[9133] in Commercialization & Privatization of the Internet
The Buffalo Free-Net / NYSERNet / PSI problems
daemon@ATHENA.MIT.EDU (Barry Shein)
Sat Dec 18 17:14:36 1993
Date: Sat, 18 Dec 1993 17:13:42 -0500
From: bzs@world.std.com (Barry Shein)
To: tenney@netcom.com
Cc: com-priv@psi.com
In-Reply-To: Glenn S. Tenney's message of Fri, 17 Dec 1993 18:56:55 -0800 <199312180257.SAA14279@mail.netcom.com>
>From: tenney@netcom.com (Glenn S. Tenney)
>At 8:39 PM 12/17/93 -0500, Barry Shein wrote:
>>And what's special about networks here? I mean, why can't I go to my
>>local movie theater by the same reasoning and say, hey, you're going
>>to run the film anyhow, what's the marginal cost of one more person
>>sitting in the audience (we'll assume an unfilled theater just like
>>you reason about e-mail just fitting in the empty interstices), why
>>not just let me in for free?
>
>Barry, your analogy is quite a bit off... The example you were giving
>about a movie theater is based on profit (or at least income) rather than
>marginal COST. The marginal cost for 101 people in a 500 person theater
>vs. 100 people is virtually nil. The loss of revenue (and hopefully
>profit) is significant.
No, that's exactly what I was saying, you only seem to be making my
point.
Perhaps it's more clear when you extrapolate that number back to the
point that you're letting everyone into the theater free which this
would seem to be arguing (or is this really a plea for an "oh gee only
please let ME in for free" argument?). If one is zero, then two are
zero, and certainly 100 are therefore zero, ...
But somewhere in that mess any ability to pay your costs and earn a
living are gone. Gee, how'd that happen?
And what if it takes 101 people just to break even on running the
movie? Thus, with only 100 then 100% of that revenue really does come
out of my pocket, and so does the 101st (e.g. if it costs $505 to run
the movie, all tolled, and 100 people pay $5 [total $500] then what's
the marginal cost of letting the next person in free? $5, the whole
fare, right? Someone has to make up that difference.)
So there's all kinds of assumptions here about profitability etc which
as far as I can tell are unfounded. I mean, if I'm losing a little
money on 4 customers what's my motivation for letting the 5th person
who comes along on board for free? Doesn't make sense.
>I buy a T1 link from XYZ company; I pay for the routers, phone lines,
>whatever; I agree to pay XYZ based on the size of my pipe. What is the
>marginal cost to XYZ if I have 1 or 100 machines on my end of the pipe, or
>if my one machine has 1 or 1000 users (my users or customers never even
>know about XYZ, they don't even know who I buy my pipe from)?
That depends entirely on the model used to set the price charged you
for your T1 connection.
One problem is that some here want to be charged under the lower cost
model that reflects apparent usage, and yet use the pipe under a
completely different model.
I'm sure if you were willing to pay the full reseller cost there'd be
no problem. The rest of this is just a poor attempt at
prestidigitation by using only 3 of the 5 available facts each time
the reasoning is presented.
It's the reason business people are often seen with a sarcastic scowl
on their face saying "look buddy, this is all very nice, but ya want
it or not?" It's not hard-heartedness, it's just impatience with a
transparently silly argument they've heard a thousand times before.
Anyhow, business runs a whole lot more on what a customer is willing
to pay for something than what it costs to produce that something. If
it's not worth anything to you then hey! I know the answer, don't let
the door hit ya on the way out! Don't tell me it's worth something to
you but isn't at the same time.
This is PARTICULARLY true for services. I mean, what's the *marginal*
cost of your doctor or lawyer handling you for free? What's the
MARGINAL cost of you coming down Sunday and scrubbing all my floors?
About nil, right? So therefore we'll see ya around noon...
See, silly, no argument there at all.
-Barry Shein
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