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Skippy25
join:2000-09-13
Hazelwood, MO

Skippy25 to InvalidError

Member

to InvalidError

Re: Unlikely

Not the cost are not elastic or highly variable consider that it cost fractions of a penny to serve a consumer 1mb over 1gb once the equipment is installed.

fg8578
join:2009-04-26
San Antonio, TX

fg8578

Member

said by Skippy25:

Not the cost are not elastic or highly variable consider that it cost fractions of a penny to serve a consumer 1mb over 1gb once the equipment is installed.

Did you mean "once the fiber is installed"? Because burying the fiber is what costs the most. Even though it is a one-time cost, it is not negligible.
InvalidError
join:2008-02-03

InvalidError to Skippy25

Member

to Skippy25
Investment costs are not recovered overnight. When a large ISP or transit provider invests 200M$ adding 100Gbps of capacity across their network, they do not charge their individual residential end-users a one-time $500 extra fee to recover the parts, labor, maintenance, operating, etc. costs plus profit forecast for the equipment's projected lifespan; they amortize it over 5-6 years. In the meantime, there are also financial charges since most of those equipments are purchased on credit for additional tax deductions.

The rates transit providers charge their clients is the amortized cost of that investment based on bandwidth distribution between clients, recurring costs such as rack space, fiber/wavelength rental, maintenance, management, power, cooling, etc. plus profit margin.

There is no immediate link between investments and rates. It all goes through statistics and financing.
rradina
join:2000-08-08
Chesterfield, MO

rradina to fg8578

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to fg8578
So now that it's buried for FIOS areas, why do they need a new source of revenue from content providers to help recover those costs? Are they deliberately pricing a product that loses money?

fg8578
join:2009-04-26
San Antonio, TX

fg8578

Member

said by rradina:

So now that it's buried for FIOS areas, why do they need a new source of revenue from content providers to help recover those costs? Are they deliberately pricing a product that loses money?

Just because the fiber is buried doesn't mean it's paid for. I own a home and a car, but I'm still paying off loans for both. Telco assets are long-lived and also have long cost-recovery periods.
rradina
join:2000-08-08
Chesterfield, MO

rradina

Member

Are they pricing it to their customers at a loss and need extra revenue to retire the cost of the build? Yes or no?

If the answer is no, then the current price allows a profit and debt retirement. They don't need peering revenue to help pay for those assets.

If yes, this would probably be of interest at the next shareholder meeting. The FTC might also be interested in understanding their strategy.

fg8578
join:2009-04-26
San Antonio, TX

1 edit

fg8578

Member

No, they are not pricing at a loss. But that actually supports AT&T's claim: with additional sources of revenue, they s/b able to lower the price to consumers (not that they would ever actually do that, despite the claims of some that AT&T "promised" to do just that).
rradina
join:2000-08-08
Chesterfield, MO

rradina

Member

So where's the debate? In my OP, I claimed this is just cost shifting. If ATT lowered prices, the cost to the consumer is the same. They pay ATT less and their content provider more. However, if ATT doesn't lower prices, the consumer gets shafted. I assume you must also be a consumer. Do you want to get shafted?

fg8578
join:2009-04-26
San Antonio, TX

fg8578

Member

I'm not sure there is a debate, but your original question was:
said by rradina:

So now that it's buried for FIOS areas, why do they need a new source of revenue from content providers to help recover those costs? Are they deliberately pricing a product that loses money?

I answered that question: the costs still need to be recovered, it doesn't matter to AT&T whether consumers pay to recover those costs, or content providers. I also answered your second question: they are not pricing their service at a loss.

As to your third question:
said by rradina:

However, if ATT doesn't lower prices, the consumer gets shafted. I assume you must also be a consumer. Do you want to get shafted?

I'm not sure where you got the idea that I don't want AT&T to lower their prices. I certainly do. All I'm saying is that they almost certainly will not, and that they made no legally enforceable promise to lower them. A general comment in a rule making is not a binding contract. I'm just being realistic, I'm not defending AT&T.
rradina
join:2000-08-08
Chesterfield, MO

rradina

Member

I was talking about my very first post where there was a comment regarding variable prices. You didn't really comment on that so my mistake.

fg8578
join:2009-04-26
San Antonio, TX

fg8578

Member

No problem -- it's easy to get lost in all the issues; I do it all the time.