Posted by: crudbasher | July 6, 2011

Toll Booths Are Going Up On The Internet


I have spoken before about how digital data can be infinately replicated, therefore isn’t scarce. Because it isn’t scarce, it doesn’t have an intrinsic value. Record companies have been rocked by this new economic reality. So, if you can’t make money selling infinate copies of something, how do you do it?

There are two emerging business models.

1. You can create a service that offers a vast quantity of data and then just charge access to it. Netflix is a good example. This is the buffet model.

2. You can setup a toll system where information is metered like a utility. Internet providers are now starting to implement data caps. They say it is because their network is overloaded but really this is just about making more money. I don’t have a problem with companies making money by the way, but let’s call it what it is. 🙂 Verizon Wireless has just scrapped their unlimited data plans for their mobile phones. For the same 30 dollar cost, they are now offering only 2 Gigs of data for mobile users. Now I have heard many people making the argument that most mobile users use less than 2 Gigs so it’s ok. This is true for now but the wireless carriers like Verizon are planning ahead. To understand this, let me tell you about the AMT.

The AMT or Alternative Mimimum Tax is a tax system that was created in the US in 1970. It was a law passed because 155 people did not pay any income tax that year because of various tax deductions. Congress, playing at class warfare (thank goodness we are past that today!) passed a law that said that people earning above 30k a year would pay a minimum tax.

Fast forward 40 years. A law that was intended to soak 155 people in 1970 in 2008 affected 3.9 million people. Congress has tried to adjust the income level up several times but it still catches more and more people each year. It’s toll booth on the road to wealth. It was just down the road a bit for most people.

These data caps are the same way. Today, most users won’t use over 2 Gigs so will accept this peacefully. How much data will they use in 5 years though? How about 10?

These data toll booths are being constructed far out in front of us, but we are driving fast and will be there before we realize it.

I think it 10 years, most students showing up to schools will have their own network connections and devices. It remains to be seen if they will have any data cap left to use them!

    • There were no surprises on pricing: for smartphone data, plans start at $30 for 2GB, $50 for 5GB, and $80 for 10GB. New customers can add mobile hotspot service for an extra $20, and Big Red will throw in a couple additional gigabytes as well. Customers currently using the unlimited LTE mobile hotspot will be given the option to retain that service for another $30.

Posted from Diigo. The rest of my favorite links are here.


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