14 Comments

Summary:

Broadband caps have become a reality at many large ISPs. Protecting the pay TV business is a rationale for caps, but as connected devices proliferate and bandwidth needs skyrocket, consumers may find those caps harder to live with and operators may find them more profitable.

cablemodemthumb

Broadband caps have become a reality at many of the large ISPs with Comcast having a cap since 2008 and AT&T adding one in the coming months.

Charter also has one, which leaves Cablevision, Verizon and Time Warner Cable as question marks. However, Verizon’s Dick Lynch has explored the possibility of wireline data caps, and judging by comments from Time Warner Cable CEO Glenn Britt earlier this month, some kind of consumption-based broadband pricing is coming. When asked about caps directly a Time Warner Cable spokesman said the company didn’t have “anything to announce now regarding caps.” Verizon doesn’t have any plans, but will continue to evaluate the issue.

However, as caps proliferate, it’s worth examining the repercussions, even those of a cap that allows someone to download 150 to 250 GB per month — or the equivalent of streaming videos for 250 hours or about 10.5 days. In my house, we use about 40 GB per month, while my colleague Darrell uses about 150 GB per month. AT&T says its average DSL user consumes about 18 GB per month while Comcast claims its median usage (the usage falling in the middle as opposed to an average) is 6 GB per month.

However, Comcast has seen its median creep up, and I personally saw my broadband use rise after I brought an iPad into my home. At the time, Comcast spokesman Charlie Douglas said the usage of more devices inside the home was bringing up the median. Of course, there’s also Netflix, which now accounts for 61 percent of streaming movies according to the NPD Group, and about 20 percent of all broadband traffic according to Sandvine.

Netflix has become the ISPs’ favorite whipping boy and will soon be the stated reason caps are implemented. The opportunity to protect the lucrative pay TV business is important, but there are future repercussions and maybe even a monetization strategy that goes beyond protecting pay TV. It would ensure broadband providers can monetize the next wave of the Internet as mobility and connected devices proliferate. Right now, it may seem crazy to imagine a home connection using 250 GB per month, but if one imagines a family of four each with a tablet, maybe a Roku box, some music streaming and a connected home automation system, those gigabytes may add up.

For example, when offering customers a warning about excessive use, cable ISP Suddenlink reportedly sent letters warning customers that perhaps they were streaming music while not in a room, which could result in heavy usage. However, having background music playing isn’t a far-fetched usage scenario, and most people tend to gravitate toward streaming services on their connected sound systems. For example, Tom Cullen of Sonos told me that more than 50 percent of the sound system’s customers use streaming music services as opposed to listening to their own music libraries. Streaming an hour of Pandora uses 56.25 MB per hour, assuming a 128 Kbps streaming rate, so to use up 1 GB, one would have to stream about 20 hours of music.

As more of these services come online, as Om predicts, those caps won’t look as generous. With casual video conferencing through FaceTime, Skype or other chat services, it’s not crazy to think people will be broadcasting more and more of their lives, and maybe even lifestreaming from their homes among a select group of people. For example, I’d love to have a continuous lifestream from the GigaOM home office I could flip to in order to chat with colleagues, and I wouldn’t mind offering them the same, even though it would require me to change out of my sweats. FaceTime requires a mere 90 MB per hour, but if I used it for streaming my work each day, I’d rack up about a gigabyte each day in FaceTime alone 22 days out of the month.

The point here is that while a 250 GB cap seems reasonable for many today, in perhaps as little as two years it won’t be. And by then, carriers will have consumers trained to think of broadband as a capped or consumption based service as opposed to an all-you-can-eat buffet. Comcast has said it will raise the cap as usage levels rise, but there’s no guarantee. AT&T actually has an incentive to keep that cap at 150 GB since it will charge overage fees. (Comcast just cuts off service after a person exceeds the cap multiple times.) So while the urge to prevent Netflix and other streaming services from competing with pay TV is a likely goal of these caps, they are also training the consumer to consider broadband limits, which may in turn limit innovation and new applications.

  1. …and we all can’t have flying cars because we have to pay for fuel by the gallon! That’s unfair! Evil gas companies must be profiteering.

    Share
  2. If the argument here is that there is not enough bandwidth available in dsl, fiber or cable so caps are required, something has to be done. Bandwidth demands are only going to grow and grow quickly. Which means the providers will have to further reduce cap, if they don’t upgrade capacity. A self fulfilling death.
    But if Comcast is saying that caps will rise as demand goes up, then this is just price gouging. Either you have the bandwidth or you don’t. The government needs to open up the land line broadband to more competition. They also need to do Rural Electrification type financing to help finance that competition. Its clear that the current providers have no motivation to provide faster, cheaper broadband. And we know that faster, cheaper broadband is possible, because its happening in other countries.

    Share
  3. This is one of the market opportunities ISPs abuse. First they have capping then next they will offer additional pricing for premium services which disables capping. Others, implement bucket pricing…

    Share
  4. “but if one imagines a family of four each with…”

    You forgot to specify high bandwidth HD and for music streaming 128kbps is the minimum, what about something like flac? Today’s supposed bandwidth numbers quantify hours of use and and media quality, BOTH of which will be going up in the near future.

    Share
  5. My issue is really that the cable companies are just trying to protect an old market, from the “fat and happy” days.

    Here in Canada there has been much lobbying for tiered pricing, although our government has stepped in and prevented this, for now.

    The reason that bothers me so much is because our cable companies had a far superior opportunity than Netflix and such to offer even better services, but instead of competing they went to the government for help. With their existing content relationships, our Cable companies could have offered a Netflix type service on steroids. I would have happily traded my basic cable package fees for this type of service to get the “what I want to watch, when I want to watch it” aspects that we all so enjoy from Netflix/Apple TV, etc. I would probably have been willing to pay even more for this. Instead, they try to protect their old model.

    So, I have abandoned cable altogether, worked out my over the air HD and buy my TV shows through Apple and Netflix.

    Sucks to be them.

    Share
  6. It’s not about bandwidth. Congestion is caused by too many people online at the same time, transferring data at too high a speed, not their total monthly usage. If this was about bandwidth, then AT&T wouldn’t allow users to go over the cap by just paying more. If these ISPs were really running out of bandwidth as they claim, they’d be LOWERING the speeds they offer, not raising them. Higher speeds = more usage. Of course, none of them are willing to give up the higher fees they charge for faster accounts.

    If American markets had any real competition, they’d never be able to get away with this.

    Share
    1. Uhm, not that I agree with caps but… You need to learn the proper meaning of words. What you are calling an issue of congestion is INDEED bandwidth issues. Bandwidth is NOT the quantity of data you are allowed to transfer. Bandwidth IS how quickly data can be transferred. To this end, it is likely that none of our US broadband providers have enough BANDWIDTH to provide all their customers with enough BANDWIDTH to meet their stated service level offering. That’s why we have all of this “UP TO xMB/s” business. Every broadband provider over-sells. The major issue is how much.

      We get caps primarily get caps because providers want to. They don’t want to spend the extra money in upgrading high usage areas.

      Share
  7. Of course, according to Mr. Glass who is an WISP interested in providing as little service as possible to paying customers, not having cars at all would be just fine. Nothing wrong w/ donkeys.

    Share
  8. Caps are just for money, go to http://www.stopthecap.com , the carriers do not lack for bandwidth. They are going to train us to pay for bandwidth by the caps and the prices will go through the roof. In most markets there is no competition for broadband. For some “strange” reason where there IS competition, the prices are lower. (a LOT lower) Most European countries put the US to shame in terms of pricing and access to Broadband.

    Share
  9. I think you really said it when you said that it will limit innovation. In my spare time I’ve been experimenting with some relatively high bandwidth operations, namely streaming music for people. There was a time I was streaming to around 13-16 people for several hours which uses up most of my upstream bandwidth and 1-2GB an hour. Once caps come about am I not going to be able to have the opportunity to try things like this for fear of getting charged? Are we going to have to revert to physical media as programs get larger and larger and are more commonly downloaded than boxed?

    And to top it off, AT&T is pouring billions of dollars into their wireless services and is leaving those of us with U-Verse stifling. I live in an outdated community with rotten copper. We could totally benefit from fiber. Do they want to innovate and lay fiber? No. They’ve even made statements that they plan to abuse the copper for a long time. It’s stupid! And now people are saying that AT&T now has the ability to upgrade people from DSL to U-Verse by force and as they see fit. So now we’re just going to cram more people onto a service that’s already outdated and somewhat unstable? Makes perfect sense.

    Share
  10. Yea, as it stands now, with 3 people, and 3 netflix accounts, and no TV service, we go thru 1TB on average per month on charter. I have never gotten a warning, but I am on the ultra 60, and the theoretical download limit per month is over 19TB. I have received a call once, when we hit 4 TB, and was just told to curtail it a little bit. What I pay now is only a few dollars under a business line, and its not reasonable for them to threaten moving me to a business line, as I have considered it already.

    Share
  11. Assume we ARE talking about cord cutting, of the TV variety. I cancel my Comcast cable TV service and replace it with a variety of Over The Top services. In HD. Even at 720p 24fps the offerings on XBox, Apple TV and Vudu run about 5-6Mbps. And Vudu has an even higher bandwidth offering. At 5Mbps watching about 4 hours per day you’d run through 250GB in about a month. Ignoring the fact that the average american home has multiple sets. And ignoring any other uses for the internet. Even 250GB makes it difficult to replace your existing pay TV service with something over the internet if you consider HD a requirement. Imagine a future with 1080i (x4) videos and it will start looking really really limited.

    Share
  12. Scott from Aus Monday, March 21, 2011

    You should all look at the way ISP’s in Australia work. We have had download limits, ever since we had internet. And we are only just getting some decent limits now.

    I think its basically because bandwidth to overseas cost to much for ISPs not to have limits.

    There are many different ways it can be done.

    Most plans are capped and only count downloads. So streaming content is not an issue. There are some plans where uploads are included, and downloads from some providers are free.

    They also have peak and off-peak limits.
    And shaped plans, which basically means if you go over your limit, they reduce your bandwidth for the rest of the month and don’t charge you overuse fees.

    However, ISPs that charge overuse fees, normally charge it at a ridiculous rate. Such as $2 p/Mb and have a limit of how much can be charged.

    Anyway, its a system that promotes competition. But in the end the consumer has to be careful or they have a massive bill to pay.

    Share
  13. I think it is interesting if instead of taking this one, single event you go back 15 years and look at the time line from the Telecom Act of 1996 that was good for consumers and competition (some of it captured well in “Broadband Bandits”) until today. The incumbents and cable companies single unifying effort was to accomplish the watering down of the 1996 act, which they succeeded in doing from 2000 through 2009 and focusing their local lobbying efforts at the state level for disarming the state regulatory commissions. Using ATT as an example, one of their prime arguments for deregulation (which when translated means regulation for competition) was that if they didn’t have to share their network built on a monopoly, they could invest in fiber and build out of a broadband network. Once they accomplished the neutering of the URC’s, their broadband network was built for the main purpose of delivering television; copper become sufficient for delivering the speeds THEY needed for delivery and fiber to the home is no longer in their plans. Now all of a sudden it is an outrage that ATT is implementing caps to their ISP business? We made our bed and now we have to lie in it.

    Share

Comments have been disabled for this post