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Summary:

While not so uncommon overseas, bandwidth caps and metered broadband are coming to the US market place. Time Warner is the first major cable company to announce its metered broadband strategy & prices for a small Texas market, in what can be described as draconian. We […]

While not so uncommon overseas, bandwidth caps and metered broadband are coming to the US market place. Time Warner is the first major cable company to announce its metered broadband strategy & prices for a small Texas market, in what can be described as draconian.

We have written about Bend Broadband of Oregon resorting to such tricks. Comcast, recently proposed bandwidth caps as well. What it means: get ready to pay more and get less for broadband. Will this spur into action, and switch ISPs or look for alternatives. Take our poll and share your opinion.

  1. Docsis 3.0 offers throughput of 160 Mbs. Why don’t they focus on it.

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  2. @ Rick, I agree with you, but the incumbents are not exactly sharp when thinking about these things. I look at Free.fr and how they have made their game about speed, quality and letting customers do what seems is reasonable. Competition is such a great thing.

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  3. Bandwith caps? Ridiculous! We have been in other countries that have it but we believe there has to be a good reason for it. We would certainly run fast if that occurred our ISP.

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  4. I believe that broadband will have to be metered at a certain point. Many users will not notice. One fiber network builder told me:

    “If it was usage based, I’d open everybody up to full throttle. But customers want to pay $30 per month and not worry about usage. Calculating prices is like doing an actuarial table. People who buy 256 Kbps and are doing a little browsing and e-mail are [subsidizing] the tech-savvy user who has a 3 Mbps connection and is using it full throttle.”

    For the opposite POV, talk to Brad Templeton, who has some interesting points about how bandwidth pricing would harm innovation.

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  5. i only use broadband which is one time fees and unlimited usage..

    else my bills will skyrocket!

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  6. Do most users even have a clue how much they’re downloading and uploading? Shouldn’t ISPs make that info freely available before they start launching bill-by-the-byte schemes?
    http://www.zatznotfunny.com/2008-06/the-internet-gas-gauge/

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  7. Kevin Walsh Tuesday, June 3, 2008

    Although their motivation is understandable, broadband service providers (BSPs) introduce usage caps at their peril.

    Why?

    First, the average consumer doesn’t know how much, say, 250 gigabytes is. How can they be expected to moderate usage (“Buffy, no more iTunes until next month!”) when they don’t know if they’re approaching the cap?

    Second, BSPs have advertise broadband based on one number: peak downstream bit rate (ok, two; they’ve recently started to talk about peak upstream rates as well). This despite the fact that those rates can only be sporadically attained. In essence, the BSP has taught the consumer to believe they’re buying a pipe that shuttles bits at, say, 10 Mbps, 24×7 and now they’re stuck with the consequences. What Comcast is really saying is “Buy our 10 Mbps service but we’ll cut you off after 2.315 days if you really use it like we advertise you can!”

    BSPs need to understand that broadband is just the pipe. Services travel over the pipe. Services are things like high-speed internet (HSI), VOIP, accelerated video downloads, enhanced gaming packages, etc. You can start to charge for new services delivered over broadband. You can’t go back and redefine broadband.

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  8. I would change my provider in a heartbeat if they were to meter my usage. It makes no sense in this world other than admitting that your company has no desire to further invest in their backhaul networks.

    I have recently switched from Comcast to ADSL2+ (10/1) and have had a markedly better overall experience with almost no slowdowns and truly good service. My assumption is that as Comcast, et al., continue to discount the needs of their customers they will begin to lose out to other “High Broadband” services like AT&T’s U-Verse, FIOS and even Covad’s offerings.

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  9. Only one option, couldn’t switch if I wanted to, therein lies the crux of the problem. Lack of competition.

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  10. As Om mentions in his comment, competition is key. Competition used to be fierce in the initial ISP times. But consolidation came, and the investments to deploy broadband reduced the number of players and competition. Now we have less options to choose, and ISPs might try to exploit that. If your ISP tries to do that, resist and switch.

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  11. The real issue here is Comcast greed.

    Take for example their $3 Million Dollar bill:

    http://pixible.com/2008/06/3-million-dollar-comcast-bill-accused-of-rape/

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  12. Has anyone considered that fact that tiered pricing and caps could mean LOWER prices for some consumers? Keep in mind that US broadband penetration is embarrassingly low relative to other parts of the world. What if broadband rates for entry level (and low consumption) packages were to go down to compete with dial-up prices and high-end packages with caps included additional support, static IP, dedicated bandwidth, etc.? It’s not all about more money from all customers, but instead about consumption being charged appropriately for everyone. How many people are still out there saying that they’d love to have broadband, but can’t afford it? Did you consider them? How many times have you heard that the top 2%-5% of users are using over 50% of the bandwidth? Don’t you think they should pay more freight? We all forget that until about a month ago, all of our mobile phone packages looked just like this and nobody complained. Heck, if Sprint wasn’t going out of business, mobile packages would still be completely tiered!

    Everyone’s knee-jerk reaction is that caps mean more money, more money, more money and that a change in pricing would mean an immediate move to the competitor. However good business models (and I’m not saying this is the ONLY good business model or even the right model) will move into other technologies and providers. If cable is the first to do it and it makes sense (assuming they do it right), you can count on the telcos to follow in their footsteps. Bad business models speak for themselves, but don’t assume that the guys at the MSOs are a bunch of uneducated and disconnected execs. They are a pretty strategic bunch of folks (no I don’t work at a cable operator).

    The bottom line here is that the folks that read this blog are the digital elite and with tens of millions of broadband customers in the US that don’t read OM daily (heathens!) and many tens of millions more that don’t use broadband at all, there’s a whole lot of strategic planning to decide on the right pricing to get the most of them online. Not everyone will be impacted to the same degree Om’s readers think they will be. Although everyone wants the best and fastest service for free, that doesn’t make MSOs or Telcos any money. Sorry, but the fact is that these guys are in the business to make a profit and will only do so if the buying public continues to buy at the rates they charge. And… they will (on both counts).

    The fact is that we were all conditioned by AOL that Internet is flat rate and by mobile phone providers that usage charges and tiers are what to expect. Well, it looks like the table are turning. This is far from over, but don’t think the cable execs haven’t thought about this long and hard and don’t think for a second that the telco execs won’t ever do it if it’s successful.

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  13. The move seems to coincide with Netflix revealing a set top box that will use Netflix customer’s broadband. I doubt if Comcast, Time Warner or anyone else wants to pay to support a competitor. They make a lot of money selling video on demand.

    In some places cable must compete with telcos over speed, so it wouldn;t fly in those areas. I’d say it’s aimed at preventing competitors from using the MSO facilities.

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  14. Short answer, yes.

    Long answer… maybe not. The limits being tested by TimeWarner are pretty ridiculous for someone like me (using 100-150 GB/month on average), but I don’t think the rumored Comcast caps at 250GB/month could really be considered unreasonable by most people, my quick math says this is over 100k/sec every second of the month.

    I do think Doug makes a good point: if caps are going to imposed, people should be able to pay for what they really use. Paying $50+/month to use 250GB isnt unreasonable, but for the tons of people who use <10GB, there should be a much lower priced option available.

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  15. I believe that bandwidth caps ironically encourage *increased* usage.

    While I was happy with my usage habits on uncapped broadband in Japan, here in Australia I have to use a Dashboard widget to make sure I don’t go over. When the next billing cycle approaches and you still have a few GB left, you’re going to find ways to get your money’s worth. It’s bandwidth you’ve already paid for after all, as opposed to bandwidth you didn’t need on an uncapped plan.

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  16. Almost every product you buy in a grocery store is metered; milk, eggs, and honey. Gas for your car is metered. Water usage in your house is metered. Electricity is metered. Your bank account is metered. It’s the only fair way to allocate resources. The funding needed to increase the throughput of connectivity in the US is going to cost big money, like roads, bridges and health care. If metering provides the capital for buildout and gets the US up from 16th in the world in broadband, count me in.

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  17. There is absolutely no question that I would leave my ISP, I would consider myself to be a moderate user but because most of my media comes from the internet I do hit at least 40GB per month and with the pricing they are talking about that would mean I would pay at least $55 a month for internet access and that is way too much for me.

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  18. Here in Canada, we’re already getting squeezed by monopolies. I and many people I know switched from Bell Sympatico (or Rogers Cable) to TekSavvy to avoid 60GB bandwidth caps and rip-off overage fees. ($1.50 per GB with the $30 cap on overage scheduled to be removed in a month or two)

    …but since Bell is throttling in the last-mile (using some rather Orwellian DPI-based whitelisting) and it’s not profitable to rent last-mile connectivity from Rogers (who flat-out block encrypted connections not on their whitelist), there’s no way to avoid that.

    So far, they’ve been trying to trot out blatant lies about P2P congesting their core network. (Something which, by their own figures, would mean that the throttling will only gain them two or three months of time before ordinary growth in HTTP traffic would consume the free bandwidth)

    At present:
    - They (and the conservative commerce minister who tried to pass the buck) are getting trashed in the papers.
    - CAIP (The Canadian Association of Internet Providers, representing 50+ 3rd-party ISPs), Primus (another big telco), Wireless Nomad, Vaccination Informatique, and the Quebec consumers union have complained to the CRTC (the Canadian FCC), asking that they find Bell’s practices to be illegal in the following ways:
    – anticompetitive (The throttling most aversely affects VoIP and IPTV and they’re both a telco and a satellite TV provider… and they just started up a bandwidth-intensive online video rental service)
    – illegal monopolistic practices (Bell’s network is payed for by taxpayer dollars and they’re supposed to sell access to the local loop as a content-agnostic transport, not as a white-label internet service)
    – violations of Canadian privacy laws (Ever wonder why the CRIA couldn’t try RIAA-style mass lawsuits?)
    - CIPPIC (the Canadian Internet Policy and Public Interest Clinic) has also filed a complaint with the federal privacy commissioner.
    - The Quebec consumers’ union has filed class action lawsuits against Bell Sympatico (breach of contract) and Videotron. (the Quebec equivalent to Rogers Cable. I forget why)
    - …and the CEO of TekSavvy arranged a net neutrality protest on Parliament Hill last month.

    At present, Bell Sympatico is bleeding customers like crazy (despite a massive ad campaign and flat-out lies by the phone agents in an attempt to scare, deceive, and bribe people into staying… my personal experience),

    Given how obvious some of their lies are and how strong the response has been, My only conclusion is that Bell Canada execs think they’re still in a pre-Internet era where enough stalling and money can get you out of anything.

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  19. Once a few big companies start quotas, everyone will be forced to follow for economic reasons.

    ie:
    Say 5 or 10% of people use amazingly huge amounts of data, while the rest gently subsidise.
    * Comcast puts a cap, angering the 5-10% while making it slightly cheaper for the remaining 90-95%.
    * That 5% of customers moves to another company. Comcast doesn’t care because that was the 5% that cost them too much anyway.
    * Other companies now have MORE unprofitable users. Say 10-15% of their users now. So they either bump up their price (so low users now move to COmcast) or implement a quota (so high users move elsewhere).
    * Eventually there’s only a few hold outs of unlimited data, and ALL the big users go to them. 60% of their users are unprofitable.

    Unlimited DOES work, as you have demonstrated in the US for many years, and it works based on low end users subsidising high end users. It fails as soon as a couple of companies start removing their unprofitable customers. It’s possible the ISPs have no choice with the increased bandwidth use of illegal and legal video services.

    I hope we find a way of encouraging the development of high bandwidth applications while implementing quotas.

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  20. Anyone who says they are understanding of why isp’s are changing to metered services are completly clueless and have no understand of the technology, the politic in place and the amount of greed these mega-corps who want more of your billions of dollars have. Creating toll highways to your websites because they claim there are a few out there using all of the bandwidth and overloading there networks is so far out there as to be complete garbage. Fiber Optic networks create data

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  21. Fiber Optic networks create data trafic between whole countries and they are out of bandwidth!! If that is the case they have not been taking customers money and investing in there networks but there fat bank accounts, hugh CEO paychecks, and yachts! IT IS A MONEY GRAB FOLKS. Say goodbye to some of the greatest things the internet has given us, youtubes, voip, MMO gaming, video on demand, (oh wait those things may compete against there products). Without all the great things the internet has to brings me I don’t want there services and to get them I am not going to pay more for it just because they feel the need to control our internet access for a few more billon dollars they seem to want from us. Oh remember when AT&T said that google is getting a free ride on our pipes? Like without all the internet content we would be willing to give them the billions of dollars we give them now. I guess they are have a difficult time affording gas for there families suv’s!!

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  22. Dimitrios Matsoulis Thursday, June 5, 2008

    Metered bandwidth is another issue with which users will have to wrestle in the near future. What final users want is the best possible service, without wanting to deal with ISP problems, the same way I do not care for example about Amazon’s servers when I do my online shopping. In that sense there will understandably be very little understanding from the consumers’ point of view and in my opinion we will see large user migrations. Finally, however I think the prices might settle to such levels that having a no-limit package or a limit plus extra/GB will be about the same.
    http://electronrun.com/

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  23. competition might be good thing, but what I see as post-”over-competition” in Finland makes me still thinking — where is The Line after which competition leaves ghost towns?

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  24. [...] would be using much more than the 5 GB some incumbents want us to use. It is hardly a surprise then that nearly 90% of you who responded to an earlier poll conducted by us found the idea of metered broadband [...]

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  25. [...] data is pretty close to the findings of a poll conducted by us earlier this year. Ninety-one percent of 1,159 voters said that they would switch to another ISP, while 6 percent [...]

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  26. [...] according to PC World, TechCrunch, and the Associated Press. GigaOm posts a poll — “Will Metered Broadband Make You Switch Your ISP?” — and concludes: “get ready to pay more and get less for broadband. Will this [...]

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