I continue to think the best business parallel for LLM model providers is cell phone networks.

· Bits and Bobs 8/11/25
  • I continue to think the best business parallel for LLM model providers is cell phone networks.
    • Extremely capital intensive to build out, but then much lower marginal cost to operate.
      • Though inference has much more marginal cost than cell phone networks.
    • The actual service depends somewhat on quality, but they're all within spitting distance of one another so it's mostly a commodity.
    • In the 90's various ISPs gave unlimited plans… which led to overutilization, which led them to do traffic shaping.
    • Before the iPhone, cell phone carriers imposed significant control on the UX of devices on their network so they could reserve the right to upcharge.
      • For example, certain carriers required GPS to be disabled by default so the user had to pay to use that carrier's map app.
    • OpenAI is moving to control the last-mile UX.
    • They'll likely move to "throttling" maneuvers, for example only giving access to the premium model in their 1P surface, not via the API.
    • It's clear that people will pay for access to the latest and greatest model, preferring it over last year's state of the art.

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