Blog Post

Congressman Files Bill to Stop Tiered Broadband Pricing

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

ericmassa1Updated: Rep. Eric Massa (D-Corning) today introduced legislation that would force Internet Service Providers that want to implement usage-based pricing plans to go through several regulatory hurdles, including public hearings, to determine if such pricing is anti-competitive. Such usage-based plans may involve tiered pricing or caps based on the amount of data downloaded.

Massa is one of the two New York congressmen who spoke out strongly against efforts by Time Warner Cable (s twc) to expand its tiered billing trials. Under its plan, announced March 31, residential customers in five cities would have paid a different price based on the amount of data downloaded each month. However, a little more than two weeks after it was proposed, the trials were canceled after the public and members of Congress protested. AT&T (s T) has a similar trial underway in Beaumont, Texas and in Reno, Nev.We have argued that such caps deter innovation by raising the cost of broadband, and are the result of a lack of real competition in many U.S. broadband markets. Massa’s legislation, known as the Broadband Internet Fairness Act (HR 2902), seeks to get public input and regulatory approval through the Federal Trade Commission before an ISP can implement a usage-based pricing plan. On a conference call with reporters today, Massa said he chose to funnel the process through the FTC rather than the Federal Communications Commission because the FTC has experience dealing with competitive issues.

Specifically, the bill:

  • Requires ISPs to submit plans to the FTC, in consultation with the FCC, if they plan to move to a usage-based plan;
  • Prohibits volume usage plans if the FTC determines that these plans are imposing rates, terms, and conditions that are unreasonable or discriminatory;
  • Sets up public hearings for plans submitted to the FTC for public review and input;
  • Only affects Internet providers with 2 million or more subscribers;
  • Imposes penalties for broadband ISPs that ignore these rules.

Massa also said that if an ISP wants to charge extra fees on a per-gigabyte basis, they should have to undergo a process similar to that of utilities, which are required to get regulatory approval. Joining Massa on the call were Ben Scott, policy director at the Free Press, an Internet advocacy group, and Phillip Dampier, founder of the web site StoptheCap, which was founded last summer to protest usage-base pricing. I’ve reached out to major ISPs for their perspective on the bill, and will update the story as needed. So far Comcast (s cmcsa) has referred questions to the National Cable and Telecommunications Association, which has declined to comment.

Update: An AT&T spokesman said via email such a bill, “advocates for a radical and unprecedented government mandate that will demand that consumers have only one all-you-can-eat pricing model for Internet services.” In AT&T’s view, such a model forces those who don’t use the Internet often to subsidize heavy users who take up almost half of the capacity on AT&T’s network. “In their zeal to protect high-volume users Free Press is abandoning the vast majority of consumers who use the Internet in a more moderate fashion,” said AT&T’s statement.  We’ve heard this argument before.

43 Responses to “Congressman Files Bill to Stop Tiered Broadband Pricing”

  1. Mr. Bennett, you spent much effort accusing Mr. Dampier of ranting, avoiding the issue, over-excitement – you name it.

    OK, let’s get to the core issue – bandwidth. There’s a difference between bandwidth/speed and quantity of usage. In my case, I rarely download anything that requires high speed but I listen to WiFi internet radio for maybe 30 hours a week, which along with my other use could take me well over some arbitrary cap, without my having put any significant stress on the provider’s system.

    Quoting what you wrote:

    “Like I said, the cost of raw bandwidth is declining, slowly, but people are using more of it. On the question of connections vs bandwidth, it’s helpful to bear in mind that each connection has a certain capacity, so the overall system has to be engineered with enough capacity to meet peak load. While it’s true that off-peak usage doesn’t cost anything measurable, increasing the capacity to meet greater peak load does have a cost, and it’s not linear.

    So bandwidth is not free.”

    All very true, but it’s absolutely no argument for caps. It’s logical that the telecoms should invest in higher speed and offer them for a higher fee. Unlike usage caps, paying for a higher-speed tier would be the user’s choice. Users would voluntarily limit their own speed rather than having the telecom company imposing an arbitrary cap. And I don’t think you’ll find anyone who wants higher speed objecting to paying for it.

    You can be sure that usage caps will be designed so that users will often exceed their limit and pay steep overcharges. This is nothing but a money grab by which the telecoms, exploiting their monopoly positions, will be in effect charging their customers up front to raise money for capital investments which are not necessarily guaranteed to happen. In a truly competitive environment, companies would invest their own money in capital improvements and recoup their investment from customers willingly paying for better service. The cap will only work under monopoly or near-monopoly conditions and would actually be a disincentive for improvement.

    So don’t try to tell people that the cap is in their own interest when it is not.

    • KP, by my calculation your Internet radio use comes to 3.5 GB/mo. I don’t think you’d have a problem even with a 3G wireless system at that level.

      The problem that keeps coming up here is the supporters of the Massa bill making sweeping generalizations that aren’t backed up by even simple calculations and then impugning the motives of the carriers. Some people are persuaded by this sort of thing, of course. What I find really odd is the use of the term “cap” to describe usage-based pricing. Comcast has a cap – 250 GB/mo – and if you exceed it for two or three months you’re history. The system that TWC floated and then withdrew is not a cap.

      The costs of middle-mile bandwidth vary region by region, and there’s no hard rule about how much it should cost to each consumer. And it certainly is the case that transit costs are capacity-based, so the economics of broadband are very sensitive to usage.

      That’s inconvenient, but true.

      OK, that’s all, I’m out of here.

      • Mr. Bennett, I think you confused per week with per month – your estimate of my usage is less than mine by a factor of about 4.

        Rather than “impugning the motives” of the carriers, I’m simply looking at what the incentives are that drive their actions. According to law, investor-owned companies have one obligation only, to make money. They will behave differently according to whether they are an unregulated monopoly, operating in a truly competitive environment, or perhaps as a regulated monopoly.

        An unregulated monopoly will try to make the most money with the least effort or investment that it can get away with. Rather than investing in its infrastructure, it will play with its rate structure with devices such as caps, putting a damper on its customers’ use of its service – especially if it plays the rates so that users end up paying steeply for over-use.

        By contrast, companies in a competitive environment have the incentive to improve their infrastructure and offer their customers higher speeds which plenty of them will willingly pay for. I’m not saying that monopolies won’t ever improve their infrastructure, just that they’ll take their own sweet time.

        Any of the arguments you have made in favor of caps applies equally well to a non-capped, higher speed scenario – better, in fact, since the latter imposes no limitations on customers other than what they willingly impose on themselves.

        Quote “The system that TWC floated and then withdrew is not a cap.”

        It is actually a tiered series of caps involving steep over-use charges for those who step over the line.

  2. Richard Bennett says: “Congratulations, you’ve just made the argument for higher prices”

    WRONG. More bits traveling through my cable line costs Time Warner ALMOST NOTHING. Their attempts to claim their networks need to be upgraded to handle the extra load are complete BS.

    If they are sitting on top of an obsolete infrastructure, its because they had no motivation to do so to since they have no competition. Their gross margins have been pretty healthy over the years given the skyrocketing costs of cable TV packages when compared to inflation for the same time period.

    • An EXPONENTIAL increase in traffic isn’t free on any infrastructure, SD, it has a substantial cost in terms of equipment and transit.

      And if you knew anything at all about the MSO business, you’d be aware that margins on Internet service are better than they are on TV, simply because the MSO has to pay the broadcasters for their content. When the costs of content go up – as they do regularly for ESPN and other premium suppliers – the margins that MSOs make from delivering it go down.

      TWC would be happy to have you sign up for Internet only, but they do have to make a profit in order to pay for the continual upgrades that Internet users want.

      Incidentally, you may want to consider switching to decaf, you’re a bit over-excited.

      • Talk about being over-excited, you just spent one reply a few up from here accusing me and our readers of trying to support bandwidth hogs and pirates. Hardly. Time Warner Cable’s proposed Internet Overcharging scheme would have provided 20GB usage allowances on standard rate service, 40GB for those paying around $10 more. That’s hardly “bandwidth hog” territory.

        In fact, yesterday’s bandwidth hog is tomorrow’s average user. Consumers know one thing about cable companies – their bills never decrease, only increase. So when your provider comes a-knocking telling you about a pricing change that is “about fairness,” people are right to be suspicious.

        The one major difference between Stop the Cap! and AT&T is that one of us didn’t have to do focus group testing to try and find a way to convince people that their Internet Overcharging test was something other than a naked profit grab. We rely on company documents and good ole common sense, not dollars.

        Once you get beyond the PR fog machine of company’s like Time Warner Cable and read their own financial reports, you learn TWC earned more than $4 BILLION dollars in revenue last year and actually spent only $146 MILLION dollars to support the cost of the network. That represented an 11% decline from the year before. Bandwidth costs are declining, new technology can inexpensively upgrade every customer, creating new revenue streams from selling even faster, premium tiers of service.

        It works for Verizon FiOS, Cablevision, and many other providers who rake in the profits and don’t feel a need to throw a 20GB cap on people and expect them to pay the same price for the same level of service.

        The only thing exponential about all of this was the proposed profit-taking from customer wallets.

        TWC is terrified of consumers abandoning their traditional video programming packages for online video only. TV Everywhere, an industry proposal to deliver massive amounts of VIDEO (so much for their clogged pipes theory when they are the ones proposing to clog them) to authenticated cable TV package subscribers tells an important story.

        This isn’t about bandwidth hogs or piracy. It’s about protecting their traditional cable TV business model and leveraging even higher returns on their broadband product to keep shareholders placated.

        Please show me where TWC is losing money on flat rate pricing, based on actual company information and not your “if you knew anything you’d already know” speculation.

      • Gee, Phil, let’s see what I said that got you so worked-up:

        Right, “Stop the Cap” wants to foist the costs of providing bandwidth to hogs and pirates onto moderate users. This is Democracy at its finest – do what you want and send the bill to somebody else.

        What part of that do you find inaccurate?

        Your organization insists that any departure from flat-rate pricing is a violation of some principle or other, and therefore must be scrutinized by the government; you further maintain that at $10 for 20GB is unreasonable.

        What data do you have to back that up? As far as I can tell, most TWC users are well under 20GB/mo today, and a small number are over 40. If that’s the case, there shouldn’t be any problem with these proposed caps.

        I think the major problem here is that most people don’t have any idea how much data they move across their Internet connection each month, so it’s easy for a hysterical special interest and a grandstanding politician to create fear and trembling over the prospect of an across-the-board price increase.

        Pirates do have a fairly good idea of how much they download and upload each month, as their piracy tools keep track for them. So this is one of those cases where you throw a rock into a pack of dogs and you know which one you hit because he does all the yelping.

      • “Right, “Stop the Cap” wants to foist the costs of providing bandwidth to hogs and pirates onto moderate users. This is Democracy at its finest – do what you want and send the bill to somebody else.”

        Repeating your opinion doesn’t prove your contention, nor does it provide the evidence you seem to demand from others.

        The costs of bandwidth are already paid for by customers large and small, and those who vary between the two. The company’s product is enormously profitable, and the CEO told a conference just a few weeks ago Time Warner Cable’s existing network is so robust, he’s “comfortable” with the network as-is and doesn’t see any need for major upgrades over the next decade.

        So let’s add it up. Company’s costs are dropping. Company’s profits are rising. Company’s capacity to deliver its product over its robust network is good for at least the next decade. That equals sign up new customers, keep the ones you have today happy, sit back, and deposit the checks. Life is good.

        What it does not equal is a patently obvious PR campaign that co-opts some consumers into believing the thesis that TWC’s costs are wildly out of control and that price increases are necessary to forestall the great Internet brownout (they used that line on our community as well). Then, to use your dog analogy, they throw the prospect of rate increases into the kennel and let customers fight over who gets to pay for this rate hike.

        Only one problem — the justification for price changes is borne from nothing but an executive boardroom seeking to protect their video business model and also improve shareholder value, something being challenged in their video business by the current downturn in the economy.

        Your characterization of our position on these issues is also fact-challenged. Readers can visit our site and make up their own minds. Is government scrutiny required when uncompetitive markets with unequal providers attempt to launch “pricing experiments” in markets where a truly equal competitor would shepherd victimized subscribers out the door? You bet.

        We’d prefer competition would take care of the problem, but we’re unlucky living in a community where that simply isn’t an option. And $10 for 20GB? I’m not certain where you got that number, because that wasn’t the TWC proposal for our area, nor for Beaumont, another test city. In fact, 20GB of consumption in Beaumont was priced at $54.95 a month (our reader also received a $25 temporary new customer discount that month). Don’t take my word for it. You’ll see a copy of a customer’s bill on Stop the Cap! You’ll also see he claims he was never told about the pricing experiment when he signed up, and got a bill for $73 in overlimit penalties in addition to the monthly cost for his broadband. Only after a complaint with the Better Business Bureau did he get a credit, and a promise by TWC to be sure their employees and salespeople disclose such pricing experiments before the customer signs up.

        What a deal.

        You then refer to us a “hysterical special interest.” Let’s get the fact box back out and provide full disclosure to GigaOM readers and let them decide who represents consumers and who represents special interests here.

        I am a consumer living in Rochester, NY and a Time Warner Cable customer. I have no affiliation with the telecommunications industry, do not receive a penny in salary for the volunteer work I do for Stop the Cap!, nor does our group, entirely composed of consumers with absolutely no industry ties whatsoever, derive any money from any provider, interest group, think tank, or politician. Period. I pay for the site out of my own pocket, and some of our readers chip in and help with the rest of our expenses.

        You are a research fellow at the Information Technology and Innovation Foundation, a Washington-based “think tank” that exists to influence public policy. You couldn’t signal that any better than just recognizing the address of ITIF — “K Street,” Washington DC. They don’t call them K Street Lobbyists for nothing.

        ITIF’s motivations (and possible backing) may be gleaned from its proposal earlier this year to create $30 billion in tax credits for spurring broadband development. A brouhaha erupted when ITIF’s Robert Atkinson launched an attack on the Huffington Post against Free Press for, as the latter characterizes it, “[an attack on] Free Press for trying to advance our nefarious ‘agenda of getting open networks and even more broadband competition.'”

        How anti-consumer!

        It turns out ITIF’s $30 billion tax credit proposal was quite a deal for big telecom interests. It was structured so that telecom companies receiving the money didn’t actually have to spend the money on… you know… deploying new broadband networks. They could, in fact, use the tax credits to fund other projects. Heck, they could even use them to create online gas gauges to help deploy Internet Overcharging schemes, if they wished. Who would be among the biggest likely recipients of the ITIF proposal? AT&T, Comcast, and Verizon, among others.

        After one reader digested the entire ITIF proposal, he commented, “In other words … why don’t we just give the money to AT&T and Comcast and expect nothing but a kick in the … insert your most tender parts here … in return?”

        You can read about the ITIF’s “inside the beltway” power player Board of Directors and their presumably-not-working-for-free staff, including yourself on their website. What you can’t find out is who is actually paying the bills and keeping the lights on at ITIF. When Atkinson was challenged whether any industry money enters the checking accounts at ITIF, the silence was deafening.

        You used an analogy to essentially infer that I, and/or those who are opposed to abusive Internet Overpricing schemes are somehow involved in theft of content. You reliably demand “evidence” from others, while providing none yourself (and also “forgetting” to mention you have a professional dog in this fight). You seem to be doing a whole lot of barking yourself, based on a whole lot of inference, speculation, and accusation.

        And to think your bio on ITIF says:

        “Richard’s written work on wireless networks and the Internet’s structure and regulation forms a central part of the broadband policy debate, framing often emotional issues on a dispassionate and technically sound basis.”

        Apparently the ITIF has created new meanings for “dispassionate” and “technically sound.”

        Now that readers have additional disclosure about who we represent (and I’m a lousy swimmer so I wouldn’t last five minutes in the waters off Pirate Bay), I’ll trust them to decide for themselves who has the interests of consumers in mind, and who has the interests of the broadband industry in mind.

        Thanks for the engaging debate.

      • That was a great rant, Phil, but too many pixels had to die in order for you to avoid dealing with the issue. And now I have to say that I’m not speaking for ITIF or any other organization here, and have in fact made similar arguments on this very blog before I went to work for them this Monday. So your comments about Huffington Post and Rob are completely irrelevant and off-topic, as are your complaints about ITIF’s address (it’s not on K St, BTW.)

        The special interest you represent is heavy users of broadband capacity, the same one that Stacy Higginbotham speaks for. Like you, she’s a TWC customer seeking a lower bill. While I can appreciate wanting more for less (who doesn’t want a deal?), the problem I have with your group is that you’re bent on using the power of the government to get the freebies for you. That’s a dangerous road to take. It’s also interesting that the Congressman who’s written your bill isn’t on any of the relevant committees, nor does he represent Austin, but that’s just a curiosity as well.

        You claim: “The costs of bandwidth are already paid for by customers large and small, and those who vary between the two.”

        Excuse me, but are you claiming that bandwidth costs to TWC are a constant – the same for each customer/account – regardless of how much each customer uses? Because that’s the pertinent question here. So you need to address it, and forget all your weak personal and professional attacks.

        And yes, we know that the costs of raw bandwidth are declining (which they can only do if there are costs for bandwidth, of course) but the relevant question is whether they’re falling as fast as customer consumption is increasing. The data I’ve seen says they aren’t.

        So let’s see if we can’t stick to the facts.

      • “It’s also interesting that the Congressman who’s written your bill isn’t on any of the relevant committees, nor does he represent Austin, but that’s just a curiosity as well.”

        He a member of the U.S. Congress. Bills he proposes affect EVERYONE.

        “Excuse me, but are you claiming that bandwidth costs to TWC are a constant – the same for each customer/account – regardless of how much each customer uses?”

        Ummm…..yes, for the most part they are. The point is that the end users and the ISP both pay for connections….not bits. The ISPs pay for network connections to transit and peers and for maintaining those networks. Whether idle or used to full capacity, they pay for the bandwidth. This is exactly why ISP refused to charge per GB for movie studios to transmit data. They said the cost is in the connection whether used or not. As it stands now, ISPs offer customers bandwidth-limited connections to their networks. We pay for those connections and they cost the ISP whether we use them or not, and since my connection is bandwidth-limited already, I should be able to use that bandwidth to it’s fullest whenever and however I want. I shouldn’t have to count bits because the bits themselves don’t cost anything. Setting some arbitrary cap and charging me outrageous overage fees is a pure money grab, plain and simple.

        “And yes, we know that the costs of raw bandwidth are declining (which they can only do if there are costs for bandwidth, of course) but the relevant question is whether they’re falling as fast as customer consumption is increasing. The data I’ve seen says they aren’t.

        So let’s see if we can’t stick to the facts.”

        Let’s do shall we. I would LOVE to see this data! Please provide it or a link to it.

      • I enjoy the back and forth Richard, but all good things really have to come to a close at some point.

        Yet again not a single claim or representation you’ve made has been backed up with anything beyond your personal opinion. I invite anyone who wants to explore the costs and revenues of Time Warner Cable’s broadband division to visit the Investor Relations section of and read the SEC filings for themselves. They can put up a PR snowjob all they like, but they can’t easily lie to their shareholders and the SEC.

        Landel Hobbs, COO of TWC admits that usage based pricing in a goldmine that will deliver bigger veins of enrichment as time passes. “Average Revenue Per Subscriber continues to grow,” he said. “Broadband data is such a great product. I think there will be some customers who don’t use much that will select the lower tier. But over time, they will use more and move up to the higher price plans.” — NY Times (4/8/09)

        Of course they will. Because when TWC sets low usage caps based on nothing but a whim, it immediately stems video competition from customers afraid of exceeding the paltry allowance provided, and provides a built-in Money Party, even for consumers who may not exceed them today, but almost certainly will tomorrow. That means $$$$.

        The fear-mongering over broadband slowdowns, brownouts and exafloods is used as an excuse to justify plundering customers’ wallets. The same company that complains about online video is going to be providing a bountiful harvest of online video themselves, but only if you are an authenticated cable TV package subscriber. They’re also unconcerned about the ability of their own network to sustain it, and even if they were, DOCSIS 3 provides a viable upgrade path at costs more reasonable than what they just spent implementing Switched Digital Video to handle additional HD channels. It also creates new revenue potential for them -and- reduces the need for neighborhood node management/splits.

        The rest of your reply has all sorts of problems and misconceptions:

        1) I honestly am happy with continuing to pay the $50 a month I pay right now for Road Runner service and am not asking for a lower bill. If competition delivers one, that’s fine with me, but I’ve been happy as a Road Runner customer since it arrived here in 1998 (in fact I was a beta tester and among the first five to have formally purchased the service when it went live).

        I will not accept, however, a ludicrously higher bill. For me to maintain the same service I have right now, allowing me to use 20GB or 200GB a month without looking at some gas gauge, it will cost me 300% more — $150 a month. That’s completely outrageous and unacceptable, especially because it comes with absolutely ZERO service improvements. It’s the same product and service, only now three times more expensive.

        Now what am I willing to pay more for? Additional speed, especially on the upload side. Just taking care of my web work, uploading at Road Runner speeds on a Standard account tops out at 384kbps. I pay extra right now to get a whopping 1Mbps upload. Give me more speed, especially for uploads, and I’ll open my wallet. Throttle or cap me, and I start looking for another provider.

        Of course, one of the reasons they chose Rochester is that there was no Verizon FiOS service just waiting to cash in on TWC’s mistakes.

        You asked about the costs to deliver bandwidth. They are declining industry-wide. Time Warner Cable admits it right in their SEC filings. We’re talking about costs that are FAR less than the $1-2/GB TWC was asking subscribers to pay -in addition to- their monthly broadband account fee. Based on TWC’s own revenue statements, there is an enormous markup taking place under current flat rate pricing models. Telling customers they’ll need to pay $150 a month for the same level of service they used to pay $50 for, or get stuck with paltry usage caps with steep overlimit penalties, and the markup now leaves earth’s orbit.

        Again, readers can read the reports themselves. Your response is always “the data I’ve seen” or, when you boil it all down, ‘if you knew what I know’ rhetoric that comes with no way a reader here can check it out for themselves. That’s empty rhetoric.

        While we’re sticking to facts, you said you found it curious Eric Massa doesn’t “represent Austin.” I find it curious you’d even mention it. He represents western New York, which is where I live. I have no idea what Austin has to do with this.

        And, if you’re going to work for ITIF, at least know their address. Despite your protestations they aren’t on K Street, here’s their complete address:

        1101 K Street, NW, Suite 610
        Washington, DC

        Honestly, if we can’t even trust you to know your own employer’s address, how can we believe anything else you have to say. :-)

        Honestly, I wish you well in your new career, and I enjoyed the back and forth. I hope readers can take something from it as well. Regards….

      • I assumed that everybody who cares about this issue would have read the New York Times Bits Blog entry on bandwidth costs, as it’s part of the basic reading:

        The relevant part is this: “In general, [bandwidth] cost is linear. That means if everyone started using a lot of Internet video, and a cable system split all their 500 home nodes in half, the cost of the Internet bandwidth would double. That cost, however, has been declining steadily, perhaps 5 percent to 10 percent a year, Ms. Dillenbeck said.”

        Like I said, the cost of raw bandwidth is declining, slowly, but people are using more of it. On the question of connections vs bandwidth, it’s helpful to bear in mind that each connection has a certain capacity, so the overall system has to be engineered with enough capacity to meet peak load. While it’s true that off-peak usage doesn’t cost anything measurable, increasing the capacity to meet greater peak load does have a cost, and it’s not linear.

        So bandwidth is not free.

        And I am not speaking here for anyone but myself, once again.

      • Another relevant part is….

        “The other way that cable companies are increasing capacity is by using new technology known as Docsis 3. This is a standard that allows companies to use more video channels for Internet service. The current standard uses one video channel. The first generation of Docsis 3 service combines four 38-Mbps channels into a pool of roughly 152 Mbps that can be divided among customers. Cable companies can decide whether to use that capacity to offer higher speeds to customers or to increase the number of customers who can be served at slower speeds, avoiding the need to split nodes.”

        If Time Warner Cable would have rushed to rollout DOCSIS 3.0 as fast as they rushed into their Internet Overcharging scheme, then we wouldn’t be having this discussion. Instead they’re only rolling it out in NYC in 2009 (coincidentally their most competitive market), and will gradually phase it in over the next couple of years. They don’t seem to be rushing to shore up the levies for the impending exaflood.

        Oh and yet another relevant part of that article….

        “A medium-sized Internet provider might pay about $10,000 per month for a one gigabit per second connection to the Internet. If the system didn’t own its own network in the metropolitan area, it may need to spend another $2,000 to $15,000 per month for a connection between a local system and the central office of whatever company was providing their Internet bandwidth. Assuming that bandwidth is divided among nodes of 500 homes sharing 38 Mbps, that means the cost of bandwidth ranges from 76 cents to $1.92 per month.”

        And that’s for a medium-sized ISP. I’m sure TWC negotiates rates even better than that. So explain to me how on Earth a flat-rate pricing model isn’t insanely profitable now and for the forseable future? Greed….just pure greed!

        As I alluded to in an earlier post…

        “All these costs, by the way, apply whether or not anyone on the system is actually surfing or downloading anything.” “…providers will not sell bandwidth by the gigabyte to businesses, even though many customers want to buy it that way. For example, some movie studios that send large files to DVD manufacturing plants, don’t want to pay for connections they only use from time to time.

        “The network providers almost always say ‘No,’” Mr. King said. “As long as the bandwidth is open for business, it will cost you the same whether there is data running or not.”

        In other words, the cable and phone companies want to charge consumers per gigabyte even though they refuse to sell it to business customers on the same basis.”

        This is an excellent article that describing the cost structures of ISPs. I encourage everyone to read EVERY WORD of it rather than take snippets out of context.

      • Right Michael, the bandwidth equation is a bit complicated. Technologies like DOCSIS 3 carry packets a mile or so, and then they’re handed off to a regional network that takes them to an Internet Exchange point. The regional network is built in part by the cable company, and in some areas will require the use of lines leased from the phone company. The costs are very different, but in either case are bound by capacity.

        Once at the Internet Exchange point, the packet has to find a route that will take it to its destination, and that route may have a fee associated with it, which will be volume-based. The confusion in the Bits article is that it doesn’t include all three parts of the packet’s journey in the explanation, although they are included in the pricing calculation.

        It’s also worth noting that DOCSIS 3 requires each consumer to upgrade his cable modem. If you’re leasing one, that’s not a big deal, but if you bought one, it may be. There is only 1 DOCSIS 3 modem on the market right now, so it may be prudent to delay this upgrade until more are available. And similarly, the deployment of D3 will stress the regional (“Middle Mile”) network, and that’s not a free upgrade either.

        Finally – and this is all I’m going to say – we already have means to stop price-gouging in the 20 percent or so of broadband markets that don’t have competition: file a complaint with the FTC. That system works pretty well, so I don’t see any need to replace it with a system that requires permission for every new pricing plan. That’s the big fallacy of the Massa plan, and it’s evident from the discussion that it’s not based on real data or a commitment to explore the least intrusive means of regulation to achieve the desired goal.

      • Well in an HFC system is the last-mile coax that’s the bottle neck and D3 goes along way to alleviate that, and it does so fairly inexpensively. if the “middle mile” gets stress then just light up some dark fibers to the node…..that’s way cheap to fix.

        The modem and CTMS equipment upgrade for D3 isn’t going to break the bank either as pointed out in this NY Times article…

        “Cablevision has said it spent $300 million for its upgrade to Docsis 3 and the deployment of Wi-Fi hot spots for use by its Internet customers around the New York area. That investment comes to about $97 for each of Cablevision’s 3.1 million customers, or $60 for each of the homes passed. Those relatively low numbers are consistent with other reports that say the overall cost to deploy Docsis 3 is quite low compared with the premium prices that cable companies are charging for 50-megabit and 100-megabit service.”

        Cablevision had no problems with modem supplies so I don’t for one minute buy that as a reason for delaying D3 deployment.

        And finally…and this is all I’M going to say on the subject. Healthy competition, Congressional legislation, common carrier status, muni broadband services, FTC anti-trust action, FCC regulation……I’m for whatever means works to break free of these cable monopolies and old-school telco-think, and to push this country to the forefront of the information age rather than stagnate and watch other nations pass us by. Just ask our Canadian friends to the north how Internet Overcharging is working out for them.

  3. I think the AT&T complaint may be unfounded. A key point of the Massa bill is that it does NOT outlaw metered billing … only the use of such practices to thwart competition. I suspect there would need to be some rulemaking to clarify, but this seems like an excellent way for providers to manage their networks in a transparent and fair fashion.

    • How would an ISP use metered billing to thwart competition? If anything, metering encourages customers to switch to a different ISP. Maybe I’m just not evil enough to figure this out.

      • Where do you think the future of TV is? Its all going to be IP based. That is the ONLY REASON broadband companies want to meter your internet – their cash cow revenue stream is going away.

        There will be no need to sign up for cable TV anymore and make you sign up for the 100 channel package even though you realistically only watch 10. Problem is that is how cable companies make their money when negotiating contracts with networks.

        If everything is a-la-carte and on demand, Time Warner and Comcast become nothing more than utilities selling a commodity.

        This is the only reason they want to meter – they realize the data people will be sucking down through their cable modems will grow exponentially.

      • Also, what broadband ISP will you switch to if the only thing you can get in your area is Road Runner and you don’t have DSL in your area?

        Do you honestly think people in every town across the US have a choice? The answer may surprise you.

      • In most markets there’s either not another option to switch to, that option is so slow as to not really be a comparable service, or is only a telco/cable co duopoly in which they don’t compete on price or collude with each other on Internet overcharging (see Beaumont, TX)

  4. Foo Bar

    Come on Internet dummy: This bill provides *protection* to Internet users. ISPs would love to turn the open, standards-based Internet into a beast like Cable: pay for use of different ports, different applications, and pay for different transfer speeds based on content type. Telling them, “No, you must treat all traffic with indifference” is incredibly important.

    • Of course, the bill doesn’t protect Internet users from across-the-board price increases, which is what the ISPs will resort to if they can’t use metered billing. Somebody’s going to end up paying more; it’s just a question of who and how much.

      • Right, “Stop the Cap” wants to foist the costs of providing bandwidth to hogs and pirates onto moderate users. This is Democracy at its finest – do what you want and send the bill to somebody else.

        Eric Massa needs to take Econ 101.

      • Jesse Kopelman


        Your argument would work if there were any evidence that TW is planning to lower rates for low usage customers. There is not. Rate caps are about increasing carrier profits, not fair billing.

      • TWC already offers two lower tier services… they simply make them hard to find on their site and even harder to actually sign up for. So why the need to switch pricing models when these tiers already exist? Oh, despite what TWC has said about the reduction, there was only plan that actually has a lower cost (along with a $2/GB overage charge) than anything they offer today.

        TWC officials have also been quoted telling their shareholders that those who already willingly pay more for faster service actually subsidize the lost revenue from the few who have dropped to the lesser tiers.

    • What innovation are you talking about? The US lags behind developing countries in terms of broadband infrastructure because there is not real competition. Cable companies have monopolies in the markets they serve.

      I would rather Washington reverse the policies of the 90’s and allow real competition in any given market.

      There is no reason why I shouldn’t have a choice to go with Time Warner or Comcast or Cox no matter where I live.

    • I think you are confused on what is actually trying to be regulated here. We’re not advocating regulating CONTENT on the Internet, but rather ACCESS to the Internet. The reason we’ve seen such unprecedented innovation is because ISPs, until now, have for the most part kept their hands out of controlling what content is transmitted over their networks. However, being unregulated and greedy, they now want to change that. They now want to monetize the content as well as the connection, and they want to “double dip” by charging BOTH the end user and the content provider. They also want to limit the growth of the Internet through Internet Overcharging so as to keep them from having to re-invest a fraction of the BILLIONS of dollars in profits they continue to rake in.

      If we want innovation to continue and to prevent ISPs from forcing their own self-interests on the consumer, we can’t let ineffective “markets” continue as they are now.