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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!

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    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.

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      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. :(

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      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. :(

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  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?

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  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?

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  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.

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  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.

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  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.

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  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.

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

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    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.

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  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.

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  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.

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  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.

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  11. Shankar, I am amazed that the ISPs in the US are working hard to destroy the value of their networks. The network is not a finite resource like food. When a consumer is using up bandwidth it is also creating value for other nodes on the network. The sunk cost of infrastructure doesn’t change much. The cost of metering the bandwidth and resulting customer dissatisfaction resulting in increased support costs is simply not worth it. Indian ISPs for sure have bandwidth caps for some plans but all of them offer unlimited plans with lower speeds too hopefully someday they’ll move forward. However driving in reverse is never easy.

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  12. @ Shankar

    This is the US, not a developing nation. This is nothing more than the avarice of telecommunications companies interfering with the progress of technology, especially when many other first-world nations have readily accessible high-speed consumer connections of 20 Mbps or higher.

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  13. Notice how Verizon is not on the list (although they do like to follow the crowd on stupid stuff like this). Possibly it’s because they use fiber! What a concept, build a network for true broadband and you don’t have traffic management issues.

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  14. [...] this isn’t the only effect that these tiers will have. As Stacey Higginbotham at GigaOM points out this will have as detrimental effect on the the carrier technology that provides the pipes in [...]

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  15. [...] 3. Paying for bandwidth by the drink [...]

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  16. @Greg Glockner:
    Yes that’s all well and good but you also have to think of the other bandwidth using devices i.e. PC(movies&games), XBOX & XBOX360, PS3, Wii, Rokus Netflix applicance, Apple TV, etc. All of these devices are capable of using lots of bandwidith and offer ondemand video services which is something that threatens the Cable TV box of today that doesn’t match up. News, TV Shows, and weather can all be streamed in Hi-Def, fullscreen, 5.1 surround sound so you can experience your local news in awe.

    The average broadband user pays about $50 bucks a month, right? Have you ever wondered where does that money go toward? Well it goes to little projects like this – http://www.gizmodo.com.au/2008/06/ten_million_pixel_comcast_display_wows_viewers_with_unthrottled_ultra_hd_video-2.html

    Why spend money on upgrading a network when you can complain about a certain percentage of users and punish everyone? Greed. Like Tood Spraggins said, Verizon is upgrading their network to Fiber Optic and doing it one neighborhood at a time in several different states at once. They are looking to get the people who switch from their competition to their network that doesn’t offer any caps and tells the RIAA/MPAA to take a flying leap.

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  17. [...] One example is the growing trend of ISPs implementing data caps and metered pricing. A recent GigaOM post describes how Time Warner, Comcast, AT&T, Charter and Frontier Communications are all either [...]

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  18. [...] take them up on that offer of truly unlimited broadband, we’re seeing the carriers pull back with tiered plans and broadband caps. With the mobile web, carriers are weighing as many alternatives as they can before accepting dump [...]

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  19. [...] take them up on that offer of truly unlimited broadband, we’re seeing the carriers pull back with tiered plans and broadband caps. With the mobile web, carriers are weighing as many alternatives as they can before accepting dump [...]

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  20. [...] how to protect their data services revenue. They don’t want to make the mistakes made in the broadband wireless world that led to ISPs becoming dumb pipes. They also have to consider how to best use more constrained network [...]

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  21. [...] central conclusion is one I would agree with, and have written about before: Network providers can and will use DPI technology to improve their profits at the expense of their [...]

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  22. [...] Time Warner is joining other ISPs in trying to squeeze more money from their broadband pipes, generally in the name of needing to upgrade the network or to stop bandwidth hogs.  But in truth, caps and tiered plans are about limiting competition (especially from online video), and squeezing customers because a lack of competition means they can. Here’s the money quote from the BW article: “We need a viable model to be able to support the infrastructure of the broadband business,” Time Warner Cable CEO Glenn Britt says in an interview. “We made a mistake early on by not defining our business based on the consumption dimension.” [...]

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  23. [...] Time Warner is joining other ISPs in trying to squeeze more money from their broadband pipes, generally in the name of needing to upgrade the network or to stop bandwidth hogs.  But in truth, caps and tiered plans are about limiting competition (especially from online video), and squeezing customers, because a lack of competition means they can. Here’s the money quote from the BW article: [...]

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  24. [...] though not by much. On principle, I don’t use Comcast, especially since they instituted metered broadband. Of course I could move back to New York and sign up for either Verizon FiOS or Cablevision, but [...]

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  25. [...] and online gaming companies. Thanks to that, it’s now a microcosm for a battle against consumption-based broadband attempts around the country. If metered broadband works in Austin, then it can work anywhere [...]

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  26. [...] which broke the story about Frontier’s delay. In February, Beasly told me the ISP would introduce its caps in August. Not much has changed since then, except for the outrage over the TWC caps. This goes to show how [...]

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  27. [...] many ISPs charge based on the different speeds of service, but in the U.S., I only know of  one: Charter Communications, which mixes speed and capacity limits and plans to cap capacity based on the level of speed a customer chooses. Its smallest cap is 150 [...]

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  28. [...] Time Warner is joining other ISPs in trying to squeeze more money from their broadband pipes, generally in the name of needing to upgrade the network or to stop bandwidth hogs.  But in truth, caps and tiered plans are about limiting competition (especially from online video), and squeezing customers, because a lack of competition means they can. Here’s the money quote from the BW article: “We need a viable model to be able to support the infrastructure of the broadband business,” Time Warner Cable CEO Glenn Britt says in an interview. “We made a mistake early on by not defining our business based on the consumption dimension.” [...]

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  29. [...] then took the information on consumption-based broadband plans and divided the price a customer pays per month by the amount of data they can consume under the [...]

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  30. [...] have cable out to her apartment building just yet. However, it too is planning some form of consumption-based broadband billing as [...]

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  31. [...] to the recent metered broadband trials engaged in by Time Warner Cable and AT&T (although others are talking about them as well), arguing that the bandwidth caps are “arbitrarily low” while the cost of [...]

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  32. I was rather surprised when I came across this article. I’m a charter broadband customer and have not received notice about the caps. When was I going to find out? When my bill went up for exceeding the cap? This is a poorly run company that deserves to be in bankruptcy (where it finds itself now). BTW, I confirmed that your reporting on charter and caps. http://www.dslreports.com/shownews/Charter-Confirms-New-Caps-100676

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  33. [...] after it was proposed, the trials were canceled after the public and members of Congress protested. AT&T has a similar trial underway in Beaumont, Texas and in Reno, [...]

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  34. [...] to figure out exactly how much different services cost consumers on a per-byte basis. And once you train someone that downloading a 2 GB video costs $2 in overage fees, then they rightly wonder why sending a text message that consumes a mere 160 bytes (you can cram [...]

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  35. [...] world, rather than a per-GB pricing model. Verizon has been one of the last holdouts on the idea of metered broadband, in which an ISP charges users based on the amount of data they consume as opposed to charging a [...]

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  36. [...] Verizon’s CTO Dick Lynch said in September that Verizon was also in favor of some kind of consumption-based billing, it was kind of like watching your favorite indie rocker sell out. Why would Verizon, which is [...]

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  37. [...] now that users are getting “good enough” IP video streams delivered to their TV sets, consumption-based or capped broadband, as it is currently being tested by service providers like AT&T and Comcast, could end that [...]

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