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GigaOM White Paper: The Facts & Fiction of Bandwidth Caps

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Beginning on Wednesday, Comcast, the largest broadband service provider in the U.S., is going to start capping the total amount of data you can transfer using their broadband connection — to 250GB per month. With this move, the cable company will become the symbol of a new Internet era, one that is both monitored and metered. It is an era that threatens to limit innovation and to a large extent, the possibilities for new startups.

I have been very vocal about the short-sightedness of this decision being made by Comcast (and some other carriers), and along with my colleague Stacey Higginbotham, have been covering the story pretty closely. It is a clear and present danger to the way we use the Internet in this country. 

In order to give you a better understanding of the issues at hand, I have teamed up with my old friend Muayyad Al-Chalabi, an alumni of Bell Labs and until recently an analyst with The Monitor Group, to release this white paper, “Broadband Usage-Based Pricing and Caps Analysis.”

In this paper, we aim to highlight the possible unintended consequences of such policies, among them the stunting of growth and innovation of web-based applications. And of course, higher costs. Plus:

  • The strategy ignores the high degree of dependency “interactions” between power users and the rest of the network. The power users don’t act in isolation and in fact represent the hubs in any scale-free network; sequestering them and overcharging them will result in either low usage or worse, higher costs.
  • Given the growth trend due to consumers’ changes in content consumption, today’s power users are tomorrow’s average users. By 2012, the bill for data access is projected to be around $215 per month.
  • Strategic pricing involves the recognition that changing prices alone cannot solve the challenges facing carriers. Carriers are taking the easy way out trying to protect the “walled garden” rather than figuring out how to innovate in service delivery and harvesting more value from the overall content and applications opportunity.

If you’re interested in getting a PDF copy of this white paper, please enter your email address below. Otherwise, I have embedded a copy (using Scribd) for you to read it online.

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95 Responses to “GigaOM White Paper: The Facts & Fiction of Bandwidth Caps”

  1. I received the email Sept 12th from Comcast and read it in disgust. I new it was coming, but it has been a huge topic of debate where I work at (a phone company where I do DSL support for the technicians)

    Even though this does not ‘directly’ affect me ‘now’ (which Comcast wants me to believe), I understand what it will do for the future and how it IS going to affect me. Personally, I am disgusted – as I have been for quite some time.

    Although this per se is not the reason I am leaving Comcast (far many other problems they refuse to fix even though they admit it is their problem when I went on a huge rant on my site), this may be the straw that broke the camels back for me. Enough is enough.

    I may not be one of the ones downloading 250GB a month that will get hit ‘Directly’ by Comcast (as they say), but I AM one that a) wants what I pay for (which I am not getting currently) and b) I have interest in the innovation and technology in the future.

    If I did not have have interest in that, I would not have made it to where I am now; and, in 10+ years, it says a whole lot! In 10 years we have come such a long way, but because of what this will start, we will not make it that far in the next 10 years or thereafter as we have today.

    Comcast needs to open their eyes and see what negative influence this will have on the innocents of this.. instead of just blindsiding them to make them think they are not being affected. It will affect us all. Period. And, it is not going to change the habits of the ones they are trying to punish.. just push them further.

    Least, that is my 2 cents.. right or wrong.

  2. @Ryan
    It’s not only “pirates” who complain about usage caps. With more and more legal media being available for download, these data-caps are going to prove a problem. Music is already available for download and is proving to be very popular amongst the average user. DVD’s are now available for direct download, which can be 4gb or so. If you’re on a 30gb plan, that’s nearly a sixth of your usage gone. Then you’ve got to take into account games, which can also rack up sizeable chuncks of your cap if you’re downloading them, and then also if you take into account online play. All of these forms are legal ways of how you could use up your download cap.

    One method that I think might work for those that are going down the cap route is for ISP’s to also be content providers. My ISP, iinet ( has been fantastic in developing their Media Lounge, where iinet users get unmetered downloads from iTunes, ABC iView (TV streaming), and also a few select TV channels that they’ve set up – including Barclay’s English Premier League, NASA Space Channel, and WA Symphony Orchestra Concerts. They also have their own gaming servers which also provide unmetered content.

    Now, if only Telstra would get around to providing us with internet speeds comparable with the US…

  3. Ricosauve

    Here in Canada, Rogers, the cable provider now has a 95GB/month cap on the 10mbit and 18mbit connections.

    I don’t watch a lot of regular TV, most of my video is in video podcasts (cranky geeks, half of revision3) and of course audio podcasts. I was living on dial up during a transitional phase, and when I moved in to my new place, I was happy to get the cable ‘net. Until I was 3 weeks in to my first month and had already used 80/95GB. This was late August/early September, so there weren’t even new TV shows to “pirate”, it was all getting the high def/med def versions of the vidcasts, legit streaming video (Daily Show/Colbert and the like) and playing online games(and surfing like a crack addict coming out of rehab of course). When I called them, I was even willing to “upgrade” and pay extra for business class, working on the assumption it was unlimited, but the tier 1 guy didn’t know anything about business service, and the ‘retention officer’ that I had to repeat “if you don’t have high speed, I don’t want your service” over 5 times to wouldn’t even entertain the idea.

    Bell is the DSL provider, and they have no limits posted on their site. Checked the info for the various levels, the EULA, and the ToS, and could only find reference to “excessive use” being “investigated”.

    Other than a bit of oddness with yahoo messenger, the 5mbit DSL is performing as well and sometimes better than the 10mbit cable service.

    The kicker is, 2 weeks after I canceled the account, Rogers called me up to do a customer satisfaction survey. Talk about right hand/left hand mutual ignorance.

  4. @everybody from over seas or with caps.
    Let’s take a look where we (Internet) comes from. The network of interconnected networks developed because of no caps. I remember uucp storing email and data on my servers to be forwarded at night to somebody else on behalf of somebody else.
    Next came the Web, would that have been developed if we would have had caps on our research networks?
    Remember all the commercial networks at the time with caps? Or the pain to get anything running on them?
    So I feel sorry for you if you have caps, but please don’t put me or my mind in a prison just because you are in one. Btw I don’t even come close to the Comcast cap.
    And telling me they will enlarge the cap if more people are reaching it. Is just insult to me, why enlarge the cap when many people are hitting it. That will cost even more, so I must think they think I’m not very smart. Let me say this. I return the favor.

  5. I think the public at large has little understanding of the actual internal ISP network architecture, as is evident in most of the comments above. Briefly, in any give neighborhood there is one path all the data uses. I would hate to live in the apartment building directly across from the Google campus. The usage there would be crazy. You can’t expect there ISP to put in a 40Gps dedicated line just for them. Verizon is spending over 800$ per customer to install FiOS, and that’s just 30Mps. Every network has a bandwidth weakness. Comcast is spending hundreds of millions right now upgrading to Docsis 3.0 and bigger back bones, as is every ISP. The way I see it the guy downloading a hundred movies a day is no different than the guy driving the Hummer in front of me. One pollutes the environment the other pollutes the internet.
    Comcast Business Class internet isn’t capped for little more with faster speeds. Why would a true “Power User” have regular service? You’re downloading hundreds of FREE songs and music; you can’t afford to pay ten bucks more a month to do so?

  6. Pay per Byte and throttles are just tricks they are using to keep you, the customer, from downloading content in direct competition to them, the cable companies. The scare tactic, the potential for a $200 bill from Comcast, will make many families vow never to download a movie, watch a TV show, or play an online game again for fear of going broke. The Cable Companies are hoping and praying they can kill the fledgling ‘on demand’ business by making it too expensive for the average family.
    In the New York Metro market, where there is true competition with VZ in the mix, there are no hints of caps or throttles.

  7. Comcast’s cap has a different objective than Time Warner’s.

    Comcast will happily sell you digital HD television, which does *not* count towards their 250GB/mo cap (10x larger than TW’s). So Comcast is not trying to throttle use to protect an under-built system. Comcast is trying to prevent NetFlix and Blockbuster from competing with their cable tv business. And to motivate content sites to enter “collaborations” with them. Raising monthly rates is nice too. They are simply trying to leverage an access monopoly to develop and protect other revenue streams.

  8. @ronald

    I agree with this description. “Means short sighted greedy without any substance.”

    I think more importantly this is an issue where regulation has to come into play. the cable and telephone companies are much less regulated than the banks who are playing havoc on the economy. I am sure the BSPs with caps are going to do exactly the same on innovation.

  9. Families with two or three kids who also use computers will eat through 250g simply by the streaming video/music/skype. Then toss on the fact you have Vonage and you work out of a home office.

    I wonder if comcast voip bandwidth counts.

  10. @keaton

    Good point your bring up; looking at international peering data and connectivity from NZ, you re-enforce the point is that the lack of power users locally results in most of the traffic being served outside the carriers domain. Higher international peering with Singapore, Sydney, Tokyo and transit capacity to the US is a byproduct of such policy.

  11. @bdraco

    250 Gbytes/month = 250 *10^9 * 8 (bits per byte)/(30 (days)/(24 (hours)/(3600 seconds) ~ 772 Kbps.

    It is a nice number to talk about, but does not take into consideration peak traffic during busy periods (which can be 2-4 hours of prime time viewing, or 4 hours for a football game), nor does it deal with multi-user scenario where each person is viewing different or multiple streams of data.

  12. Well 250 Gigs sure “sounds like a lot,” until it is taken into context that the average user in 10 years will likely consume that much or more. The advent of DVD for download, legally, along with music, and various high def data streams. I streamed the Olympics live when I could, regularly buy and download DVDs and send out home movies to various friends and family using the bittorrent protocol. I think this is all normal behavior, certainly ethical and legal. Between work and home my average bandwith is over 100 gigs and this is for an extremely small in house tech company. Can you point out where this makes me a pirate? Most of my family is in the same boat, sending out HD copies of home movies and birthday parties, weddings, etc consumes a lot of bandwith in and of itself.

  13. I live in New Zealand, and we have bandwidth caps. I have the largest plan offered done here, 50GB cap, & pay roughly 150 bucks a month for it.
    Typically my non geek friends only go for 5-10gb packages, and only costs them 30-50 bucks a month.

    None of them can download like i can though ..

    Yet somehow everyone finds it 100% possible to do anything. Although I pay more for internet, and I have had to cut down my usage since moving from Canada. I have only limited the amount of things I do, not stop doing things completely.

    Although as a consumer I much prefer no cap + cheaper pricing offered by living in Canada. I honestly don’t know how these telcos ever made money in the first place with flat fees. if the ISPs pay per data, why dont the consumers? There is a direct proportion of the cost to the amount of data. If everyone who used the net paid for how much they used it, my folks back home who use MAYBE 1gig of their net bill wont be paying for the excess usage the neighbor down the street has managed to run up. Because the geek down the street knows he can do this.

  14. Brett Glass

    What you neglect to mention, in your paper, is that you are one of those who are responsible for the imposition of download caps. By cheering the FCC on as it attacked Comcast’s more sophisticated network management techniques, you were among those directly responsible for the FCC edict which required Comcast to implement the caps.

  15. muayyad Al-Chalabi


    Too bad, you stopped reading, because if read further, you might have gotten the points of the paper. It is not just about fairness, but about business decision based on facts on the ground. It is just ironic that it is the same guys who fought À la carte video pricing are installing micro-pricing based on bytes.

    Surely, the broadband residential market is not monolithic; some markets are hot and getting hotter (like New York City), but most are NOT competitive at all. It is this mixture of markets, products, national footprints, public scrutiny that prevents carriers from having different policies for different regions at this time. Thus, the tactic of indirect rate increases, initially aimed at soft targets, then affecting every user.

    The paper points out the fact that the 5% of users who generate most of the traffic is a phenomena that is not constrained to broadband access, but occurs in natural networks like protein networks. Carriers can chose to fight it, but the results will not be as they expected. Hierarchical structures with different degrees of connectivity

  16. I stopped reading on the first page as soon as I saw the line “direct rate increases are hard to implement in a competitive market.” You can’t have it both ways. You can’t argue that the cable companies are being unfair because the market is non-competitive, and at the same time acknowledge that they’re targeting power users because competition prevents them from implementing direct rate increases.

    In fact, I’m more sympathetic to the argument that the market is NOT competitive, but the author blew his credibility with that particular line. With the market as it is, I don’t blame the cablecos for trying to be as profitable as they can be. As far as innovation is concerned, usage caps and metered usage should spur entrepreneurs to come up with ways to deliver content with lower bandwidth usage.

    As far as the market is concerned, we should focus more on getting regulators to encourage competition via broadband wireless, etc.

  17. @James

    I think it takes either an exaggeration or a rather narrow viewpoint to brand this “a new Internet era” – particularly outside the US, usage based charging is far from new.

    I think you just made my point… essentially the usage based charging which was common place outside of the US is now going flat rate. And in places where usage based charging was present, the usage was not enough and innovation was focused almost entirely on making use of as little bandwidth as possible – which if you believe broadband is a platform doesn’t make much sense.

  18. @WD

    You couldn’t be more right about describing Comcast (and other BSP) and their failure to address the big question. I think FCC needs to step in and essentially separate services from the pipes – something they should have done in 1996 and instead we are back to the future. I continue to blame the FCC for all our mess.

  19. My general feeling is that Comcast is looking at the future, and seeing their own internal bandwidth needs for content delivery. There is an inherent business conflict in being a content provider and an ISP. They’re most likely to sacrifice the latter to the benefit of the former based on the premium revenue they receive for content.

  20. Response to Allen’s comment:

    My reference to innovation was not limited to the creation of new service or widget. Innovation can be achieved along multiple axes; Finance (business models), Process, Products and Offers (design, performance, systems, support services) and Delivery mechanisms. Innovation happens when there is a contradiction between two and more elements- in our case end-user demand and carrier cost.

    What the carriers need is a mind set built around “creative destruction” (using Schumepeter’s phrase) – a process in which the old ways of doing things are endogenously destroyed and replaced by new ways. Cost-plus only method of pricing will not blend well with the explosive traffic growth and shifts in consumer behaviors. For example, if users had to pay for every web sites visited, then we would not have ad-based business models and users will have stopped using the internet all together.

  21. I think it takes either an exaggeration or a rather narrow viewpoint to brand this “a new Internet era” – particularly outside the US, usage based charging is far from new. That said, metering, particularly in the dialup days when every minute spent online represented another penny or more of cost, did have a substantial negative effect on users, both deterring uptake in the first place and deterring users from spending longer than the minimum they could get away with. I doubt Comcast’s cap will have anything like that effect unless either data volumes explode without them adjusting it, or they slash the cap dramatically.

    I would prefer a truly unmetered/unlimited service, but there have been far more draconian caps than Comcast’s out there for years without the sky falling on us.

  22. @OM
    Don’t we have a new name for this kind of management.

    Wall Street

    Means short sighted greedy without any substance.

    For the _nth_ time it’s not about today it’s about the future. See above management description and look at the Investment Banks to what happens when such management practices take place. You bail them out or you pay higher subscription cost, take your pick.

  23. Well, 250g is a huge amount of bandwidth. Who uses that kind of bandwidth? I would bet it is mostly participants in a p2p network. As you know, the vast majority of such people are breaking the law by distributing copyrighted digital works.

    I actually think that the failure by our government to police the distribution of such copyrighted works has left the door open to vigilante efforts like this — and the problem is that Comcast does not actually have the end-user’s best interests at heart. What they care about is profitabilty.

    We are left with a vicious circle that hurts everybody.

  24. A quick glance at the paper was enough to prompt me to put my email down for a pdf copy so I can read through it at leisure.

    Frankly I’ve been sceptical of the view that real innovation is so sensitive to costs. If the only way that some innovation can succeed is if it has zero marginal cost to the user, then it doesn’t seem to me that the ‘innovation’ in question is all that valuable a thing.

    I’m going to be interested to see if you make me change my mind at all.