Nerdism at its best

January 25, 2017

Why data caps are bad.

For most customers, a TB of data will be plenty, but there’s an important principle here. If consumers simply accept broadband data caps, the FCC, which is currently investigating them, will have less incentive to crack down on the ISPs that impose them. Then there’d be nothing to keep Comcast, Cox, AT&T, or the newly-merged Charter/Time-Warner-Cable Goliath from dropping them even lower.

Why would an ISP do that? Greed, but also because they fear streaming video will encroach on their traditional TV profits. After all, AT&T now owns DirecTV, and Comcast has a huge pay TV business.  Cox also has their cable and phone services. They all want to protect those revenue streams from cord-cutters. If streaming video gets too expensive, it will slow the cord-cutting movement and encourage people to stick with pay TV.

Broadband data caps are a form of price discrimination.

The anti-Net Neutrality crowd has been happy to sow confusion for years, pretending that the content on the Internet is the same thing as the network connection that Internet service providers sell us. Here’s the difference: Websites and applications serve up the content on the Internet; they aren’t the same thing as the connection we pay cable and phone companies for every month to get online and access all that content.

Data caps have been around for a while on mobile networks but have now made their way over to home broadband connections. ISPs like to promote these caps as “fair” but that’s an apt description only if you think these companies should be able to charge you twice for their service (once to connect and again to actually use the connection).

There’s no technical justification for caps like the ones AT&T, Comcast, and Cox are pushing on to their home broadband customers; they’re just another way for ISPs to exploit their customers. Comcast has rolled them out in about a dozen markets, with plans to take them nationwide. If you don’t like the cap you can pay an additional $30–35 a month to avoid it — regardless of how much data you actually use. AT&T just announced a similar program, but you can avoid the additional fee for unlimited data by subscribing to the company’s pay-TV service on DIRECTV or U-Verse. You can bet COX will be following suit.

On the mobile side, AT&T, T-Mobile and Verizon are all combining data caps with sponsored data programs. AT&T and Verizon are happy to exempt their own content streams from your monthly data caps, regardless of whether you stream one hour a week or leave it running in the background 24/7. And T-Mobile’s cap is different, but its exemptions apply only to video and music apps.

If an ISP can randomly exempt content from your monthly cap based on its source or type — regardless of how much data you consume — why do the caps exist in the first place?

In January 2013 at the Minority Media and Telecommunications Council (MMTC) Broadband and Social Policy Summit , National Cable and Telecommunications Association (NCTA) president Michael Powell clarified in a speech that cable’s interest in data caps was no longer (or never was) about network congestion but instead about pricing fairness.

I had to read that one twice. So what of the angst over bandwidth hogs and bytes and bits and network management and capacity constraints? That’s not actually true? Well, okay, if the new argument is about how companies recover their investments and fairly allocate those costs then we can all agree that is quite reasonable. But if that is the case, then changes the debate to one about pricing (costs) and not about capacity (caps).

There are plenty of ways to address pricing that fairly charges customers without requiring them to pursue an engineering degree or a private investigator to figure it out. Let’s be clear: Broadband is not like electricity, where utilities must first generate the power they deliver to customers, requiring them to charge heavy users more because it costs the utilities more to serve them. Even the ISPs themselves allow that marginal costs for additional bandwidth are negligible between light and heavy broadband users.

ISPs already have a way to offer consumers different price options for internet access – it’s called speed. If you are a comparatively light internet user who goes online primarily to send email and surf the web, you can buy a lower-speed tier and save yourself some cash. If you don’t see daylight much, and use your connection to watch a ton of online video, you’ll probably need to upgrade to (and yes, pay for) something faster.

Virtually all ISPs use this pricing model already which, it turns out, works pretty well. Most consumers don’t know a gigabyte from a hole in the ground, but they do know when their internet connection is slow. Pricing by speed offers consumers predictability on their monthly bills and an understanding of what they’re paying for. With data cap-based “penalty” fees there’s a big chance they’ll instead get a nasty bill shock at the end of the month and then wonder what on this green earth they did to deserve it.

The FCC has an Internet complaint page

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