Wednesday, December 10, 2014

Monopoly pricing of communication

Communication technology is a fixed cost enterprise. Usage based pricing is a variable profit scheme in the monopoly pricing category. While not a "fair" proposal, the obvious effect of monopoly pricing on communication networks is to raise the cost of using the network.

The introduction of monopoly pricing to displace fixed pricing is a restructuring of the network. The cost of content as network payload changes from marginally decreasing to constant. The communication service producer's profit function changes from one dedicated to capital service to one dedicated to marginal exploitation.

Unfortunately nothing good can be said of the marginal exploitation of communication networks and channels aside from the glories of capital gains. The examples found in television and radio demonstrate the loss of economic utility in the form of content quality. Furthermore, this loss in value to the consumer is compounded by the effect for economic externalities like the environment and government. We can see in the world today how business will send government to the bottom of the ocean for a one percent benefit on a year. While wonderful for the next trip to Vegas for some one or another, it's a tragedy for millions and billions of others.