[mike70]

Consider an analogy. Assume, back in the 1920's that automobile companies argued that since railroads already had their rails laid, all automobiles regardless of quantity, should be shipped at a fixed cost. It would have been a great business model for the auto industry.

Basically, the Googles and Yahoos of the world have chanced upon a business model where they can ship as much of their product to their customers as they can, but the shipper can only charge them a fixed fee.

If the shipper (telecom backbone providers) has to increase capacity to handle the increased traffic, then tough. But the Googles and Yahoos can sell as many ads as they want, knowing that the next ad can be sent to their customers without a marginal cost. All fixed costs of increased traffic fall on the telecoms without compensation. It's a great business model for Google, but a little shortsighted for the internet.

[HiTech RedNeck]

But to complete the analogy, the dealers would be paying according to the rate at which automobiles were being unloaded off the railroad cars. You pay one rate for 10 cars a day, another for 100, etc. Also the fuel on the cross country portion of the hauls would have to be virtually free to the railroads.

[Sofa King]

"All fixed costs of increased traffic fall on the telecoms without compensation."

If the people who are paying for the bandwidth don't want to pay more for increasing it, and it isn't profitable for the telecoms to increase it without charging more, then it won't be increased and shouldn't be increased because there is not enough demand for it to justify the cost.

The free market is handling this just fine right now; letting any of the companies involved stack the deck with g'vmt help is just going to make things worse for the consumer in the end.

[IndyMac]

I think your analogy is wrong. The railroads charge the shipper for each rail car that is moved to a destination while broadband providers charge for a fixed quality of service regardless of how much traffic is moved. These are quite different revenue models but accurately reflect different business realities.

The railroad and its customer don't typically care if the rail car arrives in 2 days or 2 weeks while the internet user cares primarily about speed and latency.

If the railroad was also in the auto business and charged its automotive competitors such a large shipping fee that they couldn't compete, then you would have an appropriate analogy for this part of the issue.

[MortMan]

If the shipper (telecom backbone providers) has to increase capacity to handle the increased traffic, then tough. But the Googles and Yahoos can sell as many ads as they want, knowing that the next ad can be sent to their customers without a marginal cost. All fixed costs of increased traffic fall on the telecoms without compensation. It's a great business model for Google, but a little shortsighted for the internet.

Not exactly. When the telecom backbone providers increase capacity, they do so to serve more customers, and in many cases justify higher fees to their existing customers based on their infrastructure improvements.

Further, the accessibility of content gatherers like Google is a drawing card for the information transporters like Comcast. The relationship is much more symbiotic than the infrastructure giants seem willing to admit.