April 20, 2009

Pricing Network Use [8:27 am]

Cost, value and intangibles: Internet Providers Try to Charge More as Costs Fall (pdf)

The debate over the price of Internet use is far from over. Critics say cable and phone companies are already charging far more than Internet providers in other countries. Some also wonder whether the new price plans are meant to prevent online video sites from cutting into the lucrative revenue from cable TV service.

Cable executives say the issue is not competition but cost. People who watch or download a lot of movies and TV shows use hundreds of times more Internet capacity than those who simply read e-mail and browse the Web. It is only fair, they argue, that heavy users should pay more.

[...] Still, critics say the image of Internet providers as restaurants about to go broke serving an endless line of gluttons simply does not match the financial or technological realities of the industry.

They point out that providers’ profit margins are stable, and that investment in network equipment is generally falling.

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