Several years ago, I remember having a conversation with someone very smart who worked at an internet service provider. He told me that his company was walking a very fine line in terms of how the internet is paid for and monetized. The companies that provide access to it were in a state of perpetual balance with the individuals and companies that provide services over it. If the internet wasn’t full of so much awesome stuff, there might not be a point to paying for it, this person said.
The internet has since become thoroughly commercialized, so I can’t help but wonder whether that balance is now completely out of whack. With virtually nothing online coming for free anymore, exactly why are we paying to access it?
Just for kicks, I thought about how I personally use the internet and broke it down into four categories: ongoing pay services, pay-per-use services, seemingly free services and actually free services.
Ongoing pay services: These are the things that demand payment on a regular monthly or annual basis, including Netflix, Skype, Xbox Live, hosting and domain registration for websites, and so on. Services such as Hulu Plus, Spotify, Marvel Unlimited and the like also qualify. I don’t currently pay for any news services, but at the rate at which organizations are adopting paywalls, it’s probably just a matter of time.
Pay-per use services: This is for individual, one-off purchases, like iTunes music or apps, or books and the like from Amazon.
Seemingly free services: This covers everything Google, Facebook, Twitter and just about every other supposedly free internet service, from maps to email to search to videos to social networking, where the fee isn’t necessarily monetary, but rather informational. As is evident from the ongoing NSA-PRISM scandal, the cost of such services – should a user’s data fall into the wrong hands – can potentially be much higher than any dollar value. Such services will inevitably lead to or spur alternative subscription and one-off options, whether it’s the sort of virtual private network encryption I wrote about recently or perhaps even micro-transactions – imagine a Google-like service that doesn’t gather your information, but rather charges you per search. Either way, we’re going to pay for all this stuff one way or another.
Actually free services: I’m a little hard pressed to think of internet features that still fall into this category, other than Wikipedia, personal blogs and piracy, which is ultimately going to be countered either by copyright cops on the down side or superior, paid legal services on the upside. Even the vast majority of websites, while useful, are effectively advertisements for whoever they belong to (yes, even this one, in a sense). So is there anything else left that’s truly free?
Adding all this together, it’s clear that simply using all the cool things on the internet now amounts to a major expenditure for the average person. So again, the question: why do we pay to access it?
The internet has often been compared to electricity, as far as utilities go. While there are some similarities, they are also ultimately very different. While we do pay to access the electricity grid and for metered usage of it, just like the internet, we don’t pay yet again for individual uses of it. We don’t, for example, pay another fee for using electricity with a shaver or to power light bulbs. We do pay to buy those individual items, but we also do that for the devices that connect us to the internet. The internet is thus different from electricity because there is an extra layer of payment involved in order for it to be useful.
Using the internet today is more akin to paying a hefty cover charge just to get into a shopping mall. Put another way, that $50-plus monthly internet bill is effectively a big system access fee. Here in Canada, we certainly raged against that.
Sure, the internet’s network needs to be maintained and upgraded and that requires money, but so do malls, yet we don’t pay directly to use them. Perhaps it’s time to rethink the whole economics of the internet. That’s not meant as any sort of anti-telecom-company idea, but rather a genuine suggestion.
To continue with the mall analogy, it’s the stores located there that pay to maintain and upgrade their common infrastructure through rents to the property owners. Those costs are then passed on to consumers in the form of higher prices in the stores.
Could that work with the internet, and should it? In a way, it already does. Service providers, from Google to Skype to Netflix, pay ISPs for their access and bandwidth usage just like consumers do. In a sense, the current scheme means ISPs are double dipping: they’re getting user fees from both service providers and service users.
Perhaps, in an age where everything useful about the internet costs us in one form or another, the responsibility of maintenance and upkeep should be passed on solely to those providing services on it. That might result in them charging higher prices, but so what? They’d have to compete with each other – as well physical world services – which could keep prices low.
It also might be preferable to have the likes of Google and Apple fighting ISPs to keep access costs down and improvements up. That would save the public, government and regulators a whole lot of effort.