[CAnet - news] Too expensive to meter: The influence of transaction costs on commuications..

For more information on this item please visit my blog at 
http://billstarnaud.blogspot.com/
-------------------------------------------

[Again another excellent paper by the well known iconoclast and debunker
Andrew Odlyzko and his co-author David Levinson.  In this paper they refute
many of the arguments for fine scaled charging which underlies the
architecture of IP Multimedia Systems (IMS), Next Generation Network (NGN)
and the old bugaboo QoS. Further substance to this argument can be found in
the article below from the NY Times in regards to charging for WiFi access
at your favourite coffee shop. Thanks to Andrew Odlyzko and Dave Macneil for
these pointers.  --BSA]

Too expensive to meter: The influence of transaction costs in transportation
and communication

http://www.dtc.umn.edu/~odlyzko/doc/metering-expensive.pdf

Abstract. Technology appears to be making fine-scale charging (as in tolls
on roads that depend on time of day or even on current and anticipated
levels of congestion) increasingly feasible. And such charging appears to be
increasingly desirable, as trafficc on roads continues to grow, and costs
and public opposition limit new construction. Similar incentives towards
fine-scale charging also appear to be operating in communications and other
areas, such as electricity usage. Standard economic theory supports such
measures, and technology is being developed and deployed to implement them.
But their spread is not very rapid, and prospects for the future are
uncertain. This paper presents a collection of sketches, some from ancient
history, some from current developments, that illustrate the costs that
charging imposes. Some of those costs are explicit (in terms of the monetary
costs to users, and the costs of implementing the charging mechanisms).
Others are implicit, such as the time or the mental processing costs of
users. These argue that the case for fine-scale charging is not unambiguous,
and that in many cases may be inappropriate.

[...]


>From the NY Times, March 4, 2007
Digital Domain
What Starbucks Can Learn From the Movie Palace
By RANDALL STROSS

WI-FI service is quickly becoming the air-conditioning of the Internet age,
enticing customers into restaurants and other public spaces in the same way
that cold "advertising air" deliberately blasted out the open doors of
air-conditioned theaters in the early 20th century to help sell tickets.

Today, hotspots are the new cold spots.

Starbucks became the most visible Wi-Fi-equipped national chain when it
began offering the service in 2002. Now, at more than 5,100 stores,
Starbucks offers Internet access "from the comfort of your favorite cozy
chair."

Before you pop open your laptop, however, you need to pull out your credit
card. Starbucks and its partner, T-Mobile, charge $6 an hour for the "pay as
you go" plan. 

Metering and charging for a service, of course, is the prerogative of any
business owner in a free market. One will always find entrepreneurs willing
to try new ways to profit by erecting tollbooths in front of facilities that
had been freely accessible.

In the past, this took the form of coin-operated locks on bathroom stalls.
(You may have first encountered these at a moment when you were least ready
to praise the inventor´s ingenuity.)

Today, the outer frontier of pricing innovation can be found at the
Dallas-Fort Worth International Airport, where some electrical outlets are
accompanied by a small sign: "To Activate Pay $2 at Kiosk." 

The restaurants´ predecessors, the movie theater owners of almost a century
ago, understood that not every amenity, every service, every offering must
have a separate price tag attached. 

Panera Bread, which has more than 900 Wi-Fi-equipped sandwich and bakery
stores, has set itself apart from its contemporaries by upholding the
old-fashioned spirit of those bygone theater owners who never stinted in
their efforts to make public space inviting.

The grand movie palaces did not have to show the revenue-enhancing potential
of an ornamental gold cornice or plaster pilaster. So, too, at Panera Bread,
where its fireplaces do not have to demonstrate a monetary payback to
justify their place in the stores.

Neither does Wi-Fi. Neil Yanofsky, Panera´s president, said that no cost
accounting had been done on its service, which is free. The rationale
relates to ambience: "We want our customers to stay and linger."

A Panera cafe does half of its business at lunchtime - there is little
lingering then. But before and after the lunch rush, the restaurant
addresses what it refers to internally as "the chill-out business," which
constitutes a not-insignificant 15 to 20 percent of its revenue.

Panera has no interest in rushing these customers out - the longer they
stay, the greater the likelihood that resistance to the aroma of freshly
baked muffins will crumble. Free, unmetered Wi-Fi is one way the restaurant
sends an unambiguous signal: Stay as long as you like.

[..]


-------------------------------------
To SUBSCRIBE:
send a blank e-mail message to
[email protected]

To UNSUBSCRIBE:
send a blank email message to
[email protected]
-------------------------------------

These news items and comments are mine alone and do not necessarily reflect
those  of the CANARIE board or management.
-----------
[email protected]
[email protected]
www.canarie.ca/~bstarn
skype: pocketpro
SkypeIn: +1 614 441-9603


_______________________________________________
news mailing list
[email protected]
http://lists.canarie.ca/mailman/listinfo/news