Flying Virgin

Posted: September 17, 2012 in Current Affairs, Economics
Tags: , , ,

Oh bother.  They’re at it again.  I’m on the long flight from Boston to Dreamforce in San Francisco and I have a lot of time to think.  First stop is the Zuora user group meeting “Subscribed” happening at the Ritz Carlton.  It’s Zuora’s second bash like this and it’s nice to see them doing well with a great idea like subscription billing.

I am on a Virgin flight, which is my choice for these long hauls.  The plane is full of Dreamforce attendees and the excitement is palpable.

It’s nice to have the option of WiFi and power for my computer so that I can work.  Signing onto the go-go inflight wireless service is always something of a Gumpian box of chocolates, you never know what THEY’RE going to get and today is no exception.

Back in July I wrote a post on a similar Virgin flight titled, “Like a Virgin” that delved into the murky world of product pricing and it looks like this might become a thing for me because I am doing my own little inflation study on the price of WiFi.  If you need to catch up on my musings, you can click the link but a synopsis of my study from the original post is here:

Thanks to go-go’s record keeping, I am able to access my account history.  It seems in 2010, the first time I bought the service, I paid $12.95.  The cost actually went down for several flights after that either because they were running a special to get people hooked or, and this is a dim memory, someone was giving free or discounted service to all passengers during the holidays.

At any rate, my point is that the price of WiFi has gone up dramatically over less than two years.  Today I paid $17.95 for the same service I once paid $9.95 for.  Off the base of $9.95 we’re looking at an 80% increase and divided over two years that produces a 40% inflation rate.  Yikes!  Looks like the increasing cost of Internet is tracking the plane’s altitude.

Ok, so back to today.  Want to guess what WiFi costs today?  Today I plunked down $34.95 for a month because I am going to do this a lot this month, but a single day has a cost of $24.95 and a single day is the benchmark.  Going from $17.95 to $24.95 is a rise of a bit more than 33%.  Presumably they were making money at $17.95 and now that the equipment is fully amortized the additional fee is pure profit.

I know, the fee indirectly includes the free electricity for my computer but I prefer to think of it as something they throw in for the cost of a ticket since I could use the plug for anything else like charging my phone.  But if I am charging a phone and not using WiFi then am I technically freeloading on the WiFi users?  It gets complicated.

At any rate I think I’d have to go back to 2010 when I started using WiFi on these flights.  If you go back to the July post you see that I started paying $12.95 then it went to $9.95 before beginning its inexorable climb.  So take your pick.  I have to keep my socks on here so my math might be off but it looks like at least an inflation rate of 100% over two years.  But more interestingly, I know I am not paying double the cost of a ticket that I did in 2010 even though jet fuel is up considerably in that time.  Again some quick math with shoes on.  The cost of WiFi is now roughly equal to 3.8% of the ticket, not bad at all or about six gallons of jet fuel.

Ok, but like an economist I know there is more than one way to calculate this inflation rate.  Consider this: The cost of WiFi is so high now that they’ve come up with a new entry point, a ten dollar cost for one hour of service.  So that’s ten bucks an hour but when this started in 2010 it was ten dollars for the whole six hour flight or about $1.50 per hour.  If you use 12.95 as the basis then the cost per hour is more but no matter, this is back of the envelope stuff.  But the change suggests an inflation rate of 600%.  Six hundred percent!  Oops!  I really meant 300% per year over two years.  Feel better?  I do.

Well enough of this I am signing off from somewhere over Wisconsin traveling at 422 mph at an altitude of 36,199 feet.  It’s -73 degrees outside and $24.95 inside.

So, what did you think?

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