Hear BellSouth's scream - "You sunk my battleship!" - as Noteworthy blows their airline analogy out of the water: Would these new fees imposed by carriers alter the basic nature of the Internet by putting bumps and detours on the much ballyhooed information superhighway? No, say the telephone companies. Giving priority to a company that pays more, they say, is just offering another tier of service -- like an airline offering business as well as economy class. Network neutrality, they say, is a solution in search of a problem.
Any business practice that even vaguely resembles the airline industry should be met with a hefty dose of skepticism. Obviously, these telco spokespeople have some homework to do. Let me help: Changes In Demand For Air Travel Overall, passengers have become more empowered due to transparency in price and service information, and it appears that passengers are becoming more value conscious, demanding choice, and flexibility. However they are prepared to give up frills, choice or flexibility in return for lower prices. This is certainly very evident on short haul routes.
Making sense of the airline business The key to survival, then, is an economic limbo dance that allows the carriers to keep seats as full as possible while driving costs as low as they’ll go — while knowing too much pressure on either end brings the risk of losing customers and scuttling your business. At this point, travelers are discovering that real, qualitative differences in service are ever harder to find on the shorter-haul flights that make up most domestic air traffic. Even premium travelers have begun to flirt with low-cost options, and low-cost airlines have won at the expectations game, educating customers beforehand so they’re happy when they deplane.
This article by Hal Varian merits further study: Differential Pricing and Efficiency, by Hal Varian The classic prescription for economically efficient pricing---set price at marginal cost---is not relevant for technologies that exhibit the kinds of increasing returns to scale, large fixed costs, or economies of scope found in the telecommunications and information industries. The appropriate guiding principle in these contexts should be that the marginal willingness to pay should be equal to marginal cost. This condition for efficiency can be approximated using differential pricing, and will in fact, be a natural outcome of profit-seeking behavior.
Perhaps we should write to him and ask him to write about this topic in his next NYT column. I found this data interesting: Advertisers Climb On Board According to the AAB, air travelers have a median annual income of $93,822. Shuttle services provide an even more elite audience. On the Delta Shuttle, for instance, more than one-fourth of the passengers earn in excess of $250,000 a year, with the average annual income $181,498.
There are lots of strategies to consider: How to Fix the Airlines Of course, the traditional carriers say they don't need to match discounters' costs. American historically has achieved at least a 30% "revenue premium" over the low-cost carriers, by charging more on routes with little competition and winning more high-paying business passengers. They have been willing to pay more for first- and business-class service, airport lounges, frequent-flier programs, and other amenities. But is that 30% premium sustainable? Probably not. With Southwest, JetBlue, and other low-fare players rapidly expanding their routes and becoming more valuable to business passengers, that revenue stream is in jeopardy. "It's a real question whether [the network carriers] are providing something of value to the consumer," says airline consultant Michael Roach of Unisys R2A Transportation Management Consultants.
First, review this primer on yield management, then try your hand at this animated simulation program aimed at testing your understanding of revenue management concepts and ideas. Back to the Post article: At the end of the day, Google's Davidson says that his biggest worry is not for Google but for the prospect of bringing fresh innovation to the Internet. After all, if worse comes to worst, Google can pay AT&T or BellSouth to maintain its role as the Internet's dominant search engine. But the bright young start-up with the next big innovative idea won't have that option.
Who really gets hurt by 'prioritization' of the Internet | 
