[ NNSquad ] Beyond entry level stuff ...

It’s hard to look at any price in isolation in a business. You need to understand the accounting model – how much is allocated to overhead, what is the depreciation schedule etc. I can indeed believe that $5/month covers the fully burdened cost and then some. (http://frankston.com/?n=IPTelecomCosts).

But we need to be very careful and understand our goals. Is it more billable paths or is it an electronic infrastructure more like roads in terms of availability and its role in facilitating connectivity rather than being a requirement. Is it there to support the economy or to be a profit center. (http://rmf.vc/?n=IAC). The same infrastructure would be used for city services as well as education and healthcare. Personal use for entertainment might just be a secondary issue in this larger view.

We can also take this in a different direction and think about this in terms of slums becoming cities via DIY efforts. Today’s protocols don’t make this easy. If we had protocols that supported more ad-hoc connectivity without the idea of a provider – just the ability to use whatever path is available wired or not – how would this play out compared with other aspects of the community infrastructure. Such ad-hoc connectivity could have a very low CapEx and with an any-path-works community maintenance becomes feasible.’

We could also apply this to villages in India … if we simply connected a village as a unit and didn’t try to track usage or bill individuals? If we covered one-time CapEx costs (even better if they are low) and ad-hoc protocols that used any path available I argue the OpEx would also be low, especially per million users. What would the cost/benefit be to the economy and society?

As an aside, I remember visiting Lagos in the 1970’s. There were huge traffic jams. One of the causes was the lack of an effective phone system so you couldn’t find out if someone was available. You had to drive to them just as they were trying to visit you. Instead of asking how much we would pay for DSL (or even just voice service) we should be asking how much we should be paying people to use the infrastructure instead of clogging the roads.

From: nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org [mailto:nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org] On Behalf Of Rahul Tongia
Sent: Monday, October 05, 2009 00:52
To: David Farber; nnsquad@nnsquad.org
Subject: [ NNSquad ] 2 thoughts (new ideas) on Entry level pricing

People talk of entry level pricing. A few thoughts.

1) Entry level pricing is cheapest (or amongst the cheapest) in a place like India. The list price for DSL (now 1 Mbps) is some 256 Rupees/month, just over $5. BUT, this is usage capped. Unlimited plans are more expensive. So, if that is the trade-off, that is something worth explicit discussion. However, folks I've talked to and my own analysis indicate this is not cross-subsidized, esp. at the marginal level. They don't really make much money on the cheapo DSL, but this also gives them a landline subscriber. [note, I've seen the incumbent offer $2/month DSL as part of a package, under a special offer]
My old TPRC paper (http://web.si.umich.edu/tprc/papers/2006/592/TPRC06-Tongia-submission%20v2.pdf)
goes into some analysis on how you really can provide DSL for <$10/month in the US, assuming the appropriate local loop copper is there. Dave Burstein and others have shown how capex is now approaching $50, and we have the famous statement from ?CTO of a major ISP saying uplinking is between $2-3/month, average. Thus, for the "entry" subscriber, it would be on or below the lower end of the range.

2) A major issue is whether entry level broadband is just a "lite" version of other ("regular") broadband or is it something different? DSL is especially interesting since other than the well-known distance-bandwidth tradeoff, there is little to physically differential entry and regular DSL. "Regular" DSL can typically go faster than what they offer (my own modem allows me to line test, and I find it capable of 31 Mbps, here in India!). Thus, entry DSL is cheap in part because of marketing reasons, not because of any cross-subsidy. So, by this analysis even even "regular" (megabit class) DSL is "lite".

This, to me, speaks volumes of why carriers in the US don't offer really cheap (but still slightly profitable) DSL - they don't want people to understand how much higher the gross margins are for "regular" DSL than entry-level DSL.

Rahul