Value As a Result of Pricing Mobile Data Use

I was reading over the comments my former colleagues at the International Center for Law and Economics and TechFreedom filed on Title II reclassification to find these two paragraphs of pure Alchian bliss:

With most current pricing models, consumers have little incentive or ability (beyond the binary choice between consuming or not consuming) to prioritize their use of data based on their preferences. In other words, the marginal cost to consumers of consuming high-value, low-bit data (like VoIP, for example) is the same as the cost of consuming low-value, highbit data (like backup services, for example), assuming neither use exceeds the user’s allotted throughput. And in both cases, with all-you-can-eat pricing, consumers face a marginal cost of $0 (at least until they reach a cap).

The result is that consumers will tend to over-consume lower-value data and under-consume higher-value data, and, correspondingly, content developers will over-invest in the former and under-invest in the latter. The ultimate result—the predictable consequence of mandated neutrality rules—is a net reduction in the overall value of content both available and consumed, and network under-investment.

Leave a Comment.