One problem with usage-sensitive pricing is the cost of accounting and billing. The cost would be astronomical if network providers were required to keep detailed accounts for every packet sent (comparable to call accounting by phone companies), because packets are very small units. However, the accounting load could be greatly reduced. First, … charges based on a statistical sample of packets sent might be acceptable. Second, if usage is priced only during congested periods, most packets need no accounting. Third, traditional phone company accounting systems, which seem like the natural comparison, may not be a good model. They are centralized and off-line; we think breakthroughs are likely in the area of in-line, distributed accounting, which will substantially lower costs.
Predictor: MacKie-Mason, Jeffrey K.
Prediction, in context:The 1995 book “Public Access to the Internet,” edited by Brian Kahin and James Keller carries the chapter, “Pricing the Internet” by Jeffrey K. MacKie-Mason and Hal R. Varian. MacKie is an associate professor of economics and Varian is a professor of economics at the University of Michigan. They write: ”One problem with usage-sensitive pricing is the cost of accounting and billing. The cost would be astronomical if network providers were required to keep detailed accounts for every packet sent (comparable to call accounting by phone companies), because packets are very small units. However, the accounting load could be greatly reduced. First, … charges based on a statistical sample of packets sent might be acceptable. Second, if usage is priced only during congested periods, most packets need no accounting. Third, traditional phone company accounting systems, which seem like the natural comparison, may not be a good model. They are centralized and off-line; we think breakthroughs are likely in the area of in-line, distributed accounting, which will substantially lower costs.”
Date of prediction: January 1, 1995
Topic of prediction: Information Infrastructure
Subtopic: Cost/Pricing
Name of publication: Public Access to the Internet (book)
Title, headline, chapter name: Pricing the Internet
Quote Type: Direct quote
Page number or URL of document at time of study:
Page 283
This data was logged into the Elon/Pew Predictions Database by: Guarino, Jennifer Anne