Level 3 Communications Issues Statement Concerning Comcast'sActions

Fri Dec 3 12:20:14 UTC 2010

On Thu, Dec 2, 2010 at 7:25 PM, William Herrin <bill at herrin.us> wrote:
> On Thu, Dec 2, 2010 at 4:28 PM, Steve Gibbard <scg at gibbard.org> wrote:
>> http://en.wikipedia.org/wiki/Two-sided_market
>>
>> They don't all have the same fee-splitting systems, and you can find an
>>example to site as precedent for just about any system you could reasonably
>>advocate.  An example raised in a talk I heard a few years ago was of
>>scholarly journals that collect money from both their subscribers and their
>>authors. The authors need to be published in order to get tenure, and the
>>readers pay because they want to know what the authors are saying.

I received an interesting comment off list to the effect that there's
been a rise in journals in which the authors pays while the reader has
open (free) access via the web citing this example:

http://openwetware.org/wiki/Publication_fees

Modern newspapers have gravitated towards a comparable model in which
the advertisers bear the cost of the content and the readers have free
access via the web. I, for example, read washingtonpost.com most days.

In the abstract, the model looks like this:

1. Pick which side of the two sided market you expect to always pay
you. For example, the advertisers in the newspapers' case.

2. Offer _fully functional_ free access to the other side of the
market, where "fully functional" is largely defined by that side's
nature. For example washingtonpost.com

3. Ask a convenience fee for access which does not impact
functionality but is in some way more desirable to one or another
segment of the otherwise unpaid side of the market. For example,
paying a subscription to have the hardcopy version of the newspaper
delivered.

The jury is still out on whether this model is economically
sustainable. Still, I think it could offer useful insight to folks
like Comcast. I think it likely that the recipient side of the market
is going to be the always-payer for ISP service on an eyeball network.
That means giving the content side basic fully functional access for
free and convenience enhancements for a fee. That's why I suggested:

"Maybe you'll openly peer with all comers but only at 100 mbps in any
single location. You'll open as many locations deep in the network as
they want, but it's the peer's problem to connect there. Naturally
you'll sell a convenience service to backhaul all those connection
points to a convenient location for the peers... or they can make
their own arrangements but either way they don't get to massively
consume your backbone for free. There's probably enough separation
there between what you sell customer B and what you sell customer C to
eke over to the "good" side of the ethics line. And by the way an open
peering policy with those parameters would make you the Chamber of
Commerce's new best friend, enabling small business to vend innovative
products directly to your customers (and then pay you for the
convenience of aggregation once they build up a customer base)."

The key pitfall with this model is function versus convenience. Your
paid enhancements to the second side of the market can offer greater
convenience but you cross the line if they offer greater
functionality. Connecting where I want (instead of where you offer) is
convenient. Connecting with enough bandwidth for my service to be
usable is functional.

Regards,
Bill Herrin

-- 
William D. Herrin ................ herrin at dirtside.com  bill at herrin.us
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