Blog Post

AT&T’s New Bandwidth Cap Is Bad News for Netflix

AT&T will soon cap its DSL bandwidth at 150 GB per month, the company confirmed yesterday. Customers who use more data during at least three months will have to pay $10 for each additional 50 GB bucket of data. That’s bad news for Netflix (s NFLX) and its users, who could get dangerously close to the cap.

How much Netflix video does 150 GB get you? Not that much, actually: If you watch a movie like Moulin Rouge in HD, you’re going to use around 3.5 GB of data. A single episode of Weeds equals about 800 MB when watched in HD. If you were going to use all your 150 GB of AT&T (s t) bandwidth to watch HD video from Netflix, you’d only be able to watch about three hours per day — and that’s without doing anything else.

Nielsen recently estimated the typical customer is streaming around 11 hours of video from Netflix’s website per month. However, Nielsen’s data is based on PC and laptop usage only and doesn’t include any streams accessed via iPads, Roku set-top boxes, Blu-ray players or any of the other 250 devices Netflix’s streaming service is now available on. These devices have arguably been the biggest driver for the company’s online video growth, and they’re likely to also have a significant impact on many people’s bandwidth consumption.

Granted, all of this is pure back-of-the-envelope math. Real-life usage involves data transfer overhead, which eats up additional bandwidth. Then again, only a portion of the Netflix catalog is actually available in HD. Many TV shows are, but a good number of movies can only be watched in SD, which doesn’t eat up quite as much bandwidth.

Still, AT&T’s bandwidth cap could have a significant impact on the future of the service. Netflix currently only offers 720p HD. An update to 1080p would close to double its bandwidth impact, meaning that you’d suddenly only have 90 minutes per day to watch before you’d be billed extra by AT&T. Competitor VUDU (s WMT) is already offering 1080p streams, and YouTube (s GOOG) has been offering 1080p for over a year. It’s technically possible; there’s demand for it; but bandwidth caps could prevent Netflix from upping the ante in terms of HD quality.

Bandwidth caps could also spoil Netflix’s attempts to position itself as an alternative to traditional pay TV. U.S. households watch more than five hours of TV per day. The average American would burn through his monthly AT&T bandwidth allotment in just 18 days if he’d cut the cord and replace all of his TV viewing with HD streams from Netflix.

The biggest issue for Netflix, however, could be the psychological effect. People will think twice about using Netflix if they think it will lead to extra ISP charges. The company is well aware of these issues; Canadian users, who often have to deal with much lower bandwidth caps, have the option to disable HD streaming entirely as part of their account settings. That’s right; Netflix offers the option to make your video streams look worse so you won’t give up on streaming entirely. There’s no word yet on whether a similar option will be introduced in the U.S. as well.

50 Responses to “AT&T’s New Bandwidth Cap Is Bad News for Netflix”

  1. I’m looking at the usage that AT&T is reporting, and comparing it to traffic counters in my firewall. Looks like the AT&T “tool” is consistently reporting traffic at 10+% higher than actual measured traffic. The only way that this could be legit is if AT&T is charging for PPPoE (approx. .5%) and ATM (10.5+%) overhead, which frankly shouldn’t be my problem. I’m paying for TCP/IP packets to hit my router, and AT&T charging me for their own internal overhead is bogus at best.

  2. sweet, thanks at&t, been looking for a reason to drop your slow pathetic 6mb line anyway, this is the PERFECT reason,

    EVERYONE disconnect with these bstards

  3. Dread Pirate Roberts

    Waaa waaa!! AT&T wouldn’t have done this if some of you people weren’t bandwidth HOGS!!! I will never come close to the cap. This is a whole lot to do about nothing!!

  4. “We don’t need to stream. We can just DL from MU from time to time for other video needs.”

    Downloading ILLEGALLY will just use more bandwidth than Netflix anyway..unless you purposely find lower quality videos than the SD stream or something..

    I agree with switching from ATT though

  5. hikikomorihime

    We’re dropping to basic at&t, then upping our Netflix so we can have more discs out. We don’t need to stream. We can just DL from MU from time to time for other video needs.

  6. I have trouble believing the 5 hour figure, although I’m no fan of AT&T and am against the cap in principle.

    People leave the TV on but don’t watch it. They’re not watching movies or shows all the time, there’s news, talk shows – do they need to be HD?

  7. Comcast is capped at 250… I am switching back to Comcast! I hate ATT and especially with their cell service. Their DSL, even though slow, was the only thing saving them but now ahahah right in your face ATT greedy bastards. Suck it FTW!!! Is this corporate suicide BTW? Idiots. Loving my unlimited sprint phone by the way!

  8. Glad I cut ATT out of my cord cutting loop. As long as TW does not get the same idea in it’s head. If bandwidth was such an issue why do they keep adding ways to access it? LTE, 4G, 3G, DSL, Cable, Satellite… I’m just sayin…
    Though this business model is not new, in places outside the US people pay for a service by the amount used, when here we pay for seemingly unlimited service. In my opinion, it’s a money grab.

  9. I have AT&T DSL (150 GB Cap and not U-verse). I’m also a Netflix member. I use Standard Netflix streams and not HD (I do not have HD TV’s in the house). I ran some numbers and it looks like most of my 150 GB cap will be used just for Netflix alone. I do not agree to bandwidth caps, and if they remain in effect for the long term; I will be looking to change ISP’s.

    Here are some numbers I came up with:

    Standard definition rates = ~1.8 Mbps (as reported by my Wii)

    2700 Mb for 25 minute Show
    4860 Mb for 45 minute show
    12960 Mb for 120 minute movie

    25 minute show = 0.33 GB
    45 minute show = 0.59 GB
    120 minute Movie = 1.6 GB

    8 25 minute shows a day = 2.64 GB

    2 movies a day = 3.2 GB

    4 25 minute shows and 1 movie = 2.92 GB

    1 45 minute show 4 25 mintue shows = 1.91 GB

    2 120 mintue movies and 3 25 minute shows = 4.19 GB

    3.5 GB a day X 30 days = 105 GB

    4.2 GB a day X 30 days = 126 GB

    I’m going to have a hard time not going over my cap, considering that I use Steam for games as well. I don’t know how much bandwidth I will use for Steam or other internet access; but my guess is I will be going over the cap every month.

    P.S. I live in an apartment where I have no other choice of ISP to use. So now I have to think about moving as well to get away from AT&T

  10. I cringe at the thought of going back to time Warner, but Shame on you AT&T!

    As a software developer that works from home from time to time, this is horrible news. I just downloaded 12gb today. I guess I have to go back to TW. Your marketing team must be pissed…


    • This is what concerns me as well. I’m a consultant who is constantly working on client machines, moving large amounts of data to and from my computer. I work from home a decent amount of the time for remote clients.

      Ultimately, I could probably just expense it through my company, but I don’t think they’d be too happy about it either.

  11. WTF why do we pay for unlimited internet access i mean thats what they say they offer
    and i dont recall them saying in any adds ” sign up now for unlimited internet access that will be caped at 150 GB” correct me if i am wrong but that does not sound like unlimited

  12. stardreamer0228

    I learned about 20 years ago that AT&T was a horrid company. Glad to see the rest of the world finally coming around.

    Hmmm, but assuming I was with AT&T let’s see, change Internet providers or move away from my Netflix account? Hands down my answer is to find an Internet provider without a cap! Duh! So, now ask yourself this: is this title misleading? Is a cap really truly bad news for Netflix or AT&T.

    Another nail in your coffin AT&T!!!

  13. This is bad for everyone. Lets make sure AT&T knows it is bad for AT&T too. We need to fight this silly mindset with every means necessary, contact your congressperson, tweet about it, file an FCC complaint, tell your neighbors and friends not to let AT&T control your access to the news and media you want to watch. Unlimited flat rate is the only way that allows you to relax and use the internet. Caps and overage fees mean worrying every time you use the internet. That isn’t freedom.

    • I work for undisclosed telecom company and I can tell you that these bandwidth caps are not any kind of money grab, I cannot give you anymore information than that on the issue. And filing an FCC complaint would be pointless since internet usage isn’t regulated. And believe me you don’t that to happen. We lose rights everyday and this would be just another thing they take away from the free world.

      • A bandwidth cap has a much more nefarious purpose than a money grab, at least at its current ceiling: Get people adjusted to a large and relatively difficult to accomplish cap, then create various tiers where the cap is significantly lower, forcing people to pay more for the same level of service later. As time progresses, standard video and picture resolutions grow, but that does not require the cap to raise alongside them.
        So, no, they may not be a money grab, but they’re definitely for financial gain in the long run.

  14. Netflix recently disclosed how much bandwidth they consume relative to the major ISPs,

    According to their measurements, AT&T customers stream at somewhere close to 1.5 Mbps, which equates to 675 Kbytes/hour. Therefore, AT&T ADSL customers get 222 hours of video per month, and UVerse customers get 270 hours per month.

    The average American watches 6.75 hours of TV per day ( which comes to 209.25 hours per month.

    In other words, the reactions to the AT&T usage caps are shrill, hysterical, poorly informed, and generally ridiculous.

    • Dagupster

      They’re shrill if current usage is taken as some sort of upper bound, and if usage is correctly estimated. However, that statistic isn’t disaggregating the different types and speed tiers of DSL, and isn’t taking into account future usage growth from HD content and improved encoding quality (which is kinda compromised on NetFlix ATM, especially at 1.5 Mbps)

      Present circumstances are deceiving, and are certainly not what are of greatest concern to AT&T, which is concerned about defending traditional margins and revenue streams in an over-the-top world.

      I’d agree, though, that the cap is innocuous if raised occasionally in line with consumer video usage patterns.

    • But the cap isn’t just for video – it’s for all data. Websites, email, IM, video chat, gaming, etc. Add that to the netflix usage and a lot of people will be over limits fast. People absolutely should be upset over this. When other parts of the world can get much better speed and service than this without caps, why do US companies like AT&T want to keep subscribers in the dark ages? Is it because they are too worried about profit to upgrade their infrastructure? I’d be interested to know their reasoning…

  15. jheartney

    Since this is all speculative anyway, I decided to try figuring out what my actual monthly usage has been. After trudging through a fair bit of the AT&T site, I tried contacting their chat help line. The guy there said I can check my usage at:

    However if you go there you just get this message:

    The page you are looking for has moved, been replaced, or is currently unavailable. We apologize for the inconvenience.

    Way to go AT&T. Anyway, chat guy says this link will eventually start working some time after they make the official announcement of the new policy.

    I’ll just note that AT&T has a conflict of interest here vis a vis Netflix: Netflix’ streaming encourages people to drop/not subscribe to AT&T’s U-Verse. So screwing Netflix is in AT&T’s interest.

    Ah, the joys of the “free” market, where giant rent-seeking companies have a fine old time stomping on their captive customers.

  16. Bandwidth caps are going to be the death of us all. I’m much more conscious of how much I download, even though I never come close to my limit. Great news for telecom companies, bad news for technological progress.

  17. William

    the bigger picture is that all other providers are going to follow suit and cap theirs as well…so everyone that thinks they will get away from it by dropping AT&T is in for a surprise

  18. Someone who watches 3 hours of HD netflix content every day of the month has bigger problems than paying an extra $10 for their dsl.

    Four hours of Law and Order in “binges” that I’ve had were about 2.5GB.
    You’d have to download 5GB every single day to get to 150GB. Every day you dont thats like daily rollover. The point is to problably charge people who download torrents constantly just for the sake of doing it which just costs AT&T infrastructure costs by having to spend extra money on their backbone for the constant load.

    • cakeeater

      “The point is to probably charge people who download torrents constantly just for the sake of doing it which just costs AT&T infrastructure costs by having to spend extra money on their backbone for the constant load.”

      I’d say the point is that AT&T and other mega-ISPs continue to hold down progress in this country by treating the internet as a giant money machine, smothering competition, reducing services, constantly rolling out ways to charge users more for less service. This a naked grab for power over what we should be allowed to view, in the opinions of bloated oligarchs hellbent on a new feudalism. Some, like Josh, may take the line that ATT is within their rights to reduce services after selling customers unlimited bandwidth. Some may well be in the employ of ATT or whatever jackal of a PR firm hired by same to post comments of this nature so the befuddled, socially engineered american public will drift back to sleep. We need to shatter the monopolies of ATT, Verizon, Time Warner and Comcast. Otherwise, what we see and read on the net will be as reliable and honest as what we see on Fox News (which is to say not at all).

  19. Netflix already offers movies in 1080p, but only on the PS3 and there is only a very small inventory of content available.

    Agreed that over time there is a slight chance this could impact Netflix, and while it’s not a sure bet, AT&T and Comcast would be crazy if they didn’t raise their caps over time. So in the long run, doubtful it will truly impact Netflix. But then again, last mile providers have not always been the smartest.

  20. This was bound to happen. When videos are ever increasing in resolution and thereby file size, the finite bandwidth had to be capped.
    AT&T’s move is just the beginning of the end. And it wont be just Netflix, but a host of other businesses and services will also be affected.

    Unfortunately there is no easy solution in sight.

    Foreseeing this, we at Chazzstudios are developing a new compression technique which will compress a full length HD movie into a few MB’s instead of the present GB’s.

    This is the only way to ease the strain on bandwidth.

      • Dylan,
        Why do you think they are putting a cap? Bandwidth is a finite physical resource and in short supply. Any expansion means more investment. Nobody could have predicted this explosion in media usage.
        Not that I don’t agree that it is about money, but it is so for AT&T too.
        That is what we meant when we said ‘strain on bandwidth’.

      • att doesn’t care about customer loyalty, and this is the big problem. for every customer that cancels their services, another 10 people sign up. this isn’t about bandwidth. it’s about CORPORATE GREED.

    • Bandwidth is not the issue – these companies are flexing their muscle to protect more valuable assets like TV and voice, as well as adding a psychological brake to slow down on-line media consumption by their consumers.

      If things like bandwidth played any real role in pricing, all text messages would be free (they almost literally consume no bandwidth for wireless providers).

      The FCC needs to step in and do some serious regulation of the telecom companies – there is not enough real competition to keep the market fair for consumers.

  21. AT&T DSL customer here. AT&T maxes out in my neighborhood at around 1.5Mbps down, so they don’t make it easy to pull down 150GB anyway. If I pushed it to the limit 8hrs a day, that would probably get me close to the cap, but that’s not practical.
    The speed ceiling along with the new cap really makes cable seem like a better deal. Maybe it’s time to switch…