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Competitive Economics
by Andrew McCaskey
Lessons in Caps
When there is competition, performance and pricing respond. As Time Warner is finding out, you can irritate your customer base with arbitrary caps. The public relations problem that is emerging in Texas and throughout the Blogosphere is, however, a lot of wind and not much rain.
As Lilly Tomlin reminded us all those years ago, “We don’t care because we don’t have to”. While a duopoly DSL/Cable in any given city is somewhat inferior to being able to set the price exclusively, it’s still pretty cushy compared with open competition. If you compare the speeds (8 to 10 Mb/sec) and caps/throttling (100GB/month) it’s apparent that consumers in the UK are benefitting from the last mile mandatory sharing among competing ISP’s. The proposed Time Warner price – $75 a month to 100GB, then $1 a GB above that to a cap of $75 additional. Presumably $150 for unlimited at 10 Mb/sec.
The UK package was limited at 100GB/month – where the user could be throttled or booted for TOS violations. The price ? around $22/month. You can see what a little competition will do but as Ars Technica pointed out at high levels of consumption, it’s Choose your Poison: Caps or Throttle.
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