Tuesday, April 11, 2006

Tragedy of the "free internet" Commons

The tragedy of the commons is nowhere more apparent than one of the local coffee shops with free internet access.  Some days you go, and the connection is flying fast, and other days you go and it is crawling.  Some days, several people cannot even get a connection.  I like watching those people constantly right-clicking on their little network wifi icons, desperately trying to grab the brass ring.  Of course, some days that’s me, and I do not like it.

Now, some economists would argue that this is wasteful.  Clearly there are some of us who would happily pay $1 to be on the network while others might not.  Of course, the $1 might be $2 or $3 or $6 or whatever it takes to get the “right” amount of users off of the network, so those that value it more can use it with a at an optimum level.

Sounds right to me.  However, this forgets the marketing aspect.  “Free Wireless Internet” signs attract more people (especially in a college town).  The coffee shop probably isn’t too concerned with the quality of the service at peak hours.*  It just wants the people in the door.  It does offer free internet after all.  Well, how about working that $1 charge into the product price then?  This is a classic argument.  The users can still have “free” internet, but just charge a little more for each coffee.  Clearly, as it is now the internet isn’t really free.  The “free” internet is already in the price of each cup of coffee.  Why not simply increase the cost to deter those who do not value the free internet as much as the others.  Oh my, this is a problem now… Not everyone who comes cares about the internet at all.  Why should they pay more? [See moral hazard]  Also, what about peak hour versus off-peak prices?  No need to deter internet freeloaders when the use is already low.  If you deter them all the time, then you never get their money for coffee even when you would gladly give them free internet.  No, you couldn’t always have higher prices.  And what about people who buy no coffee to begin with, but use the internet anyway?  Enforcement costs! And on and on it goes…

Solution?  I don’t know… I guess you could disconnect the use from the coffee prices in the first place.  I see a 3rd party who gets revenue from the internet use (advertising perhaps).  If a 3rd party wanted as many eyes logged on to the network, they would be benefited by increasing the bandwidth in the coffee shop.  The coffee shop could advertise free internet, and the internet provider could charge advertisers for the eyes of those surfing for free.  Who knows… I have so much work to do, and I am wasting my time with this crap.

This is why I stopped posting.

*[There is a whole other line of argument that they should care, but for now, I will assume that away as so many economists are apt to do—Additionally, one can argue that, no, the marketing aspect means it isn’t a tragedy of the commons as the aim is not use of the network at all (as is the case with roads and beaches) but marketing period.  I agree, but that is dull and too easy.]  


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