Tiered broadband: a suckers game

by alec on June 6, 2008

Time Warner’s tiered broadband trial is underway in Texas. On the surface of it, it seems reasonable to many people. Many folks are of the opinion that heavy internet users ought to pay more.

Not so says Om Malik. The team at GigaOm has decoded what tiered pricing means for broadband users, and concluded that the limits being proposed are simply a cunning ruse to ensure that we all continue to buy our video from the video pipe and our data from the data pipe.

When Om asked Time Warner spokesperson Alex Dudley to comment, he had this to say:

“You need to understand that the networks are going to be managed and we need to make profit,” he said. “We are trying to find a balance here, and it is too soon to say that we are throwing baby out of the bathwater.”

Hmmm… the $1.09 billion last year wasn’t enough I guess.

We shouldn’t be buying the operator’s arguments at this point. The foundation of the internet is the economics of plenty. For many years network operators have built businesses on rationing supply to a scarce resource. To argue that it’s scarce now is utter hogwash. For example, just this month Fat Pipe Magazine reported that on trans-Pacific fibre routes operators are afraid of a price collapse due to a glut of capacity. Network capacity isn’t scare – it’s simply unevenly distributed. Operators, grown fat on excess profits in the last decade, need to find ways to build out capacity to meet future demand, rather than focus on limiting resources today.

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