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Will Capped Data Plans Kill the Cloud?

Posted by samzenpus on from the that's-enough-for-you dept.

theodp writes "With the introduction of its Chromebook, Google is betting big on the Cloud. As is Apple, with its iCloud initiative. So too are Netflix and Skype. Unfortunately, their very existence is threatened by data-capping carriers, who have set a course to make sure that the network is NOT the computer. 'I don't know what the solution is,' writes David Pogue. 'I don't know if anyone's thinking about this. But there are big changes coming. There are big forces about to shape our lives online. And at the moment, they're on a direct collision course.'"

1 of 530 comments (clear)

  1. Fixed, variable and opportunity costs by sjbe · · Score: 5, Informative

    But there is no fixed cost for moving data around.

    What you are saying is more or less correct but your terminology is wrong. What you are describing is properly called a variable cost not a fixed cost. The equipment used to build and operate the network is largely comprised of fixed costs. It costs the phone company the same money whether they send one packet or one million packets. The costs associated to a specific packet would be variable costs and as you rightly point out, the direct variable costs are negligible. As equipment is used, the fixed costs get amortized over a large volume of data and in time become negligible on a per packet basis. This doesn't mean they become zero but they start large and become small asymptotically.

    That said there IS a cost that you are not considering. IF there is insufficient bandwidth available to serve all requests, then there is an opportunity cost associated with the data packet. If your data can't get through because someone else is hogging the pipe, you as a customer will get pissed and possible switch services (if possible). Since we know that the telecom providers have a large but finite amount of bandwidth available, opportunity costs matter. Hence data caps. They cannot serve all possible requests until their network has the capacity to do so. If they allow unlimited usage and people actually do use it that way (and some do), the telecom incurs an opportunity cost in the form of being unable to serve some of their customers.

    In THEORY data caps make economic sense. In REALITY, it's probably more greed by the telecoms than a real problem most of the time.