Will Smart Pricing Finally Take Off? [chapter]

Andrew Odlyzko
2014 Smart Data Pricing  
Smart pricing" has been the goal of the networking research community and the telecommunications industry for decades. Yet it has also proved remarkably hard to achieve. This paper presents a brief overview of telecommunications economics and technology, and the major changes that are taking place. Special emphasis is placed on the many popular but harmful notions that continue to lead this industry astray, such as that content is king, or that telecom is characterized by high fixed costs. The
more » ... nfluence of such factors on advisability of various pricing strategies is then considered. The main conclusion is that flat rates for individual users should be regarded not as a pernicious cancer, but as necessary for the healthy development of wired networks. However, in the wireless arena, there is a mismatch between potential demand and what technology can provide, and this likely means that some forms of not-very-smart pricing will dominate. This table demonstrates the main problem faced by telecom. The most valuable information can often be conveyed in just a few bits. Thus, for example, in the early days of postal services, when receivers paid on delivery, information would often be transmitted in the form of small modifications in the address. The addressee would then scan the envelope, figure out what the message was, and refuse to accept (and pay for) the letter.
doi:10.1002/9781118899250.ch1 fatcat:rkch7z5jsfe3vdurh4hlgoppmy