I’m wondering what service are we actually paying for every month. What does it actually cost to provide data and how do they turn your services off if you don’t pay. Even before the internet was on phones, what did it cost them to provide us with minutes? I understand the phone companies provide the phones, tablets, etc but aside from that I don’t really get what they do that costs so much.
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The marginal cost of a single customer network usage is very low, it will be a bit of extra electrical usage. That is if the infrastructure is there and there is spare capacity.
The problem is building up that infrastructure, to begin with, and powering and maintaining it costs a lot of money.
At some point adding more customers will result in some parts of the network being over capacity for some locations and part of the day and you need to add more equipment to handle it.
Data caps and free call minutes limitation or just charging compared to the amount you use is a way to keep the usage down so the existing network can handle more usage.
Even for old wired phone networks, there is a capacity limitation, there might be possible that all subscribers connected to a single phone exchange can talk to each other at the same time but there will be a limitation on the number of possible phone calls between phone exchanges.
Even if it do not cost anything extra to provide the service and there is no limitation you can charge for usage. Companies’ goal is to make money. The lowest cost in general is the produce/service cost to provide. The max cost depends on what customers are willing to pay. The higher the cost the fewer customer you have. Competitor costs are also relevant here if you charge more then a competitor customer will move to the if produce/service. So ideally you set the price to what will result in the highest amount of profit.
You pick monthly fixed cost and usage cost so that the amount of money you make is maximized. A to high fixed cost and some customers that would not use the service a lot would simply not get it. A usage cost will get you more money from the customer that use it more and are prepared to pay more.
The price for a product/service is set by what customers are prepared to pay not what the cost to provide the product/service is something very important to understand.
If you go to a fast food place and purchase soda and a hamburger the soda. The cost of the soda might be 10% of what you pay and the cost of the hamburger might be 80%. They could set the price so the profit margin is the same for both, but why would they? The alternative is the cost of the soda is less than you are prepared to pay and the cost of the hamburger is more than people are prepared to pay. The better way is to change the amount customers are prepared to pay for each.
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