Paper: "Network Operators and Content Providers: Who Bears the Cost?"
Network Operators and Content Providers: Who Bears the Cost? J. Scott Marcus <http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=333755> Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste (WIK) September 13, 2011 *Abstract: * A number of network operators have recently claimed (1) that their costs are exploding due to increased Internet broadband traffic associated with video; (2) that, due to market defects, consumers need not and do not pay the increased costs of the broadband service; and (3) that it may therefore become necessary for content providers to subsidise the cost of the consumer's Internet service - especially as networks evolve to fibre-based Next Generation Access (NGA). Under close scrutiny, none of these claims is persuasive. (1) Internet traffic is indeed increasing, but usage-based cost per subscriber in the fixed network is fairly constant - technological improvements are in balance with the growth in traffic (which is in fact considerably less, in percentage terms, than it was in past years). (2) Prices for fixed broadband service are stable because costs are stable - this is a success of the competitive market, not a failure. In those instances where costs truly are increasing, network operators seem to be able to raise prices accordingly. (3) The argument for cross-subsidies rests on the theory of two-sided markets, but that theory does not necessarily imply that subsidies should be flowing from content providers to network operators. If the greatest challenge to NGA migration is that the incremental willingness of consumers to pay for ultra-fast broadband is insufficient to fund the corresponding network upgrades, then what is apparently needed is more high value high bandwidth content. One could just as well argue that subsidies should flow into the content provision industry as out of it - a detailed examination would be needed. *Number of Pages in PDF File:* 85 *Keywords:* Internet, content provider, network operator, two-sided market *JEL Classifications:* H54, L51, L86, L91 Working Paper Series http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1926768
On 11/11/2011 16:08, J.C. DE MARTIN wrote:
(1) Internet traffic is indeed increasing, but usage-based cost per subscriber in the fixed network is fairly constant - technological improvements are in balance with the growth in traffic (which is in fact considerably less, in percentage terms, than it was in past years).
corretto
(2) Prices for fixed broadband service are stable because costs are stable - this is a success of the competitive market, not a failure. In those instances where costs truly are increasing, network operators seem to be able to raise prices accordingly.
prima parte corretto, seconda parte dipende da moltissimi fattori, non e' generalizzabile, IMHO (3) The argument for cross-subsidies
rests on the theory of two-sided markets, but that theory does not necessarily imply that subsidies should be flowing from content providers to network operators. If the greatest challenge to NGA migration is that the incremental willingness of consumers to pay for ultra-fast broadband is insufficient to fund the corresponding network upgrades, then what is apparently needed is more high value high bandwidth content. One could just as well argue that subsidies should flow into the content provision industry as out of it - a detailed examination would be needed.
good point. cmq resta il problema di finznaizare la rete di accesso in fibra, 20Bn in italia +/- finche facciamo concorrenza infrastrutturale, non ne usciamo, IMHO. il primo a mollare il rame ne ha tutti i costi (almeno fino al tipping point), l'ultimo a farlo ne ha tutti i benefici. dato che conviene aspettare, non accade. c'e' un ulteriore problema, ovvero il prodotto del fatto che i telco vendono prodotti cross-cannibalizzanti (mobile vs. fisso; dati vs. voce) combinato con il fatto che l'ebitda del DSL e' minore dell'EBITDA della voce. bottom line: a meno di proventi da altri mercati, ricavi e margini in calo. mentre gli impegni finanziari degli operatori (dagli stipendi al debito alla remunerazione degli investitori, ecc. ) sono stati costruiti su ricavi ed ebitda del business pre-dati e con l'idea che mobile e fisso erano complementari e non sostitutivi. wrong guess... ciao, s. -- blog.quintarelli.it www.ilsole24ore.com
participants (2)
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J.C. DE MARTIN -
Stefano Quintarelli