What Happens When the Marginal Cost of Content is No Longer Zero? | The Scholarly Kitchen

abernard102@gmail.com 2013-07-09

Summary:

"One of the axioms of the Internet is that bits are free.  That is, once you pay for the cost of putting something online, the cost of distributing each copy of the original material is zero.  People who actually work with online material know that this is balderdash (there is the cost of customer service, maintenance of the hosting service, potentially a cost for royalties, etc.), but certainly there is a difference in the economics of print and digital publishing.  Relatively speaking, print has moderately high fixed costs and very high variable costs; digital material has even higher fixed costs, but tiny variable costs.  This basic economic formulation has given rise to the world of the Internet as we know it today with a plethora of free services, some of astonishing value, of which Google is simply the most prominent.  But it wasn’t always this way and it may not be that way forever.  There are powerful parties who have an interest in placing a price on bits, and if and when that happens the Internet will evolve into something different ... As I recall, the game-changing business model was invented by an Internet service provider (ISP) called Netcom, which came up with the radical idea of providing residential dial-up access to the Internet for a fixed monthly charge of $19.95.  Early adopters jumped on this, and not long afterward the AT&T WorldNet service matched the offer, bringing its brand name and marketing authority to a mass market.  AOL responded with a fixed-rate service of its own (which, amazingly, still exists) and rapidly became the world’s largest ISP.  Allowing for technical advances and a new cast of players, this is the world that most of us live in today ... If Netcom, AT&T, and AOL were responsible for creating one paradigm (abetted by Tim Berners-Lee, Mark Andreesen, and many others), the principal creator of the new paradigm was Steve Jobs, who transformed the world of computing with the iPhone.  Mobile access to the Internet now exceeds access from PCs.  A new ecosystem is growing up around smartphones (app stores, Twitter, Instagram).  Although this ecosystem is primarily a consumer phenomenon at this time, scholarly publishers are getting into the act, too.  I recently saw a group of proposals from scholarly content-management platform companies, and every one included a section on how a scholarly client would be able to make its content (journals) available on mobile devices.  Now you can flip through the abstracts from a journal of biostatistics on your Droid phone or watch an animation of a medical procedure on your iPad.  It truly is a new world, is it not?   There is no Internet without Internet access, however, and the ISPs that provide mobile access are not content to work with the business models of their brethren in the landline business.  Mobile telecommunications companies are now placing data caps on subscribers, something you will experience soon, if you have not already, when you traipse over to an AT&T or Verizon Wireless dealer.  The data caps are set fairly high (my daughter, who streams Pandora when she drives, has yet to hit the ceiling), but they are not really intended to tax the user.  The real target is Net Neutrality and the opportunity to collect rents from two sides–that is, the real target is the Internet companies (Google, eBay, Yahoo, etc., etc.) that have enjoyed unfettered access to their many users.  Net Neutrality is a complicated topic, which is based in politics, not technology or economics.  Its core principle is that everyone should be able to use the Internet on an equal basis.  Thus a blogger can speak to the world with as much force as, say, the journalists at Fox News or CNN.  Without Net Neutrality, large providers of content-based services would be able to purchase preferential access to users, most likely in the form of more bandwidth.  It should be apparent that ISPs don’t like Net Neutrality, as they would like to charge more to content providers that use up a larger portion of the capacity of their network.  It’s never good to underestimate the marketing ingenuity of the telecommunications companies.  I imagine a marketer driving to his local shopping mall, which charges a fee for parking.  He then steps into the supermarket, buys several items, and gets his parking ticket validated before leaving the store.  The shopping mall customer is supposed to be charged for parking, but in fact the fee is paid by the supermarket, which benefits from having the customer visit the mall.  That customer then goes into work at Huge Wireless Telco, Inc. and declares that he has found a way to subvert Net Neutrality.  Switch to the world of mobile Internet access and you will see how this works.  You pay, say, $30 each month for a wireless data plan, which comes with a cap

Link:

http://scholarlykitchen.sspnet.org/2013/07/09/what-happens-when-the-marginal-cost-of-content-is-no-longer-zero/

From feeds:

Open Access Tracking Project (OATP) » abernard102@gmail.com

Tags:

oa.new oa.business_models oa.comment oa.google oa.costs oa.prices oa.economics_of oa.net_neutrality oa.isps

Date tagged:

07/09/2013, 10:57

Date published:

07/09/2013, 06:56