Tuesday, September 05, 2006

Free Wi-Fi at Suntec City

Free Wi-Fi at shopping malls around Suntec City
Channel NewsAsia

Singaporeans will be able to get free Wi-Fi internet at shopping malls around Suntec City this month.

The InfoComm Development Authority has set up the service to coincide with the IMF-World Bank meetings…

The IDA is confident the service is stable and Singaporeans will be able to use it during the busy IMF-World Bank meetings…

The IDA says it has doubled the capacity of the network to handle the high amount of users expected during the IMF-World Bank meetings.

But with most networks, the high amount of users can slow the Internet speeds.

The free service finishes at the end of September…

Wi-Fi access at Suntec City is an example of the tragedy of the commons. The tragedy occurs when a common-property resource is overused. For example, a lake is overfished if it is accessible to all. What does it mean to overfish a lake? In economics, to put it simply, it means that there are fishermen who fish the lake even though from a societal cost-benefit analysis they shouldn’t. The problem arises because fishermen, like most of us, only care about themselves; they decide to fish as long as the benefit of fishing, say the revenue earned from selling the fish, is greater than the private cost of fishing, say the cost of driving to the lake. But when a fisherman decides to fish he also imposes a cost on others by reducing the number of fish they can catch. This is the social cost of the decision to fish. From a societal standpoint it would be best if each fisherman decides to fish only if his benefit is greater than the sum of the private cost and social cost of his action. Since fishermen don’t count the social cost in their decision, there are too many fishing the lake.

The tragedy is solved if there is a single owner of the resource. In trying to maximize profits from the lake, the owner will choose an entry fee to the lake that takes into account all costs. The outcome will be fewer fishermen and fewer fish taken from the lake.

In the case of Wi-Fi access at Suntec City, the Wi-Fi network is the common property. Each potential network user will only consider his or her private cost and not the cost imposed on others, namely, slower download speeds for everyone. Since access to the Wi-Fi is free, there will be too many users and the download speed will be slower than if the Wi-Fi network were privately owned and managed.

7 Comments:

Anonymous ted said...

I think that there is actually a single owner of the WI-FI, that is the company or organisation that decided to provide that access free of charge.

If we look at it in terms of cost, then I would suppose that the owner of the WI-FI connection decided to impose a zero dollar cost on to the many faceless users.

While it may seem that it is generally silly to provide zero dollar access, there are other aspects, in my opinion, that benefit the provider. For example, making the users pay nothing means that they cannot also expect to be treated as paying customers with certain rights. They may complain the network speeds are slow but they will, by the fact that most internet users would be socialised with the fact that more users online = slower speed, assuming a fixed bandwidth and speed.

The tragedy of the commons also assumes a finite amount of resources (your land for example), thus the more free riders the more bad it is for everyone in general, while the free WI-FI access may resembles the commons in that sense but it should be the case that the marginal WI-FI user would not deprive anyone else of the use of the WI-FI service, and that should negate the commons analogy somewhat.


Actually I think they provide the free service is only to be able to make a good impression for the IMF/WB meeting that Singapore is so advance and nice to provide free Wi-FI. :p

10:24 PM  
Blogger a singapore economist said...

Ted,

Since the InfoComm Development Authority set up the network, I treat the network as government-owned. The analogy still works even if the network is privately owned because the network is in the public domain and no one is restricting access to it.

6:08 AM  
Anonymous ted said...

I guess the fact that the service ends by the end of September means this is an acceptable cost to the IDA. So no worries about any 'tragedy' happening.

Just curious, did you think it's a bad thing that no one is restriocting access to the network?

1:27 PM  
Blogger a singapore economist said...

Ted,

Yes, I think it is bad in the sense that the network will not be allocated efficiently. But you are right that it provides goodwill during the meetings, so that should count for something.

9:05 PM  
Anonymous ted said...

Well, I guess, it depends on which perspective are you and I coming from when we discuss such interesting mundane things.
Since, it is naturally I am coming from the consuming side of things, I certainly won't think too much as to how 'bad' it is for the service provider that they are not restricting access and thus inefficient allocation of 'resources' (I would argue that the wireless internet conectivity is a near infinite one, it's the bandwidth and pipeline that is of concern, but I am not an enthuasist in IT stuff, so my commentaryis very much layman).

Thinking of efficiency all day long makes one go something something.

8:41 PM  
Blogger Mr Hardy said...

Free wi-fi access is a flow variable. It changes too rapidly with time. It may posses some factors of a stock value but technically you can't use the analogy of the common resource because the qty of 'fish in of the river' is completely within the capability of the owner to shrink or expand.

The argument that free-wi-fi access is an example of the 'tragedy of commons' is weak because it measures the wrong things.

The two commodity variables in play in this scenario which are impt to the overall mission of supporting the IMF are 'community goodwill' and "confirm can connect" average optimum connection speeds.

If you plot a diagram of net traffic agst time, u'll derive spikes in time suggestive of periods of heavy usage.

If commercial contracts can be in place to ensure adequate bandwidth to meet a theoretical surge in demand during those time periods plus the extensive use of software to direct traffic then technically the possibility of no connection would be minimized.

I believe allocative efficiency would be maximised with the promise of free wi-fi access.

By definition: Allocative efficiency occurs when all available resources (i.e. bandwidth, data transfer pipes, routing software, tech ppl etc) are devoted to the combination of goods (i.e. wi-fi access at any speed on average) most wanted by society (ppl hanging ard suntec).

Consider: Users want wireless internet connection at optimum speed on average, so Supplier responds in exchange for goodwill.

Supplier's due diligence to ensure those who want it get it and those who can't well try again later. Because they expect huge numbers during certain time periods from past experiences, they'll put in place systems to ensure connection for as many users as possible.

If Wi-fi access wasn't free as in you have to pay to gain access to the network, then some users who can't afford to pay can't access it at all. Therefore you run into the possibility of excluding the very people you want to impress and therefore the loss of goodwill.

It is a very provocative and powerful gesture and indicative of Singapore's latent potential as being rich and techie enuff to give away Free Wi-fi access to any and all user for the duration of the IMF visit. That alone is an externality that is priceless.

And so what IDA is doing is rational and when viewed with the prism of positive externalities highly profitable. Free Wi-Fi access is a smart idea!

1:20 PM  
Blogger a singapore economist said...

Mr. Hardy,

It seems that you are arguing about connectivity while I focused on the externality of slower download speeds. I don't know how much capacity this network will have, but more users generally means slower download speeds for all, particularly when demand is high. I suppose if the network had enough capacity, then there wouldn't be an externality (although you seem to suggest that at some times, capacity will be limiting).

If Wi-fi access wasn't free as in you have to pay to gain access to the network, then some users who can't afford to pay can't access it at all. Therefore you run into the possibility of excluding the very people you want to impress and therefore the loss of goodwill..

I'm pretty sure the attendees can afford to pay for access, particularly since they will have expense accounts. ;)

If I were at the meetings, I think I'd rather pay a couple of dollars to be ensured some bandwidth then to have to wait until demand decreased.

9:49 AM  

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