Re: cost of 1 gig of transport

[David Farber <dave () farber net>]

Begin forwarded message:

From: "David P. Reed" <dpreed () reed com>
Date: April 14, 2009 10:57:41 AM EDT
To: dave () farber net
Cc: ip <ip () v2 listbox com>
Subject: Re: [IP] cost of 1 gig of transport

This discussion of "cost of a gig" is very odd, very strange, and can  
only be understood as a set of political campaigns:

The idea that one gigabit or gigabyte of data transport has a "cost"  
in and of itself is so far from reality, it's clearly a political  
discussion only.  Operating a network has fixed costs that are  
depreciated over 10-30 years plus variable costs that relate to truck  
rolls and customer service/support/marketing salaries doesn't generate  
a "cost" per gig.  There is only a "price schedule" for services that  
imperfectly recovers the costs plus a profit (hopefully reinvested  
rather than returned to shareholders, since demand is growing).  One  
can allocate the price to per-gig, per-month, per-day, per-eyeball,  
per-show, ... but that is all completely flexible.  Creating a pricing  
system sometimes is assisted by "allocation of costs" - an accounting  
fiction that invents from the whole cloth a "cost per gig" or a "cost  
per line" or a "cost per customer".

Allocation of costs is sometimes used in regulatory proceedings as if  
it were real, especially when such an accounting fiction allows the  
regulated industry to collude with the regulators to play a con game  
on the regulated industry's customers.  Usually the regulators are "in  
on" the con game - after all they employ willing micro-economists to  
vet and to validate the accounting fictions.

While I feel sympathy for WISPs in rural America and their inability  
to compete at scale or to generate adequate profits to reinvest in  
their customers' and investors' interests, I don't quite understand  
why we ought to view them as special experts on the communications  
economics issues of Big Cable and Big Phone in dense HFC and Fiber in  
urban areas.

It would be worth pondering how the Small Family Farmer was used to  
sell such ideas as creating farm subsidies for multi-national corn  
agribusinesses like ADM and Cargill, and the elimination of Estate  
Taxes.

Or how Joe the Plumber turned out to be something other than what he  
claimed to be.




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