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Summary:

FCC Chairman Kevin Martin has recently taken up a populist and politically lucrative crusade against Comcast and its nefarious efforts to block certain kinds of traffic. But this is nothing more than a diversionary tactic, one aimed at taking attention away from the service providers’ implementation of metered broadband.

In an effort to burnish his public image, Federal Communications Commission Chairman Kevin Martin has taken up a populist and politically lucrative crusade against the evil cable company Comcast and its nefarious efforts to block certain kinds of traffic.

Given that we all love to hate our cable companies, especially the big ones, it is a calculated bet by Martin, who is rumored to be contemplating running for the House of Representatives after he leaves the FCC. No wonder he has been campaigning hard to chastise Comcast, and perhaps censure them for an undeniably lamentable act.

My inner cynic believes that this so-called punishment is nothing but a smart tactic by Martin to show that he is on the side of Network Neutrality and a champion of open access and the people. He told The New York Times that he was pursuing this because of openness he wants to see in the networks.

“We are setting a very high bar on what network operators can do in terms of putting limits on consumers.”

I chortled when I read that and had to shake off the image of Martin as the proverbial Internet Robin Hood. The reality is that all this talk is nothing but hot air, a diversionary tactic that taking the attention away from a bigger, more evil problem that’s emerging for the U.S. Internet: metered broadband.

Metered Broadband, better even with Network Neutrality

Today for instance, Frontier, a smallish telephone company that has operations in upstate New York, decided to impose a 5GB bandwidth transfer limit on some of its DSL offerings. As my dear friend Dave Burstein pointed out earlier today, their main rival is Time Warner Cable, which also wants to charge people by the byte.

While 5 GB looks pretty sizable – Comcast claims that their average broadband subscriber only uses 2 GB per month – in reality, it’s nothing. It’s essentially two movies in HD. Once you go over the limit, the meter ticks over faster than a San Francisco taxicab. That would limit the amount of Internet a consumer can use on a daily basis, thereby limiting the amount of time people spend on Facebook, MySpace, Microsoft, Google, Yahoo or any one of numerous services.

The situation would be no different than the early days of dial-up, when the pain of dialing up prevented us from being always on the network. When broadband came along, things changed, for usage of services like Google skyrocketed, Skype came along and YouTube became part of our lives.

Of course, it helped that the growing use of the Internet increased the amount of advertising dollars being spent online. The billions of dollars in profits being raked in by web companies made broadband providers – mostly old phone companies and cable companies with reputations for pulling a fast one on customers – jealous.

First they thought that they could get rid of Network Neutrality – by charging web companies special rates to make their sites easier to access than the non-paying ones. That turned out to be a political hairball. Comcast is finding that out the hard way.

Fuzzy Math of 5 GB Download Limits

Instead, they came out with an ingenious plan: Charge people by the byte, aka metered broadband. This way no one can blame them for playing favorites, and if consumers continue to constantly use the network, then they will have to pay more and more cash. In an earlier post, we did the math on how carriers are going to gouge consumers and pointed out what you can do with 5 GB a month:

* download about 1,000 songs from iTunes. * download five full-length movies from iTunes. * watch about 500 minutes of YouTube video. * share about 2,500 two-megabyte pictures.

According to data cobbled together by Dave, since 2001 web data traffic has grown 25-40 percent per user. As we use more web-only services – Twitter, Facebook, MySpace, YouTube and Hulu – we are going to consume more and more bandwidth. Add to it iTunes downloads, and before you know it we would be using much more than the 5 GB some incumbents want us to use. It is hardly a surprise then that nearly 90 percent of you who responded to an earlier poll conducted by us found the idea of metered broadband moronic.

Saving Incumbent Video Schemes

What makes the scheme even more devious and clever is that it saves the service providers’ video franchises. I had earlier pointed out that most of these carriers have spent billions of dollars to upgrade their video networks (telecom operators built entirely new ones) with a view that they could earn big profits as video-on-demand takes off.

The broadband juggernaut allows content owners to go directly to the consumers, by passing these video gatekeepers. But by capping the bandwidth and asking people to pony up big dollars for over-the-wire downloads, the pipe owners want to ensure that they can make their money back and then fleece us silly.

That is so much better than getting rid of Network Neutrality and of course, much harder to prove since the carriers control the numbers and they know how to fudge them silly. With that as background, here is the juicy little bit from The New York Times story that shows Martin’s heart isn’t in the right place, Comcast’s pending punishment notwithstanding:

Mr. Martin was asked whether the commission’s approach will push more Internet providers to start to impose caps on how much bandwidth consumers can use. He said he wanted to reserve judgment on that trend. He seemed comfortable with Internet providers offering services with limits, so long as they are clearly stated.

If Martin wants us to believe in him as one of the people, the 21st century Robin Hood who is looking out for the U.S. Internet consumer, then he should start by putting an end to this metered broadband nonsense right now.

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  1. Om

    Thanks for including me in your story. I wanted to stop by and give credit to Karl Bode at DSL Reports, who was the original source. Within a few hours after he broke the story, it was being discussed by two commissioners at today’s FCC hearing.

    Bandwidth is cheap but not free, so Comcast’s soft cap at 250 gig has some basis in 2008 costs. But Frontier at 98% less has nothing to do with their costs and I agree with you is about protecting their “93,600 DISH customers.” (Frontier 10K)

    Frontier in 2007 had capital spending of 315,793, which seems like a lot until you note their Depreciation expense was $ 374,435. 5 gigabytes is so low even a 2002 style network can handle it, but not maintaining the network is going to hurt them and their customers.

    Dave Burstein

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  2. Wow, someone who understands how big business works. Martin is getting tough on net neutrality as a diversion – to make it look like he is on the consumer’s side. Then, of course, he has to be “fair” to the duopolies so he will be soft on metered broadband. Which is what the duopolies want anyway – they are going to make a ton more money off metered broadband than they would have charging the websites for fast access.

    It is really starting to appear that the cloud is going to die before it gets off the ground. By the way, the “average user” includes many people like my 65 year old mother who has broadband but never uses it. Vonage, Skype, Netflix (online), etc. better enjoy their companies while they can.

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  3. This is essentially the outcome of network neutrality it appears. The ISPs cannot discriminate on apps in any way, so they move to caps. They end up making more money, consumers end up paying more money, and consumer advocates somehow get to claim victory. Huh?

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  4. Charles Farrell Thursday, July 31, 2008

    Blanket opposition to “metered broadband” is unlikely to succeed. Looking to the near future, many people are going to be wanting to watch an HD version of video-on-demand. Some are going to want to accumulate extensive film libraries. We are talking about an extremely large number of bits!

    Even with their brand-new Roku box, Netflix backed off from supporting HD, and from my experience with Roku on a “5MB” connection, it seems to barely work.

    The cable companies are going to have to make huge investments in infrastructure to support the implied excalation in bandwidth requirements. Some of the prominent providers are nearly bankrupt already. (I personally blame the outrageous, extortionate fees that they have to pay to the TV content providers).

    The most likely compromise will not be “metered” broadband as such, not some quantity of bits, but speed restricted tiers like we see today from some providers. A base monthly charge will include a download speed restriction that is too low for practical video-on-demand.

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  5. OM – While I enjoy your musings most of the time – this commentary is at best silly – bordering on ignorance. Packet Cable initiatives (the basis for metered usage) were underway long before Martin arrived at the FCC. Billions of dollars in infrastructure has already been delployed around Packet Cable. Martin is in no position whatsoever to undo these initiatives – so picking on him is what I call “silly”.

    And now the “ignorance” part – where the hell have all you guys been for the past 5 years while packet cable initiatives were being rolled out? Now it seems fashionable to write about these things – so there is one “pundit” a day taking a shot at metered usuage – a shot which is nothing more than a stink bomb – the foul odour lasts for a couple of minutes and then forgotten.

    Metered usuage in inevitable (as are tiered services)- has been coming for a few years now. The REAL DEBATE should be how law makers (and agencies like the FCC) monitor prices (as in gouging), and open up every alternative for broadband access. If they do their part – market forces will give the consumer a good deal at a fair price. Business models should be left to the operator.

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  6. [...] Yo FCC! Are You Doing Anything About Metered Broadband? – GigaOM In an effort to burnish his public image, Federal Communications Commission Chairman Kevin Martin has take up a populist and politically lucrative crusade against the evil cable company, Comcast and its nefarious efforts to block certain kinds of traffic. [...]

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  7. Cable companies and phone companies have 2 options when it comes to capping: break the law or overcomplicate their way of life. Let me explain…

    Many cable companies offer VOIP. Recently, phone companies (such as AT&T) began doing the same (VOIP in addition to POTS). Here’s where the problem with “capping” comes in… is the bandwidth utilized by their VOIP service going to count towards the transfer cap? If it will count then how will they justify this? “Unlimited calls in the US” their VOIP service will state. On the underside, if you go over the cap then you will *technically* still be paying for some of your calls.

    On the otherhand, let’s say they don’t count THEIR VOIP service towards the bandwidth cap. What about Vonage? Will these calls be counted towards the bandwidth cap? If yes = monopoly. If no = how will they keep track of this? VOIP services pop up constantly. Many small, some big.

    Now what happens when TV over IP comes along one day…?

    This capping issue is ridiculous. 10 years ago, the phone companies were the “bad guys” and cable companies complained. The tables have turned and the cable companies have taken over being greedy.

    As for “their networks can’t handle it”. I’m sorry, but cable companies are going to have to REINVEST some of the billions of dollars we pay them back into their networks. Just as phone companies held off and held off, never upgrading their systems, they are now paying for it and fighting tooth and nail to get back in the game (Verizon as an example). 10 years from now, the Internet will be ever more different than today. Do we want to stifle our advancements because Comcast wants to keep every penny?

    Which is why China now has more Internet users. Let’s go ahead and hand over our DNS servers because our network won’t be able to handle it soon (without proper upkeep with the times).

    Corey

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  8. Metered broadband is the solution, not then problem. Why should the grandma checking email pay the same as the busy torrent downloader? My electric, water and natural gas providers meter my usage, the internet providers should do the same thing?

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  9. I work from home for a software company. I probably use 1GB a day every now and then, often at least a few hundred megabytes. I would be fine with a reasonable cap, say 200gb per month. Something like 5gb is ridiculous. I could blow through that in a week and I don’t do anything illegal or even use it that much.

    I only stand against unreasonably small caps, but I know that this is going to get expensive. Cable and broadband are already expensive.

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  10. Yo

    Welcome to the rest of the world, which has had metered download limits since the dawn of time. However, us in Australia are starting to thead the other way, with shaping after we reach our ‘limit’. This means that once we use 5GB our speed is dropped to near dial-up speeds. We can still get on the net, but not really do anything

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