Today, Josh Levy waxed poetic about the tiered pricing announced by AT&T. As I mentioned in my previous entry, the danger in the low data limits is the future. Something Josh also pointed out.
But the point I hate is that AT&T is somehow evil because they aren't charging at the cost of providing the bandwidth. In other words, Josh believes that AT&T is in a perfectly competitive world where the price is equal to marginal cost (and equal to marginal revenue). Unfortunately, that's not the case. AT&T certainly faces a downward sloping demand curve and will price where marginal revenue is equal to marginal cost.
The second assumption (and wrong) in Josh's post is that users are 3G-dependent. The pricing structure is encouraging use over WIFI. And may actually induce competition to provide access to the web over WIFI. Sure, there are hot spots where it's free. But what about competition occurring between 3G and WIFI? A world where you could pay for access to WIFI that undercuts the perceived outrage over the tiered pricing of AT&T?
As Jeff Ely pointed out, most costumers are probably overestimating their usage and this outrage over killing innovation is probably misplaced. Rather, it just creates a constraint that people will innovate around.
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