Bandwidth and costs

[Dustin Decker]

On Mon, 15 Apr 2002, Jonathan Hutchins wrote:

> I was checking the numbers on this today, and at the $50/mo most of us pay
> for broadband, the initial cost takes four years to amortize ($2000/house
> initial cost + $10/Mo access fees).  Given the speed at which technology
> changes, that's not a very good amortization.  

I have long thought that the tax laws need to be changed to reflect life 
lived on Internet time and such.  As things stand today, it is 
absolutely impossible to amortize computer hardware in anywhere near 
realistic terms, as your average computer tends to depreciate in terms 
of intrinsic value quicker than a 1976 Ford Pinto.

Hell, I know for certain that the crappy P-133's that went home with 
employees after I replaced them in '99 with PII-370MHz machines (at 
something like $50.00 a pop) just came off the books at work only last 
year... depreciating this stuff is a glacial process.

> I know that Time Warner's equipment is a lot cheaper per house - they
> have most of the cable in place, and they're not doing fiber in the
> home, but still it looks like if they're amortizing the equipment over
> three years, it might not be that unreasonable to be charghing what
> they are.

I would be most interested in knowing how they run their books.  I 
suppose it is quite possible that they do some shell game math that 
allows them to right everything off as an operating expense within the 
purchase year - but I'm cerainly no tax guru.  One thing I have learned 
in the past 5 years in my own business is to purchase parts outright, 
and then refer to them as "computer repair parts".  This allows me to 
write them off entirely within a given tax year, vice the standard four 
year long practice that I (perhaps erroneously) understand applies 
specifically to new computer purchases.  If I replace a machine 
outright, I do it with "replacement parts" rather than an entirely new 
machine, even if this turns out to be the genuine end result.

My accountant has been very supportive, yet also quite addament about a 
few points.  1.) Don't buy a new computer outright if you intend to do 
it this was from someone like Dell or Compaq or whatever.  If you do, 
you end up with a single line item that must live in the four year 
purgatory.  2.) If you walk into (insert local vendor of your choice) 
and buy a new PC, make sure you don't have several items on the invoice 
with a zero dollar amount indicating a package purchase, or again, 
purgatory.

> Not that I think the price has anything to do with such mundane concerns -
> they figured out where the sweet spot lay between the highest price they
> could charge and the price that would get the most people connected,
> weighted toward the latter, and pretty much nailed it.  Otherwise you'd
> expect a big price difference between cable and DSL since the technology is
> so different.

I would expect (again, I'm not all that savvy here) that the cable 
already being there to support their other line of business helps out a 
bit.  They have the head-end and modems to deal with, but I suspect 
their price point absorbs things accordingly.  They haven't done a great 
deal to address bandwidth beyond what their cap puts in place, and in 
the future (so says /. anyway) they will charge more to bandwidth hogs 
to cover excessive bandwidth use anyway.

If anyone comes up with some solid numbers, I guess I would find them 
interesting - but more so if I were capable of competing with them, 
which I'm not.

Happy <hiccup!> tax day!
Dustin

-- 
"Even nowadays a man can't step up and kill a woman without feeling just a
bit unchivalrous..." -- Robert Benchley