43 Comments

Summary:

The all-you-can-eat broadband buffet appears to be at an end as ISPs implement caps and metered pricing for broadband services. The stated goal is network management, but the real reason is to cash in on the increasing value of the web despite being a dumb pipe. Today, […]

The all-you-can-eat broadband buffet appears to be at an end as ISPs implement caps and metered pricing for broadband services. The stated goal is network management, but the real reason is to cash in on the increasing value of the web despite being a dumb pipe. Today, Time Warner said it would expand its metered broadband trials, and on next Monday Charter will detail plans to force subscribers to pay for what they download, with plans starting at 100 GB per month caps at lower speeds and no cap for the fastest speeds.

Frontier Communications says it will start implementing service caps in about six months. It has gained notoriety for having, at 5 GB per month, the smallest cap proposed so far, but according to spokeswoman Stephanie Beasly, the ISP hasn’t been enforcing it yet. It’s trying to develop a broadband meter and figure out the right service packages to offer subscribers. “Our goal is education, so people can see what it really costs to download a movie or watch something on YouTube,” she told me.

This isn’t unreasonable on the face of it, but we have two issues with consumption-based pricing. The first is carriers need to upgrade their networks to remain competitive, and as they do the actual costs per bit drops, meaning it’s cheaper to send traffic over the network. The second is that such pricing schemes will slow innovation on the web by forcing consumers to pay for their data consumption — much in the way people once had to ration their cell-phone minutes. And that means services such as those offered by Slingbox or Hulu will end up costing consumers more. In order to give a sense of what your broadband future looks like, below we offer a chart to show that all caps are not created equal.

Comcast Time Warner Cable Charter AT&T Frontier Communications
Cap Details (largest) 250 GB per month Currently 40 GB per month with plans for higher tiers no cap for 60 Mbps service 150 GB per month 5 GB per month (however, Frontier says it is not currently implementing caps, and will develop a range from based on average usage for the area)
Cap Details N/A Currently 20 GB per month 250 GB cap for 15 Mbps to 25 Mbps service undisclosed N/A
Cap Details (smallest) N/A Currently 5 GB per month with possible lower tier 150 GB cap for 15 Mbps and under service 20 GB per month N/A
Overage Fees service cuts off $1 per GB service cuts off $1 per GB Frontier has “made no decision about potential charges”
Where entire service area Beaumont, Texas and 4 new markets entire service area as of Feb. 9 Reno, Nev. and Beaumont, Texas entire service area in the next 6 months
Provides meter will provide will provide no will provide will provide
  1. It always amazed me how & why ISPs in the US and across the world offered the “all you can eat” concept. Here in India where we really don’t have a “broad”band (even 256kBps being deemed broadband), all ISPs have metered plans and hence pricing is a combo of speed and download limit….Another way to interpret may be that the ISPs in the US have just woken up to this new pricing strategy!

    Share
    1. Actually, the way to think about it, Shankar, is that India has over a billion people packed into a much smaller area than the U.S. with only 350million people. It isn’t that we’ve “woken up,” it’s that we don’t need these pricing strategies because our country isn’t as poor or overpopulated as yours, but companies are finding a way to squeeze an increasing amount of profit out of us — in spite of the fact that we are all well aware that it is unnecessary for them to make a profit.

      Share
      1. Well, instead of looking at the over all population, look at the population which has access to internet. Even though India has a very large population, only 15-20% of it actually has access to internet. And that is much less than the population in US which has access to internet.

        Even then, India has metered plans because not everything here is done online:
        i) 95%+ pay bills at the offices after standing in a line.
        ii) Grocery shopping isn’t done online.
        iii) There is hardly anything as “return within 30 days for full refund”.
        iv) People don’t rely on Google Maps (coz all og India hasn’t been chartered properly yet).

        The companies just want to make money. So they term 256kpbs and higher as “broadband”. I had Comcast connection and used to pay $40/month for 16Mbps plan (was a limited time offer). Whereas, airtel give 4Mbps for $30 with a FUP limit of 25GB/month. :(

        Share
      2. Well, instead of looking at the over all population, look at the population which has access to internet. Even though India has a very large population, only 15-20% of it actually has access to internet. And that is much less than the population in US which has access to internet.

        Even then, India has metered plans because not everything here is done online:
        i) 95%+ pay bills at the offices after standing in a line.
        ii) Grocery shopping isn’t done online.
        iii) There is hardly anything as “return within 30 days for full refund”.
        iv) People don’t rely on Google Maps (coz all og India hasn’t been chartered properly yet).

        The companies just want to make money. So they term 256kpbs and higher as “broadband”. I had Comcast connection and used to pay $40/month for 16Mbps plan (was a limited time offer). Whereas, airtel give 4Mbps for $30 with a FUP limit of 25GB/month. :(

        Share
  2. “…the real reason is to cash in on the increasing value of the web despite being a dumb pipe.”

    And you know this because the web fairy told you so when you were high on peyote?

    Share
  3. They may only provide a dumb pipe but making that pipe increasingly larger to deal with the growing use of the web and the ever growing use of rich media, VOIP, streaming audio and video, itunes downloads and more is costing ISPs and carriers a fortune while others make the money on all that use. Trying to solve that on the source end benefits only one carrier per major content source where trying to solve it on the consumption end compensates all the networks that have to keep growing.

    Sure there are other alternatives like higher prices for everyone or just not adding the capacity to the network but are these really any fairer or more desireable?

    Share
  4. I’ve only ever had metered broadband. I generally stay within the cap, but I couldn’t say that I’m actively rationing myself – I don’t recall ever deciding to wait until next month to down load a compelling Ap or look at some amusing video for instance. I’ve simply picked a plan that closely matches my needs. It didn’t take any large cognitive effort.

    Speaking as one who already has metered broadband, I don’t buy the argument that a marginal cost is enough to kill off innovation. Sure, a marginal cost will kill a marginal innovation, but if something some new service or idea is valuable then people are going to use it despite having to maybe pay a few dollars a month extra. It hasn’t stopped me.

    I don’t know whether or not the Telcos are telling the truth when they say they need these additional revenues to fund expansion. But I can say that in any other business environment additional investment is expected bring additional revenues. The position is not completely unreasonable.

    An enterprise needs to measure ROI in $, only governments are able to use such non-monetary terms as “the good of society” to measure ROI. But I don’t advocate government handouts or nationalising the infrastructure. At the end of the day implementing a user pays principle seems the best compromise.

    Share
  5. I’m an ISP — a rural one with high backbone bandwidth costs. My cost per megabit hasn’t dropped a penny over the past 3 years, but bandwidth demand and consumption has soared; in fact, the bandwidth consumed by HTTP transactions alone on my network has doubled over the past 6 months.

    ISPs aren’t greedy when they set caps, move to metering, or raise prices; they’re simply trying to recover all of this new expense.

    Share
  6. this is going to rapidly accelerate ‘data cord cutting’ as people cancel cable/DSL in favor of wireless technologies if they will have capped plans no matter what.

    i have never understood the ‘slower speed for lower cap’ concept. if they want to hit me with overages it would make sense to put me on the fastest possible speed to increase my chance of hitting that cap earlier in the month. speed tiers make perfect sense with unlimited but none if the meter is turned on.

    Share
  7. Everyone continues to miss the big picture with these caps. The ISPs get to decide what data falls under the cap and what data doesn’t. They will cut deals will big companies to allow their data traffic to not count towards the cap.

    For example, they may cut a deal with a Hulu to say that their data traffic does not count towards the cap. This would effectively prevent other streaming video companies to compete on equal footing. The ISP can then say that they are not preventing the consumer from going to any streaming web site, they are just giving the consumer the bonus of uncapped data access to Hulu.

    Data caps are the new Access Tiering.

    Share
    1. Tom from N.J, you hit the nail on the head pal. CONTROL

      Share
    2. Agreed. I am expecting antitrust suits to follow in the next few years. Since local governments usually sanction an isp monopoly per district (much like phone companies, and often the same phone company), you can expect to see law suits when these deals go down, charging for one type of data and not another. It is like the gov’t indirectly saying for example, “facebook is ok to use, but we’re going to ‘tax’ you for myspace.” I hope people will realize this and respond swiftly.

      Share
  8. Bandwidth caps will not slow innovation directly. It’s the mindset of an average consumer that will. The rationale is easy: “It used to be unlimited, it is LIMITED now, so I need to slow down on usage, just in case”.

    Next thing you know – local area networks (say hello to BBS) might emerge that will dole out free access to content stored locally, thus not requiring paid bandwidth consumption.

    Share
  9. When Comcast announced the bandwidth limits, I installed routers with Tomato firmware at home and work to monitor the bandwidth use. I thought we were heavy internet users, but I think we fall under 20GB per month at both locations, including downloading HD content from Revision3 and iTunes.

    I don’t have a problem in general with a bandwidth cap, but I do have two issues with how Comcast is managing the caps. First, it is unreasonable for them not to provide a bandwidth meter. Most home and small offices don’t have the technical skills to install a customized router with bandwidth monitoring (like Tomato firmware). Second, if there is a cap, there should be a published price for exceeding the cap. Make it like cell phone minutes: tell us the cost if we exceed the limit.

    However, a 5GB limit is unreasonable. Even if I stopped downloading multimedia content, I alone could imagine reaching a 5GB limit on just web browsing and downloads of software updates.

    Share
  10. Thank God we elected Obama. I suspect his Administration & FCC will have a thing or two to say about this phantom billing/metering….

    Not providing a reliable bandwidth meter, when you’ll be billing (or terminated) for “overuse” is seriously unethical.

    Share

Comments have been disabled for this post