Unlimited-Storage Pricing And 'The Tragedy Of The Commons'

I've been amazed during the past few days at the Strum und Drang over Mozy and others killing off their unlimited-use plans. While I like a bargain as much as the next guy, and think some vendor pricing models are just short of grand theft (like most wireless vendors' 20 cents a text if you go over your plan), unlimited pricing and variable costs will lead to reduced service and unfairness as low-demand users subsidize the hogs.

We see the lower quality and service outside tech wherever all-you-can-eat is the business model. The all-you-can-eat sushi bar has a tiny bit of fish and a lot of rice, and no one ever called Golden Corral fine dining.

The problem is similar to that described in Garrett Hardin's influential paper "The Tragedy of the Commons," which shows how shared use of common resources for private gain can lead to overuse and eventually the demise of the resource. Let us, as Hardin did, think of a group of shepherds that all have the right to graze their sheep in a field. As a shepherd adds to his flock, he increases his income by growing more wool but also depletes the grass in the field, leaving less for the others. Eventually the shepherds add so many sheep the grass doesn't grow.

So while I'm sympathetic to Mozy users like my friend Greg Knieriemen, who had 12GBytes of data on Mozy and is seeing his bill go up 20 percent, I think his blog post saying that Mozy was setting cloud computing back five years is a bit much.

On the other hand, I have much less sympathy for some other bloggers complaining that their prices will go up 10-fold because they have 638GBytes of data on Mozy. After all, Amazon S3, generally the cheapest cloud storage provider, would charge $90 per month or so to store 638GBytes plus transfer charges.Mozy clearly doesn't make money on the 638GByte user at $5 per month, even if he or she recommended five or six friends or family members who would use less than 10GBytes each. Changing the pricing model to make people pay what they use is just fair. Otherwise, you have to raise everyone's prices to cover the extra costs.

On the other hand, Mozy hit a clunker announcing a price boost for the base service and usage-based pricing at the same time. An offer that let existing users prepay for a year of unlimited use at a slightly higher price, leaving the base price alone for a year or so and setting the amount of data included at the base price to the 90th percentile of user storage, would have seemed fair to me.

Several vendors, including CrashPlan (whose software I use to backup from home to the lab), Carbonite and Livedrive are offering discounts to Mozy switchers. I wish those with 638GBytes luck with the next provider for which they cost money.