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Paul Sweeting

Paul Sweeting is the editor of ContentAgenda.com and a columnist for Video Business. He has covered the home entertainment industries since 1985 for Billboard, Variety, Publishers Weekly and other leading business publications. He is based in Washington, DC.


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Paul Sweeting

Paul Sweeting, Media Wonk
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When "free" is no longer free - July 30, 2008

With its pending decision to censure Comcast over its network-management practices, the FCC could be planting the seed for an interesting natural experiment on the economics of "piracy" [cheesy quote marks meant to convey Media Wonk's ironic sense of ambivalence over the use of the term]. On Comcast's Q2 earnings call this morning (sales beat Street, profit misses) COO Steven Burke said the company "disagrees" with the apparent decision but added, "we’re going to adjust our network management techniques to go to a bit more of a consumption-based model." In other words, charging by the bit, as Time Warner Cable is now testing in a few markets.

While Time Warner launched its tiered-pricing test on its own initiative, heightened scrutiny of ISPs' network-management practices by the FCC could turn the Time Warner test into a trend, as Burke's comment suggests.

One effect of that trend would be to pass some of the bandwidth costs associated with P2P file-sharing on to those who are actually engaging in it, whether legally or illegally. The upshot could be the "free" is no longer so free. "Piracy" would start to have a price (of sorts).

Classic economics tells us that putting a price on something should affect the behavior of market participants. If the price of something goes up, people should use less of it. In a file-sharing network, moreover, the effect should be two-fold: You pay for the bits you download, but you're also paying for the bits you upload, for which you're getting nothing tangible in return.

How any of that might ultimately change file-trading behavior in the aggregate can only be guessed at at this point. But the FCC's action against Comcast is certainly a new input to the system, with the potential to change the incentives of the players.

Some day, perhaps, competing with "free" might be more of a real competition.

The complete Comcast earnings release is here.
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digitalshaman
August 4, 2008
Response to:
When "free" is no longer free

tier-pricing? for what? access? computation? storage? upload versus download is mentioned but it cannot be per bit pricing but per bit during upload versus per bit during download - the preference is a double entry accounting system so a set of bits which are both uploaded?downloaded at the same time depending on the point of observation - can be accounted for reliably. as for "piracy" - what is the cost? was there more piracy or less piracy when copyright terms were 14 years? how about life of the "author" plus 70 years ... if you know which bits people are willing to pay for, it is the accountants who should matter more than the economists ... if it is not cost effective to account it shouldn't the accounting - doing so in the aggregate is not an appropriate measurement. the bits that are a value should always exceed the bits that are a cost in order for there to be a reasonable business model