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Forbes.com

 

Who Pays For Speed?

February 27, 2006

By Peter W. Huber

Companies that sell bandwidth are now hatching plans to sell really fast end-to-end connections to the people most likely to buy them. Digital pundits are furious. That someone might pay more to get faster delivery of content is an outrage, they declare. The problem is this: Advertisers, not homeowners, are the ones most willing to pay for fast connections. But any pricing scheme set up to accommodate them means that some content travels first class, some coach, and that, we are told, violates a cardinal Internet principle of "network neutrality."

At stake are the huge sums that retailers spend to hook customers and close sales. That spending covers most or all of the cost of producing magazines, daily newspapers, radio programs and television shows. Google is flying high because it worked out how to target advertising much better than the traditional media, using the cornucopia of free Web content as bait. Advertisers pay Google nickels and dimes (or more) for every customer who clicks a link. Cable operators, phone companies and wireless carriers are now plotting to pick up the quarters (or more) after Google choreographs the click.

They can, they should--and they will. Nobody whines when an Internet cafe gives you a free high-speed connection as a come-on for selling coffee. When you call an 800 number the phone company doesn't charge you, it charges the retailer at the other end of the line. No law of economics, no deep logic of Internet gestalt decrees that bandwidth must be paid for at my end of the line rather than at Google's. The market works these things out, as it should. Regulators shouldn't get in the way.

The gnomes of Google know what interests you because they read what you type and watch what you click. Knowing what they know, they can hook you up to the advertisers who most want to reach you. All those billions of pages and links stored on Google's servers are as economically marginal as Jay Leno and the Super Bowl. From Google's perspective, their only role is to attract eyeballs to advertisements.

Google can also track (and thus bill for) actual customer response. Asbestos lawyers reportedly pay Google a hundred dollars for a single click-through by someone who has just searched for "mesothelioma." Super Bowl advertisers, by contrast, have to pay indiscriminately--and in advance--for eyeballs that may in fact be peering into a refrigerator or counting bathroom tiles. So they pay a lot less.

Smart companies still pay a lot for a single minute of airtime on Super Sunday because Web connections are too slow--not just for football, but for great commercials. Fast action and fine graphics are what sell running shoes, cars and beer. Exciting things are febrile, rich and subtle. Web connections don't deliver content of that quality. Google can click you through to an asbestos lawyer. But a merchant can't sell youth and vitality over a dial-up modem. So it sticks with the media that can deliver its action-packed pitch to a glossy, shimmering wide-screen television.

But that pitch is most likely carried much of the way over glass fiber owned by cable operators and a growing number of phone companies. And cable, phone and wireless carriers are racing to deploy the bandwidth that will make the last mile of the Web just as fast and flashy as the high-definition TV carried through airwaves or cable. The one hitch: Few homeowners are currently inclined to pay what these gigabit-speed Web connections cost. Accustomed as we are to free broadcasting, it could be a while before our habits change.

Advertisers, however, don't have to wait for the homeowner to shell out for an ultrafast Web connection. They have as much reason to pay carriers for a faster link to a likely customer as they do to pay Google for identifying him. Businesses that sell movies or peddle books or auction knickknacks online will certainly be willing to pay for high-speed delivery of their content. And whatever you're selling online--banking, shopping, gambling, porn or just a come-on for your walk-in showroom--you're going to sell it better with a faster connection.

If an asbestos lawyer is allowed to pay extra for favorable placement on your Google screen, MovieLink is surely allowed to pay for faster delivery of Tom Cruise starring in The Firm. Much of our broadcast system was built up by the Marlboro Man and his siblings on Madison Avenue. That suggests an interesting possibility: The next big thing after Google could well be companies that Google takes for granted, Silicon Valley sages revile and Wall Street doesn't much like at the moment. The retailer that's willing to pay Google a nickel for your click will end up paying Time Warner or Verizon a dime to deliver to you, on the double, the content behind it.

Original Source: http://www.forbes.com/free_forbes/2006/0227/056.html

 

 
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