Commodity prices never drop to zero, no matter how abundant they are (assuming a reasonably free market-- government can, of course supply "free" goods, but the results are never pretty). The suppliers of the commodities have to make a profit, or they'll find something else to do.
Gavin
Thanks for being so responsive on this issue. Although, I am still not fully convinced by the blockszie economics post.
Suppliers of commodities need to make a profit and in this case if mining is competitive the difficulty will adjust and miners profit will reach a new equilibrium level. The question is what is the equilibrium level of difficulty? Letting normal market forces work means the price reaches some level, however this market has a positive externality which is network security. Using an artificially low blocksize limit could be a good, effective and transparent way of manipulating the market to ensure network security.
Network security can be looked at in two ways:
1. The network hashrate
2. Aggregate mining revenue per block (as in theory at least, the cost of renting the bitcoin networks hashrate to attack it could be related to mining revenue)
Mining revenue is therefore an important factor in network security. Please try to consider this carefully when considering the maximum blocksize issue. To be clear, I am not saying it shouldnt increase above 1MB, I think it should. However please consider mining incentives once the block reward falls, as one of the factors. Bandwidth and the related technical issues should not be the only consideration.