At a Minority Media and Telecommunications Association meeting, NCTA’s president Michael Powell told audience members that companies who use the excuse of ‘network congestion’ to back to use of data caps are lying, because they really are focusing on making money pay for high fixed cost expenses.
He explained that when a company implements a new service, it requires tons of investment in infrastructure before it can start selling its service to consumers. As a result, prices need to be implemented on a usage-based scale to compensate for such high overheads.
“If you buy a hot tub and string it up with a whole bunch of inefficient lighting and run it all night long, you are going to pay more than your neighbor who puts his thermostat at 68% and tries to conserve energy. It’s only right. If you want to go to the Denny’s buffet and fill up your bowl, you are going to pay more than the person who chooses broccoli spears.”
He argued that the few high end users should not be allowed to pay the same price as lower end web surfers because they end up benefiting from price savings as a result of the majority of revenues coming in from said lower end users. While this argument sounds good in theory, it is still not reflective in many of today’s cable pricing plans where low bandwidth browsers still have to pay a ridiculous minimum fee, along with additional fees should they ever have the need to cross their low bandwidth cap.
With cable companies seeing as much as 90% profits on their lower end subscribers, it makes us wonder if the argument about high infrastructure costs still floats.