All you can eat vs. a la carte pricing

Recently the airline industry has taken to charging fees for many things that used to be free, like more luggage, meals, even pillows. At least, that's how the news reports it, how people talk about it. But did those things used to be free? Calling them "free" is certainly the simpler way of putting it, but it's also deceptive. It makes us react to these fees with righteous indignation, as if they're taking away something to which we were entitled, which we already owned. That may lead to some great humor, but it's not really fair.

The thing is, those things were never free. They were just included in your ticket price. There are pros and cons to this approach on both the buyer and seller sides, but let's focus on the buyer's side. Positive: that means you could take advantage of those services without feeling guilty about them or worrying about your budget. Negative: if you aren't taking advantage of those services, you're helping to pay for them when other people do take advantage of them. One way of putting it: everyone on the plane who packed light is helping to subsidize the people who packed two extra suitcases. Is that really more fair?

It's not more fair either way, really. It's a tradeoff. Too far in either direction doesn't work: a completely "all you can eat" pricing means everyone's paying for things they won't use, but a completely "a la carte" pricing makes the process of purchasing too onerous in most cases. In any case, the question of how much you pay depends more on the baseline price of the services than it does on the details of how those prices are distributed. If the airline covers its increasing costs by charging an extra fee to some of its customers (the ones, hopefully, that incur them more costs), they do so instead of raising your ticket prices. So if you're one of those who has to pay those extra fees, you're not suddenly paying more than your share. Maybe, if the fees are being done reasonably, you're just paying your fair share for the first time.

The same argument can be made for the trend amongst ISPs towards a capped bandwidth limit, and eventually, towards a per-gigabyte cost. With airfares, the vast majority of customers would cost an amount near the average cost, but with ISPs, most customers use far less than the average, while a very small number of people use orders of magnitude more bandwidth: so a change away from an "all you can eat" pricing system is probably good for a huge number of people (though the people it's bad for, who've been getting their free ride subsidized by their neighbors for years, are sure going to be volubly upset).

And unlike with the airplanes, ISPs could charge with an arbitrarily fine granularity without incurring more overhead costs from the bookkeeping than they'd earn; it's very easy to count the number of bytes downloaded to a very high precision without significant overhead and make the bill a formula based on that. They probably wouldn't because of the psychology of the issue: people don't want to feel like they have to watch the stopwatch while they surf (which is why cell phones are moving the opposite direction, towards more flat fees, even amongst customers who will end up paying more that way).

But a lot of it is just what we happen to be used to. We're used to ISPs charging a flat fee per time regardless of usage, so a per-usage fee structure upsets people. But no one even imagines the idea of a gas station where you pay a fixed amount per month for all the gas you can pump. Is there any real reason for the disparity?