Utility pricing model for the broadband?

July 9, 2008

This week’s class conversation touched a lot of interesting points like elastic an inelastic pricing, Chris Anderson and Anita Elberse controversy regarding The Long Tail theory and so on.

One of the points that got my extra attention is the utility pricing model for the Internet. There are a lot of debates among ISPs regarding the different pricing models for a broadband.

From the other side, customers are concerned about ISPs putting limits on the “unlimited” broadband services (like relatively recent Verizon case).

In this situation the topic gets more and more intriguing. Nowadays we rely more and more on Internet an even get addicted. Thus, for most of us Internet access becomes an inelastic good. In this situation, the utility pricing model (pay for what you have used) makes more and more sense. It sound pretty fair when people pay more if they use more traffic. From the other side, ISPs most likely won’t drop the prices for the “light” users to pay less (yes, looks like TLT is working here as well, since a relatively small percentage of users generate the significant part of overall bandwidth traffic).

It is really interesting to observe where is it going, especially in a case when it’s hard to predict what happens next. Honestly, I’m a flat-rate pricing fan, since I recognize that we use more and more traffic every month…


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