From: JC Dill Sent: Wednesday, December 15, 2010 9:13 PM Cc: nanog@nanog.org Subject: Re: Some truth about Comcast - WikiLeaks style
Sure, Comcast's customers are also paying Comcast. But Comcast wants to get paid from the content provider. I think they are betting that in the long run it's easier to make money from content providers (and have the content providers charge customers or advertisers as necessary to make a profit) than to make money from the end consumer. And I think they are right about this "easier" part. I think that they will succeed at pressuring big content providers to play by Comcast's rules and shift the cost of running Comcast's network from consumers to content providers.
jc
There are two different innovation paths according to who is paying. If the customer is paying, innovation is driven by the interest of the customer. If the provider is paying, innovation is driven by the interest of the provider. If the customer pays the cost of the transport, a provider with better transport efficiency / quality ratio wins. It spurs innovation where we get better quality product with a better transport efficiency. If there are three competing content services in the market offering basically the same quality product, the one with the better transport efficiency is going to win customers. Or in some cases the customer might choose to sacrifice some quality for transport efficiency. The market eventually settles on what the customers in the aggregate decide is their willingness to trade price for performance. If the provider pays the cost of the transport, a provider might effectively subsidize the transport cost of a bloated content distribution mechanism. It won't make any difference to the last mile delivery network either way. Either way they get the same amount of money. If provider pays the freight, there might be some company with an absolutely killer technology that can stream much higher quality stuff with less bandwidth usage but if the customer doesn't see the benefit, that in and of itself isn't enough to drive eyeballs to that content. If that content transport method did save the customer money, the eyeballs would move in that direction. Having the provider pay the cost stifles technological advancement. It facilitates a "deep pocket" established company creating a barrier of adoption to a startup who might have a more efficient product but the user doesn't get any direct benefit so they don't adopt it. Having the user pay gives an incentive to develop technologies that reduce the network burden. Having the provider pay distorts innovation. In the end, having the end user pay the cost for the product they are consuming results in better, faster, cheaper (yes, you can have all three). Externalizing those costs through subsidies by outside parties throws things out of balance and drives innovation in a way that benefits the provider, not the consumer.