My old friend Om Malik sent me a note this morning highlighting a white paper on metered bandwidth pricing plans written by one of his old friends, researcher and analyst Muayyad Al-Chalabi. Om posted the paper on his site (you can sign up to have a PDF version of the email sent to you but you can also print the paper from Scribd onto a PDF) with the warning that metered usage and bandwidth caps pose a "clear and present danger to the way we use the Internet in this country."
The paper itself is a scholarly analysis (complete with formulae and schematics) of how the new bandwidth caps and metered usage schemes being implemented by broadband carriers, most particularly Comcast and Time Warner Cable, are bad for Internet innovation and efficiency because the caps and pricing plans target one group of users: power users, or what broadband providers call "bandwidth hogs." Power users are useful to the functioning of the Internet because they serve as content and application hubs for all other Internet users, the paper argues.
Comcast, Time Warner and other broadband providers are measuring usage simply on the basis of bytes used per month, a pricing strategy that will either inhibit innovation or force power users to seek out carriers that don't have usage-based policies. Instead of fostering these kinds of distortions, broadband providers should instead capture for themselves the "hub" function that power users serve today by, for example, caching "hot" content and applications in their own data centers, headends or central offices.
Consumers benefit from this alternative method of handling bandwidth congestion and carriers can gain a competitive advantage by offering high-quality, differentiated services and basing prices on this "value" rather than bytes used. "Negotiating better partnerships, increasing speeds with options and easing access to content should be the foundation of pricing, not a usage-based approach as is currently embraced."
Kudos to Om and Muayyad for rising above the quotidian kind of blogging that has surrounded the P2P/bandwidth cap/metered usage issues. Too often the debate is framed by empty rhetoric, "horror stories," uninformed opinion and news scoops rather than dispassionate analysis that seeks to identify the best solution to the problem.
Which is not to say that I think that Om and Muayyad have offered a useful alternative to the caps and metered pricing plans that we all will soon confront. Part of the problem is that the solution offered, namely a pricing strategy that takes into account "applications, supply/value chain, consumer behaviors and types of assets to deploy" is far too complex for your average broadband provider -- or government regulator. It's far easier to base pricing on something that is already known and can be easily measured.
Another problem with this solution, as Om and Muayyad acknowledge: It requires carriers to spend money, potentially a lot of money, on servers, caching equipment, etc., which is simply not something any broadband provider can justify to Wall Street, particularly these days.
Moreover, if I understand the theory, broadband providers are being asked to accept a more active role in delivering third-party video, voice and other applications to co-opt the hub functionality of power users. Believe me, most broadband providers would love to do this. One tiny problem, however, is that copyright owners (in the case of, say, Hollywood films) or application providers (in the case of, say, Skype) would want their share of any revenues generated by the broadband providers that flow from the "increased value" offering.
This is the "negotiating better partnerships" aspect of the solution, I suppose. But that's the heart of the business for every cable operator and phone company. It's the sum total of what they do. And it ain't easy.
So, Om and Muayyad are onto something good, which is to identify the network distortions generated by bandwidth caps and metered pricing. The solution offered, however, isn't all that practical given that it costs money and entails a whole lot of difficult industry-changing negotiations.
Still, I'd much rather read this kind of challenging analysis that advances the ball any day of the week. Thanks Om.
Posted by Cynthia Brumfield at 12:35 PM | Print | Comments (0)
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