UBB - How Should Cost and Price be Linked?

Michael Geist is concerned because internet service providers do not match price of service at all levels to its actual cost.

But when a commodity is in short supply, selling at the cost price will lead to shortages. (In the internet billing situation, users downloading tons of movies will degrade the quality of my own less demanding service)

What the ISPs are doing is aggressively penalizing heavy use in order to keep the total demand within the capacity of the system (or perhaps just to make a lot of extra money). It should be noted that despite the rhetoric this is NOT "Usage Based Billing". It is a differential pricing scheme set to penalize both high and low usage rates.

Perhaps a fairer idea is to have true Usage Based Billing with the uniform unit price matching what the cost of  supply would be if supply were extended to meet all demand (and then get on with actually providing that extended service).

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