[ NNSquad ] Re: Poll: Cost of Broadband Discourages Many

[Rahul Tongia <tongia@cmu.edu>]

For wide swaths of people, but not 100%, AT THE MARGIN, $10/month could 
give reasonable broadband (megabit class, always on).  NO, it wouldn't 
give fiber or even much video capability. But it could help with many 
other things.

This is after I saw a figure from someone in the cable industry 
indicating to many homes were broadband ready.  There's some incremental 
one-time costs, and then mainly CRM and bandwidth.

Folks can see my webpage, FCC testimony (under what's new), and then my 
personal observations/rant as to why (in my opinion).  It's an 
elasticity game.  Say the gross margin is $1/month at $10 billing.  Now 
say the billing is $30/month.  Gross margin is $21.  With a elasticity 
of 1, they still have 1/3 the customers at 3x the billing price.  but 7x 
more margins.  [I use the terms gross margin loosely]

There's also the issue of whether one is forced to choose a bundle for 
discounted rates (voice-lines for DSL, as opposed to naked) or video 
with cable.

Rahul

************************************************************************
Rahul Tongia, Ph.D.
Senior Systems Scientist

Program in Computation, Organizations, and Society (COS)
School of Computer Science (ISR) /
Dept. of Engineering & Public Policy

Carnegie Mellon University
Pittsburgh, PA 15213 USA
tel: 412-268-5619
fax: 412-268-2338
email: tongia@cmu.edu
http://www.cs.cmu.edu/~rtongia



Barry Gold wrote:
> Lauren Weinstein wrote:
> > Poll: Cost of Broadband Discourages Many
> >
> > http://www.washingtonpost.com/wp-dyn/content/article/2009/01/21/AR2009012103297.html 
> >
> >   
>
> The Post article suggests that the price point for greater adoption is 
> $10/month.  This is a problem, because NetZero charges $9.95/month for 
> _dial-up_ service.  It seems unlikely that anybody will be able to make 
> money offering broadband at that price -- at least, not until we see 
> another couple of iterations of Moore's Law(*).
>
> So the only way to get a major increase in adoption would be through 
> government subsidies.  This has its own problem.  TANSTAAFL.  It still 
> needs to be paid for.  If people won't pay out of their own pocket, it 
> comes out of tax money.  That means either
>  a) we pay higher taxes,
>  b) we reduce some other government services(+)
>  c) we inflate the currency some more.
>
> All of these impose costs on all of us.  We should not spend this money 
> unless the long term gain to the country exceeds the cost of doing 
> this.  That seems to have been the case with, e.g., the Interstate 
> Highway System and the original development of the Internet (talk about 
> serendipity...).  Would we get the same benefit from making sure that 
> people too poor to afford it -- or for whom it's not a high enough 
> priority to spend money on instead of other things -- get broadband 
> access, as opposed to dial-up?  Keeping in mind that some people _still_ 
> won't use it because
>  . they can't afford a computer
>  . they're afraid of computers
>  . the learning curve is too steep
>
> (*) And even Moore's Law seems to have a bottom price on a given 
> commodity type.  There comes a point where the "thing" doesn't get 
> cheaper, it just acquires more features for the same price.  (Part of 
> that is the cost of non-electronic parts like fans and the case, plus 
> the costs involved in the selling chain.)
>
> (+) I have some nominations,like the War on (some) Drugs, but I have a 
> sneaking suspicion that people in Iowa have a different list...