> The physical infrastructure is what makes everything on top of it possible, and at the same time it is one of the most expensive pieces to build, upgrade, and maintain. There needs to be adequate returns on investment in the infrastructure, and that's hard to do in the unbundled model.
Why is it hard? You charge a price that reflects the cost of building the infrastructure. 200Mbps service can have a higher price than 50Mbps service, providing an incentive to build the capacity necessary to offer it. Which is still true even if the price for the faster service falls to approach the price for the slower service as upgrade cost is paid off. And then there is another upgrade and 1000Mbps service becomes the more expensive one compared to the now more affordable 200Mbps etc.
> Consider trains. Trains create value for people using the train to get around, but also value for the real estate by the train station. If you only let the train company recover from the rider, you won't incentives that reflect the true value of investing in the train.
You're essentially arguing against there being efficient Coasian bargaining. But the arguments against it are usually related to transaction costs, which don't seem to help you here. If Comcast can't charge anything to Netflix and as a result Netflix service is slightly less expensive to the user and internet service is slightly more expensive to the user, the user is not engaging in any new transactions and the net to the user is approximately zero. Moreover, then there is no transaction happening between Comcast and Netflix, which reduces the overall number of transactions that have to occur.
Why is it hard? You charge a price that reflects the cost of building the infrastructure. 200Mbps service can have a higher price than 50Mbps service, providing an incentive to build the capacity necessary to offer it. Which is still true even if the price for the faster service falls to approach the price for the slower service as upgrade cost is paid off. And then there is another upgrade and 1000Mbps service becomes the more expensive one compared to the now more affordable 200Mbps etc.
> Consider trains. Trains create value for people using the train to get around, but also value for the real estate by the train station. If you only let the train company recover from the rider, you won't incentives that reflect the true value of investing in the train.
You're essentially arguing against there being efficient Coasian bargaining. But the arguments against it are usually related to transaction costs, which don't seem to help you here. If Comcast can't charge anything to Netflix and as a result Netflix service is slightly less expensive to the user and internet service is slightly more expensive to the user, the user is not engaging in any new transactions and the net to the user is approximately zero. Moreover, then there is no transaction happening between Comcast and Netflix, which reduces the overall number of transactions that have to occur.