The problem with such thinking is that it leaves zero room for investment, innovation, and other real-world dynamics that get conveniently forgotten as “fixed costs.” Of course, if you begin with the truly outrageous claim that “bandwidth is an almost unlimited resource,” and “bandwidth is cheap and plentiful and will only grow more so with time,” then it’s only logical that you’d fall prey to this fallacy! Really? Hyman appears to be suffering from a rather serious case of marginal cost fallacy: the belief that prices should, as a rule, equal marginal costs. Given that bandwidth is cheap and plentiful and will only grow more so with time, there is no good reason for bandwidth caps and fees to take root. It fosters innovation, drives commerce, and advances political and social discourse. Consumer access to unlimited bandwidth is good for society. The marginal cost of providing an extra gigabyte of data-enough to deliver one episode of “30 Rock” from Netflix-is less than one cent, and falling. Wireline bandwidth is an almost unlimited resource due to advances in Internet architecture. Families pay more when they use more electricity, these companies point out, so why shouldn’t households pay more if they use more bandwidth? The analogy is a false one. But Hyman says the laws of economics don’t apply to broadband! No seriously, he says:Ĭable and telecom companies argue that bandwidth is a scarce resource and that imposing caps and overage fees will relieve pressure on high-speed networks. Usage-based pricing is used in countless economic sectors every day and it is overwhelming viewed by economists as a sensible way to calibrate supply and demand while ensuring costs are covered. He tries to spook people with the headline, “ Why Bandwidth Pricing Is Anti-Competitive.” No it isn’t. Hyman’s economic illiteracy is evident from the get-go. Rubbish! The only thing policymakers need to do is avoid myopic, misguided advice like Hyman’s, which isn’t based on one iota of economic theory or evidence. ![]() “It’s time to jump before it’s too late.” “Consumers and regulators need to take heed of what is happening and avoid winding up like the proverbial frog in a pot of boiling water,” Hyman warns. ![]() ![]() Of course, why wouldn’t he say that? It’s in Netflix’s best interest to ensure that somebody else besides them picks up the tab for increased broadband consumption!īut Hyman tries to pull a fast one on the reader and suggest that scarcity is an economic illusion and that any effort by broadband operators to migrate to usage-based pricing schemes is simply a nefarious, anti-consumer plot that must be foiled. Hyman doesn’t like the idea of broadband operators potentially pricing bandwidth according to usage /demand and he wants action taken to stop it. It’s an implicit plea to policymakers for broadband price controls. Of all the shockingly naive and shamelessly self-serving editorials I’ve read by businesspeople in recent years, today’s Wall Street Journal oped by Netflix general counsel David Hyman really takes the cake.
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