What with all the excitement about gig internet, one gets the impression that more bits/second clearly results in a faster internet experience.  However in reality, bandwidth is not the only major factor that goes into determining internet speed: there is also latency.  The speaker made the following analogy: if bandwidth is the number of lanes on the road, then latency is the length of the road.  Bandwidth determines how much data you can transmit at once, and latency determines how long it takes data to travel from your computer to its destination and back.  If the traffic is too heavy for the bandwidth, then speeds will be slower, but even using less bandwidth the speed is constrained by the latency.  The effects of bandwidth can be seen mostly when downloading and streaming in HD — or if there are multiple people trying stream/game/browse at the same time.  For speed of communication in activities like gaming and voice/video calls, though, the latency is much more important.

This leads to the issue at hand in the speaker’s current research: right now, there is no price on latency.  Cable companies advertise and offer plans based on bandwidth, despite the fact that bandwidth is only part of the overall picture of speed.

This leads to an interesting question: How do you price something that has never been marketed before?  You could always just ask people how much they would pay, but money in the hypothetical is never quite the same as real money.  In some scenarios, you can ask everyone to pay a certain amount beforehand, and then use a lottery system to actually buy the item for a small number of respondents and refund the rest.  This adds a sense of reality to the money in question, but unfortunately isn’t feasible when the product is an internet connection.

The other method mentioned was to try to calibrate people’s over or underestimation by also having them make choices about things for which the market prices are known.  For instance, in addition to asking about latency, you might ask how much they would pay for bandwidth and phone storage.  This definitely sounds possible, but at the same time, trying to measure how much people would pay for a thing based on measuring how much they lie sounds a like a bit of a dubious technique.  It isn’t just the money that’s intangible, but also the product.  You can describe loading times and lag to people, but you can’t actually make them experience it.  I’m not sure that you can assume that people would over/underestimate the same with regard to something they know well (like storage) and something they’ve never really thought about before, much less bought.

The speaker said that the only prices on latency so far are “just made up”.  Aren’t all prices, though?  In the end, some company is going to have to just start trying it out.  It might be a risk to go through all the effort to try to improve latency, measure it, maybe come up with tiers, and then figure out which plans people will and won’t buy, but with online gaming and things like Skype only ever becoming more popular, latency is a factor that is only going to become more important.

Given the rate at which internet use, internet business, and internet technology are growing, it’ll be interesting to be able to look back in a few of decades and remember these changes.  I’ll remember the fight for net neutrality, I’ll remember when people dropped television for internet, and I’ll even remember when we were still trying to figure out how to charge for internet plans.