Industry expert Michael Elling argues rather than managing the economics of Internet infrastructure with an ex post, cost-based pricing model, instead it should be based on an ex ante, value-based pricing that takes into account the potentially enormous future demand for high bandwidth. The growth of bandwidth demand emulates Moore’s Law for microprocessors, roughly doubling every 2-3 years. It will continue to explode with applications such as 4k video streaming and two-way, HD videoconferencing.
Moreover, Elling astutely observes, contrary to the current market segmentation strategies where providers cherry pick discrete neighborhoods in densely populated metro areas, Elling sees the greatest demand growth for premise Internet service coming from less densely populated areas where residents obtain relatively higher value via its enabling remote work and e-commerce, distance learning and telehealth.
Elling also sees an ex ante perspective that anticipates future demand rather than focusing on past and present demand as mooting the current regulatory policy debate over net neutrality. The net neutrality issue has come about because providers at the core, transport and edge network layers don’t share a unified view of how prices for their services should be set. While those at the core and the transport layers might be inclined to work out a pricing scheme with the edge providers based on ex ante demand at the edge, it’s impossible to do so as long as the edge providers hang onto their ultra risk averse, cost-based ex post demand perspectives. If all the layers agreed to adopt an ex ante perspective, Elling believes, it would bring about a unified pricing scheme based on balanced settlements and price signals that would provide incentives for rapid investment and ubiquitous upgrades at all network layers.
Elling’s concept deserves serious consideration by Internet providers at all network layers as well as public policymakers and regulators. If the United States – the nation that invented the Internet – is to realize the Internet’s full potential and benefit for all Americans, it must first make an attitude adjustment. To an attitude that forsakes a retrospective orientation of bandwidth poverty and embraces a forward thinking outlook based on bandwidth abundance and prosperity.