Re: ALSO MUST READ NYTimes.com: Charging by the Byte to Curb Internet Traffic "People seem to be missing the point."

[David Farber <dave () farber net>]

________________________________________
From: Jean Camp [ljeanc () gmail com]
Sent: Monday, June 16, 2008 1:41 PM
To: David Farber
Cc: ip
Subject: Re: [IP] ALSO MUST READ  NYTimes.com: Charging by the Byte to Curb Internet Traffic "People seem to be missing 
the point."

On Jun 15, 2008, at 1:08 PM, David Farber wrote:

> Mr. O'Dell is correct about rate, but the scarce resource here is
> _congestion_ flows, which are highly variable. The correct
> (economically, and in my modestly informed opinion technically) way
> to charge for these is with some form of spot pricing, i.e. prices
> that change in real time and with location. When there's no
> congestion, no matter how much bandwidth someone currently uses the
> charge should be zero. Conversely, when your neighbors are running
> real-time movies via IP, both you and they should be charged
> congestion fees for whatever each of you is  doing.  Even if you did
> not "cause" the congestion, your usage is   exacerbating it for
> everyone.



There is a serious moral hazard problem with congestion pricing as so
clearly illustrated in the California electricity market. If the price
goes up when the supply goes down and there are extreme barriers to
entry, congestion pricing results in suppliers chocking off the supply
in order to maximize revenue. Esther's dining model fails in this
discussion because choice is limited and there is little to no entry.
(See the short and sad history of CLECs.)

It seems like many of your subscribers are almost re-inventing Clarks'
expected capacity mechanism from the nineties, first presented (I
think) as  "Explicit Allocation for Best Effort Packet Delivery
Service" at  the Telecommunications Policy Research Conference in 96.
It is worth a read. http://portal.acm.org/citation.cfm?id=288396.288401
[[The Expected Capacity Service is a two level priority scheme. It
provides a guaranteed minimum capacity service with a guaranteed burst
size allowance provided by a token bucket. For sender-pays, each user
selects a profile. The profile consists of two measures: minimum rate
and token bucket depth (comparable to TCP's window size.) In response
to the user's selected profile, the service provider offers a price
for the time period (e.g. a month) in which the profile will be
enforced. Thus users are provided a fixed and predictable price for
their selected profile.]]

thanks,

L. Jean Camp
http://www.ljean.com
Net Trust
http://code.google.com/p/nettrust/
Economics of Security
http://www.infosecon.net/






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