Tech moves away from the all-you-can-eat model

[Commentary] Now, thanks to the ingenuity of the tech and telecom industries, there are so many people demanding so many new services that networks are straining to keep up -- and the costs of adding capacity are escalating rapidly. That's why Comcast and other cable operators are demanding that they be allowed the flexibility to manage their networks to give lower priority to services that hog large amounts of bandwidth -- or, at a minimum, to charge higher rates for customers who use such services.

And it is why AT&T announced last week that it was moving away from its unlimited pricing for Internet and data service on its wireless networks, in favor of the kind of "tiered" pricing that Eli might appreciate. Not surprisingly, those who have relied on cheap and plentiful network capacity to dramatically expand their businesses -- everyone from Google to iPhone application developers -- are concerned that charging people based on what they consume will slow the growth in Internet usage. As a general rule, the most sustainable pricing strategies are ones that avoid overcharging one group of customers to make it possible to offer bargain prices to others. The danger of such cross-subsidies is that a competitor could come along and pick off the overcharged, and highly profitable, customers by offering a better value. At the same time, you don't want to push that logic too far by charging every customer a different price.