[brudgers]

Economically, adding such a layer creates perverse incentives. My router becomes profitable when I make its bandwidth scarce. The same incentive applies to everyone else with a router.

My ISP's gateway agreements become structured around a new definition of efficiency. Extract the maximum possible toll for each bit.

This new definition means, the more spam received The more my email host can raise the tariff. It can hold my incoming mail hostage.

The logic which underpins the idea is the finite pie. It ignores the possibility that network effects offset the cost of infrastructure even though that's what has driven the internet and mobile cell networks to vast scale over the past twenty years.

But it's still a great thought provoking article

[Taek]

In the world of ISPs, the potential pie is a lot bigger than our current pie. If you reduce the barrier to entry, a lot more people will find it worthwhile to spend money on being competitive.

If you make bandwidth scarce and expensive, I'll come in with my own router and charge less than you. Right now that would cost me millions of dollars. But if just needed $10k or $20k in capital to start profiting from my whole neighborhood, you might see a lot more ISPs cropping up.

I also think that decentralization will start to play a much bigger role in all of this. It's hard for you to hold my mail hostage when I'm using the decentralized MailCoin to manage my email.

Right now, cryptocurrencies aren't really strong enough to do all of this. But maybe in 5-10 years they will be enough to be the fundamental 5th layer mentioned in the article.

[eof]

> My router becomes profitable when I make its bandwidth scarce. The same incentive applies to everyone else with a router.

If you make your bandwidth scarce (and expensive) someone else with a router may be incentivized to make their bandwidth slightly cheaper; so you end up with zero profit (as you have no customers). This is the fundamental reason why market-based strategies are effective; you are competing with everyone else's router, not cooperating.

[brudgers]

In a finite pie model, yes, there's a Hobbesian war of all against all. Another model has Apple and Google agreeing not to poach each other's employees.

The idea of micro-transaction tariffs for traffic on the internet has been around since the 1990's when people were not sure that the internet could scale using the shared bandwidth model. It did, and micro-transaction tariffs never took off because it didn't solve an actual problem.

The article doesn't mention any existing problems that micro-currency tariffs would solve. The only problem crypto-currency in its current form solves is one of the minor problems with micro-transactions - it more easily allows for very small values to be treated as integral outside the system of micro-transaction - i.e. crypto-currency in its current form might not require aggregating many micro-transactions in order to purchase goods or services unrelated to the internet.

[DennisP]

> My router becomes profitable when I make its bandwidth scarce. The same incentive applies to everyone else with a router.

This is a case where the public goods problem works in our favor.

Assume there are many routers, owned by different people, and lower total bandwidth increases total group profit.

If a person is providing 5% of total bandwidth and increases it to 10%, the total bandwidth only increases by about 5%, decreasing overall profits slightly. But that person's share of the profit doubles. Consequently everyone's selfish interest is to increase bandwidth.

Of course this only works out well if there's plenty of competition, rather than the local near-monopolies we mostly have now.

[higherpurpose]

More likely the opposite will happen, as thousands or millions of people will become "ISPs", and rent their bandwidth. I think it will be more like the storage competition, where it gets cheaper and cheaper all the time per GB.

[brudgers]

Most people's routers don't sit between me and what I am interested in - e.g. your router probably isn't between me and HN. Instead the routers between me and HN are run by big boys not enlightened individuals. Tor only works because their is no cost to linking the network.

The analogy, I would use is banks and there reconfiguration to maximize fees. They still make money from loans, but minimum balance fees and ATM surcharges carry much less risk.