That is, of course, unless the government steps in as it has in other countries and artificially fosters competition, so that the cost to the companies plays a more significant role in determining the prices.
gxti 16y ago
There are certainly huge roadblocks to a market as liquid as gasoline (ahem) but the first step is getting the prices out in the open. "Unlimited" doesn't have a price tag because there's no way of knowing exactly when they'll cut you off, and they most assuredly will, but if they charge by the gigabyte then they don't have any grounds on which to terminate a contract when the customer is already obligated to pay for what they use. I'm embracing this change and hope to see more of it in the future.