Award Winning Blog

Tuesday, March 4, 2008

Usage-Based Pricing and a Potential Unanticipated Consequence

Some Internet Service Providers have begun to experiment with usage-based pricing in lieu of a one-size fits all pricing model. This makes sense and few, if any, network neutrality advocates would take issue. Price discrimination based on usage has plenty of efficiency and fairness justifications. As a moderate user I do not particularly want to subsidize the gluttonous throughput consumption of gamers, P2P file sharers and full motion video consumers.

But I can anticipate a problem if Web browsers begin to pay closer attention to the meter. Much of the content Web browsers access comes with a heretofore minor burden—the obligation to download more throughput than the desired content. In a throughput capped pricing environment, consumers will have to estimate the impact of unsolicited and possibly unblockable advertising downloads that accompany desired content. There are plenty of scenarios where a quite small uploaded request for content triggers a substantial cascade of both desired content and possibly substantial bandwidth and throughput consuming advertising content, e.g., the 30 section full motion video advertising that precedes the streaming of desired content.

Advertiser largely support much of the desired content web browsers can access. This bargain made absolute sense when all we had to give was possibly our attention. In the future we may to part with a portion of our monthly throughput quota, a possibly harder deal to accept, unless advertisers agree to subsidize both the content and the conduit that delivers it.