CDNs should pay eyeball networks, too.

Tue May 1 22:46:56 UTC 2012

I can't agree with this. You are assuming a cost-plus model. Many things are market-priced. 

If you are the only game in town, and you have a great product, you sell it for the most you can. You aren't a charity. 

The customer always has the option to not buy your product. 

----- Original Message -----
From: Valdis.Kletnieks at vt.edu <Valdis.Kletnieks at vt.edu>
To: David Miller <dmiller at tiggee.com>
Cc: nanog at nanog.org <nanog at nanog.org>
Sent: Tue May 01 18:18:48 2012
Subject: Re: CDNs should pay eyeball networks, too.

On Tue, 01 May 2012 18:03:06 -0400, David Miller said:

> From an accounting perspective, every R&D effort that I have seen or
> been a part of was not billed to any customer.  R&D has always, in my
> experience, been an internal charge against a company's own profits.

RIght - and when pricing the result of the R&D, you take into account the
internal charges and estimated sales volume to determine a target price
point.  R&D was $316K and you estimate you can sell 100 of them, you're
going to have to charge at least $3,160 a copy to make a profit on the
project.  You sank $150M into R&D and think you'll sell a million units, you'll
need to charge $150 to break even.  And so on.

The point is that if you already got *paid* the $316K, it's morally wrong to
include it in the calculation of "sunk costs we need to recoup to turn a profit".