At the turn of the century in the little town of Conway, Ark., electricity was hot stuff.
With demand for home lighting growing, in 1904 the city installed a new 200-horsepower Corliss steam engine and generator that would allow residents to bask in the glow of 25-watt incandescent lights from sundown through sunup. Up until then, the 1,000 or so lights connected to the power system ritually were turned off at midnight. For the expanded-hours service, users paid 35 cents per month, per light.
By 1910, the system had enough juice to accommodate 2,500 incandescent bulbs plus another 76 streetlights. But customers wanted more. Intense temperatures in the summer of 1910 were driving demand for electric fans, and a local printing company needed electricity to run new motor-powered presses and folding machines.
With the breadth of electricity applications growing, on July 8, 1910, a three-member committee of the Conway, Ark., city council voted to stop selling electric current to local residents for a flat monthly rate. Instead, they’d require all customers to install a meter. Customers would no longer pay by the light, but by the kilowatt-hour. The council fixed a price of 15 cents per hour, and in Conway, Ark., the business of measuring usage and charging customers proportionately was under way.
Conway was just one example of an industry-wide conversion. In the 1870s, when electricity flowed across strings of arc lights at a constant current and a common voltage, measuring usage was simple: you simply recorded the total time the current flowed. But Edison’s invention of the incandescent lamp in 1879 prompted big changes in the way electricity was delivered. Circuits were subdivided to allow individual control of lamps. The light in your house could be turned on, while next door, darkness reigned. Equally important, the commercial introduction of the transformer in the 1880s produced a new form of electricity, alternating current, whose consumption varied depending on the needs of the end device. Sensing a big opportunity, electricity entrepreneurs like Westinghouse’s O.B. Shallenberger starting building new meter systems that could record with precision how much electricity individual customers were using – and allow distributors to charge them apace.
The first prong of that very same practice already has been introduced in today’s residential broadband Internet market. Thanks to a new breed of metering devices, broadband distributors have a good grip on the consumption patterns associated with their own flavor of “juice,” the kind that travels at thousands of bits per second and delivers not AC electricity but IP data packets.
An analysis of broadband usage patterns by the company Ellacoya Networks shows that in a typical cable broadband deployment, 5 percent of the user base consumes 61 percent of available bandwidth, mostly by weight of bandwidth-gobbling “peer-to-peer” activities such as slinging music and video files across the network. Yet despite these obvious imbalances in consumption, the manner in which broadband is made available and priced remains stubbornly similar to the 1880’s “one light bulb, one fee” model for electricity. Substitute the word “computer” for “light bulb” and you have a reasonable parallel.
The cable industry’s response to these imbalanced consumption patterns so far has been lots of internal hand-wringing and a little bit of external wrist-slapping. Some operators have resorted to so-called “bandwidth caps” that turn off the spigot if users exceed a certain monthly data allotment. But that’s the economic equivalent of the local restaurateur rushing to bar the door from the customer who has a bothersome habit of wanting to eat lots of food.
In real life, of course, the way the restaurant would respond to this plea for more is by cooking up extra helpings of crabcakes and selling them at a profit. Cable, oddly, has no mechanism yet in place to fulfill what is unmistakably an expression of appetite.
The electrical power companies that sprang to life in the late 1880s had little trouble figuring out ways to capture economic advantage from the rising demand for their service. Electricity companies had light bulbs, then electric fans, then refrigerators and washing machines to feed. Broadband distributors have PCs today, and home security systems, digital photo appliances and video game consoles to contend with tomorrow. The consumption patterns for broadband are going to get more disparate, and the imbalance among customers, more pronounced. If cable can’t figure out a way to synchronize its product and pricing to the demonstrated wants of the world, its high-flying broadband service business is liable to go the way of the gas lamp: Out.
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