[1st-mile-nm] Broadband to go free in 2 yrs in all of India to everyone

[Andrew Cohill]

On Apr 28, 2007, at 12:27 PM, Dewayne Hendricks wrote:

> [Note:  It looks like exciting things are in store for India as far
> as broadband is concerned.  So where is this kind of bold thinking
> here in the U.S.?  DLH]
>

It is not at all clear that "free broadband" is sustainable.  The  
longstanding problems with free services (in any market, not just  
broadband)  include market distortion and low quality service.

Market distortion occurs because "free" services suggest to users of  
the service that supply is inexhaustible, and so users use as much as  
possible.  Not everyone thinks this way, but a small number of users  
who hog bandwidth can consume all available supply.

This leads to low quality of service, in part because there is no  
pricing feedback to users (see above), and in part because the lack  
of revenue makes it difficult to expand capacity as demand increases.

In fact, fees alone do not guarantee a sustainable business model.   
In the U.S. and most other markets, the current broadband business  
model is upside down.  Service providers enjoy maximized profits when  
customers, paying a fixed fee for Internet access, don't use the  
service at all.  Service providers make the least profit if customers  
like the service and use it a lot.

 From an economic perspective, charging a fixed fee no matter how  
much bandwidth a customers uses is exactly the same as giving the  
service away for free.  Neither one provides the funds necessary to  
expand capacity, increase service areas, pay for proper maintenance  
and upkeep, and add new services.

A solution is to move to a service oriented architecture (a different  
network architecture AND a different business model) that conveys a  
clearer relationship between supply and demand to customers.   
Customers pay for services, rather than buying a bucket of  
bandwidth.  Service fees are based on the real cost of providing the  
service, thus providing information to customers about supply and  
demand.  This can be done easily with both wired and wireless networks.

Andrew

-------------------------------------------------
Andrew Michael Cohill, Ph.D.
President
Design Nine, Inc.

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