Flexible Pricing & the Digital Divide

By Brad

Ars Technica reports on an interesting theory being floated by former Clinton economic advisor Robert J. Shapiro and Federal Reserve economist Kevin A. Hassett: Can flexible pricing of broadband based on usage actually break the digital divide?

From the story:

Shapiro/Hassett’s economic projections conclude that a “flat rate” pricing model gets the country 79.4% penetration for people under $30k by 2017, and 86.4% for people over $75,000 in the same year. But in a scenario in which “80 percent of the additional cost [is] allocated to the 20 percent of very high bandwidth users,” even lower income household broadband adoption will rise to 98.5 percent in 2017.

“To the extent that lower-income and middle-income consumers are required to pay a greater share of network upgrade costs, we should expect a substantial delay in achieving universal broadband access,” the study concludes. “Our simulations suggest that spreading the costs equally among all consumers—the minority who use large amounts of bandwidth and the majority who use very little—will significantly slow the rate of adoption at the lower end of the income scale and extend the life of the digital divide.”