Give It Away, Give It Away, Give It Away Now

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Wired claims that the surest way to make money providing wireless Internet access is to give it away. Counterintuitive though that may sound, I'm writing this very blog post from DC WiFi cafe Tryst, preparing to order an overpriced coffee beverage and sandwich.

So… why does it work like that? Partly it's a question of transaction costs: I don't want to have to worry about going through the hassle of paying for access and thinking about how long I'm spending online when I've got perfectly good access at home. But if I can go out for lunch or coffee and just bring my laptop along, I might well stay a little longer and have another drink as long as I'm here…

NEXT: It Had to Happen Dept.

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  1. Once again, the old fears (mid-90s=”old” these days) about IT worsening sprawl by fostering telecommuting are being rebutted. What’s actually happening is telecom feeding into an urban renaissance.

  2. Not to mention getting people out of the house (or office) into public spaces.

    Of course, I just got back to the office after sneaking out to the Starbucks’ down the road…WiFi or not, some of us just need the caffine and sugar…

  3. Julian, thanks for deleting my correction of your grammar, BTW.

  4. I don’t delete comments, so I’m not sure what you’re talking about. Correct away.

  5. Funny how the people that complain about traffic and the need for public trans are the same group that think telecommuting will lead to more sprawl. More telecommuters = less cars. Less cars = less traffic. Count me in for more telecommuting.

  6. Julian,

    Ahh, well I’ll blame it on your wicked web guru. 🙂

    Mo,

    Paris and lower Manhatten will be WiFi soon!

  7. This is kinda like little salt and pepper packets, when you think about it – who the hell would buy such things on their own? But who _doesn’t_ get pissed when the morons at the drive-through don’t give you proper condiments, like salt, automatically?

    This is just a rather high-priced version of the same thing.

  8. The title of Julian’s article (repetitive as it is) is a misnomer. No sensible business gives anything away for free.

    The price of the WiFi is in that cup ‘o java you’re drinking — just as the “free” oggling of topless dancers is covered by that $12 drink you just bought, and just as the price of those “free condiments” (mayonnaise, ketchup, salt, pepper, napkins) are in the price of that Big Mac.

    TANSTAAFL, my friend.

    As far as “More telecommuters = fewer cars. Fewer cars = less traffic. Count me in for more telecommuting.” … Amen, brother!

  9. Oh, that reminds me: “free” in common use is the Economics equivalent of the term “zero-price”, as refering to any individual thing (good or service) performed. As an example, having someone collect your dishes when you are done eating in a restaurant is “free” in the common use sense – you don’t have to pay for it. More explicitly, and accurately, you don’t have to pay extra for that particuarly service – it’s price is covered in other ways.

    When you think about it, in accordance with your point, a huge amount of things are “free” in the common use sense (which is where common use gets silly and exposes faulty assumptions and reasonings, as it often does) – when you get down to it, you explicitly and directly pay for very little. For instance, you don’t pay for menus, you don’t pay to be greated, you don’t pay to sit down, you don’t pay to walk on the floor, you don’t pay to be protected from the rain by the roof, you don’t pay to use the bathroom, and most people don’t pay for sex. Of course, you pay for them alright – just not explicitly and line-item individually. It’s a basket of goods, really – a package deal.

    How it is that breaking a basket of goods into individual products and selling them sepperately explicitly for money becomes immoral or otherwise wrong or taboo, as with sex and relationships, becomes economically incoherant…but then, you’d think we’d be use to that sort of thing by now.

    Post that ended up starting being about money and ended up being about sex: +1 for Plutarck.

  10. Uh…upon re-reading:

    “For instance, you don’t pay for menus, you don’t pay to be greated, you don’t pay to sit down, you don’t pay to walk on the floor, you don’t pay to be protected from the rain by the roof, you don’t pay to use the bathroom, and most people don’t pay for sex.”

    I ask myself: Just what the hell kind of restaurant is this, anyway?

    That didn’t quite come out as I intended it to. Oops.

  11. I’d say! (I was about to cut ‘n paste that very same paragraph. Thanks for doing it for me.)

    Menus, chairs, bathrooms, and real estate are all part of the general overhead — calculated in THE COST OF DOING BUSINESS.

    It is then up to the (hopefully smart) business person to recoup such costs during the course of doing day-to-day business.

    Sheesh! What is this!? Are we back in Econ 101 class again? Do we have to spell out such elementary concepts?

  12. Yes, we do.

    Pricing has little to do with the actual cost of the product or service but rather, what the market will bear. There is about a nickle’s worth of oats in a 4 dollar box of Cheerios, for instance. Figuring out where the other $3.95 went is an interesting exercise.

  13. I forgot to mention that the 4 dollar Cheerios sit next to the 4 dollar Wheaties.

  14. “Funny how the people that complain about traffic and the need for public trans are the same group that think telecommuting will lead to more sprawl. More telecommuters = less cars. Less cars = less traffic. Count me in for more telecommuting.”

    A lot of people make this error. Only about a quarter of the trips generated by a suburban house are work trips. That leaves 3/4 that are shopping, school, movies, etc. And while these trips aren’t as clustered during rush hour, and hence don’t contributed to the traffic problems as much, they are still worth considering, as they do add up. The fear is that people will work from their home offices in their suburban homes, and still have to drive 5 miles to big box stores by the highway for everything. Like suburban park and ride lots at the train station, telecommuting solves one transportation problem, but can create other land use and transportation problems – for example, too many houses on a little unimproved country road without sidewalks, all on septic instead of municipal sewer.

    But so far, telecommuting seems to overlap more with people who want to live in an actual neighborhood, in an interesting city. These people walk or subway for a lot of their trips.

    Will it remain this way? Suburban homes in residential subdivisions have always been seen as refuges from the big, bad outside world. But when you have no contact at all with that world, even the sprawl people get bored. And going out and doing something is much less convenient if you have drive a long way, and less satisfying if you never get out of your car. So I see telecommuting as continuing to be more popular among urbanites.

  15. Well, yeah! Prices can be, and often are, perverted and distorted. Especially when you bring a greedy third party into the equation.

    In a natural marketplace (the agora) there’s a willing buyer and a willing seller. That’s 2 parties. But when party #3 arrives on the scene, slapping tariffs on top of the product, heaping taxes onto the deal, artificially raising the price through the costs of regulations, etc., etc., ad nauseam — then we no longer have a normal, natural marketplace, and you’ll get your distortions like the $3 loaves of bread and the $2 jugs of milk that you’ll need to go with your $4 Wheaties.

    So, No! Figuring out where the price gets looted is not a particularly interesting exercise. (We all know it stinks.) That ain’t “pricing;” that’s stealing.

    Excuse me while I go barf.

  16. “when the taxes don’t prevent a trade from takng place, you still have willing buyer and seller, and the tax is just one more “cost of doing business” priced in.

    But there comes a point where that price becomes too high, Julian. I would certainly switch my breakfast preference if and when Wheaties sell for $27 a box. Same for any other commodity.

    And at that point we’ll no longer have “willing buyers,” thanks to Mr. 3rd Party who distorts the natural agora.

  17. Actually, with respect to the analysis above, I don’t see how the imposition of taxes etc. really changes anything. For those transactions when the taxes don’t prevent a trade from takng place, you still have willing buyer and seller, and the tax is just one more “cost of doing business” priced in.

  18. Nope. As long as Cheerios sell for four bucks, so will Wheaties. It has little to do with cost of production.

  19. And a few shelves above the $1-2 dollar Generic Colored Corpuscles.

    “Gotta Have My Corpuscles!?”

  20. Fine, but when Cheerios sell for forty bucks, will Wheaties follows suit, too? And if so, how many “willing buyers” will remain to make it worth any further production?

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