

Who Should Pay for Netflix? - mcdavis
http://www.attpublicpolicy.com/consumers-2/who-should-pay-for-netflix/

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rahimnathwani
The article is conflating the ISP's _costs_ with the _prices_ paid by
consumers:

"And I think we can all accept the fact that business service costs are
ultimately borne by consumers."

The above statement seems designed to cause confusion. The implication is that
the total price consumers pay is determined wholly by the costs incurred in
delivering the service. This may be almost true in aggregate, but isn't true
at an individual level.

ISPs offer an all-you-can-eat internet service, but aren't happy with the
customer-level margins for the most heavy users (including Netflix users).
They could raise prices for heavy users (e.g. by applying caps in the same way
as mobile providers) but have chosen instead to engage in different tactics to
limit usage or get additional revenue from other sources. Throttling P2P
traffic (I don't know which ISPs in the US do this) and asking CDN providers
to pay for ports are two examples.

This seems to be like they're increasing the maximum speed of the local pipes
('unlimited water up to 100 litres per minutes!') without being willing to
increase the size of the pipes into (and capacity within) their own
distribution network.

Am I missing something, or is it just that the business model of offering
unlimited high speed internet only sustainable at a higher price?

~~~
_Robbie
Both this blog post and the Netflix blog post it is responding to seem
intentionally confusing. The core issue is that the interests of the consumer
and provider are misaligned. In a normal market if the consumer wants more or
better service, the provider will make more money by providing the service.

In this case the consumer wants more service in the form of more data for
streaming video. In a normal market, the additional sales from the extra data
would fund the required infrastructure. In reality, however, since the ISP
sells a data rate, not data, they do not get extra revenue from heavy usage
customers.

Both of these blog posts miss the mark by misinterpreting the probably
rational consequences of this misalignment as unreasonable greed or
unfairness. I assume that both of the authors know the real issue here and
that these posts are meant to manipulate the public regardless of accuracy.

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adenner
Especially for capped connections we already are paying for it. Say we get 250
gb a month. We should be allowed to use that as we see fit. If that means
millions of cat pictures why should that be treated any different then
streaming video. The big problem is that in most areas there is little to no
competition so we are all stuck.

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tedsanders
I find the argument pretty compelling. If Netflix usage requires more internet
pipes to be upgraded, then it seems logical that Netflix users should pay
rather than internet users in general.

However, it all presumes that we can attribute increased demand to Netflix and
Netflix alone. Suppose you have two services, A and B, which each require 10
ZB of ISP bandwidth. The ISP builds 20 ZB of capacity and the world is happy.
Now a third service, C, comes along and requires 10 ZB more of bandwidth,
requiring the ISP to upgrade its 20 ZB pipes to 30 ZB. Does it make sense for
the ISP/society to charge service C for that network upgrade? C's only crime
is arriving last. Otherwise, it is identical to A and B in terms of the load
placed on the network. It seems you me you could just as plausibly blame
sustained demand for B as much as new demand for C.

I'm conflicted.

~~~
tinalumfoil
IMHO, the extra cost should be passed on to the consumer. This way, we don't
get 1 ISP having deals with services A, B and C making people not switch due
no other ISP having those same deals and no new ISPs come up because they
can't get the same deals because nobody wants to switch.

