The GAO finds a few problems with broadband data caps

18 Comments

Consumers aren’t keen on wireline data caps and they are doubly unsure how much data they are using. Those appear to be the common themes discovered by a preliminary report issued by the U.S. Government Accountability Office as part of a multimonth study requested by Representative Anna Eshoo (D-CA). The final report will be issued in November, but possibly not in time to influence the decision around the Comcast and Time Warner Cable merger.

The GAO conducted eight focus groups and interviewed several experts (I was interviewed by the GAO as part of the report) to try to understand why data caps exist, what effect they have on the consumer and how they might influence innovation. The study covers both wireless and wireline, although already it seems a bit dated given that the findings only mention one wireless carrier throttling speeds, when all carriers now do so.

"Annual Broadband Subscribers Under Data Caps (Q1-14)"

But it’s the wireline side that concerns me, mostly because data caps aren’t a good tool for managing network congestion but are an exemplary tool for getting consumers — especially heavy users — to pay more for data. The report notes this, but spends most of the time highlighting how confusing consumers find the idea of guessing how much broadband they use.

During focus groups, the GAO found that may consumers estimated they were using a lot of data even when they were doing something relatively light, such as online shopping. They also had misconceptions about how much data having an app like Twitter or Facebook might use while open in the background. More troubling is that ISPs weren’t doing a great job on the education front.

The GAO found that its review of ISP tools showed “varying data-use estimates for similar applications.” The report also mentions that while consumers are worried about applications that aren’t using their gigabytes, they might miss the “hidden” applications such as backup services that could consumer up to 30 percent of their data allowances.

It also cites figures from Sandvine that show how cord cutters tend to be heavy users of data, almost near the caps provided by some ISPs, and discusses how the proliferation of more devices in the home could push people over their caps and into paying overage fees. We’ve worried about that too.

As a start, I’m glad Congress is looking at how data caps are affecting consumers and ultimately the development of new applications and services delivered via broadband. Absent true competition, that allows customers to avoid falling under a cap, having the threat of regulation might be the only thing keeping ISPs in line.

18 Comments

Robert J. Berger

What Telco/Cablecos are doing is using their oligopic and political power to enforce Artificial Scarcity.

Tim

You are mistaken. The Internet is composed of private networks that carry traffic from one point to another for a fee. The terms under which they connect is determined by business agreements. At no point has there ever been a concept that a network must accept traffic for free. Yes, Netflix has always paid for a connection to “the Internet.” But, at least one of the parties they were paying, Cogent, did not themselves have sufficient capacity to deliver the amount of Netflix traffic they were accepting to its final destinations. E.g., I could open up a hosting facility, buy a 100 mbps connection to the Internet, and then sell 100 mbps connections to 10 different www sites, hoping they did not all try to use simultaneously. If my customers are not satisfied with that, they need to find someone else who can deliver the capacity they pay for, which as a last resort may be the ISP. That’s all that happened with Netflix. It’s the way the Internet has always worked. But, Netflix is trying to confuse people with bogus Net Neutrality arguments. At heart, I’m sure they know these arguments are faulty, but it nonetheless helps deflect customer dissatisfaction away from them onto ISP’s, who are always an easy target.

Shenan

No, I know that that’s how the internet works, which is why I mentioned peering agreements in my earlier post. You misunderstood what I meant. When has there ever been a time in internet history that an endpoint (in this case Netflix) who pays their ISP for the data that they send had to ALSO pay for the data to be delivered to those who requested it? The Netflix case is the first time I have heard of this happening. Maybe there are other obscure examples, but never anything so blatant, to my knowledge.

Tim

Netflix was not paying twice. They stopped paying Cogent (and probably other transit providers) and started paying the ISP’s directly. Other large content providers have been doing this for a long time. Think about it. Suppose Netflix buys a 10 Gbps connection from Cogent for $5000/month. Cogent carries the data across the data center and hands it to Comcast. Do you think Comcast is obligated to accept this data for free, while Cogent pockets the $5000/month? No. Cogent pays Comcast, who is doing most of the work to get the packet to it’s destination. There have always been multiple “toll booths” as a packet travels from source to destination, each collecting fees in proportion to the value they provide. Otherwise, why would someone lay fiber across the ocean? Often fees are waived if both parties see mutual benefit, but that is purely voluntary on both sides.

For sure there is potential for ISP’s to abuse their monopoly power, but that is not what is happening here. Netflix is not being singled out for any reason beyond the high volume of data they send. They would like every ISP customer to help pay for that, not just their own customers. ISP’s rightly object.

Shenan

It seems to me that Netflix is paying twice now. They pay their ISP for the data they generate and send out on to the internet, and now they also have to pay Comcast, Verizon, and AT&T to deliver the data to their customers who request it. Can you name one other large content provider that has to do this? Source links would be appreciated. Unless I missed something or there are secret agreements going on, I have not heard of any such thing, except for Netflix.

Tim

Netflix has multiple connections to the Internet: to Comcast, to Verizon, to ATT and to at least one transit providers who can reach customers not on those networks. In essence, they are their own ISP, or more specifically a CDN. You could say they pay twice in the sense that they pay to move their content from wherever it originates to wherever they connect with Comcast, and then they pay Comcast to deliver it the rest of the way. This is routine. It’s just that it’s usually handled by middle men. A www site pays a hosting facility who pays a transit provider or CDN who pays an ISP. Nobody made Netflix pay the ISP’s directly; they just decided it was more efficient to cut out the middle men. Here are some details on Apple’s CDN
http://blog.streamingmedia.com/2014/07/apples-cdn-now-live.html
Lots of other good posts there if you want to understand how Internet plumbing works.

Shenan

It seems you misunderstood the blog post you linked. You missed this sentence which is immediately before the one you quoted: “Strong net neutrality additionally prevents ISPs from charging a toll for interconnection to services like Netflix, YouTube, or Skype, or intermediaries such as Cogent, Akamai or Level 3, to deliver the services and data requested by ISP residential subscribers.”

The key words are “toll for interconnection”, which is exactly what I described in the post to which you replied. Netflix is fine with paying on their end to send the data. They don’t want to pay a toll to every intermediary that decides to charge, which is only natural, because that’s not how the internet works. They pay for what they send; you pay for what you receive. End of story. If every intermediary starts reneging on long-standing traditions of peering agreements and trying to ALSO charge senders, it’s the end of the internet. In the case of Comcast, et al, THEY want to charge the senders AND the receivers. Insane.

Tim

Please see http://blog.netflix.com/2014/03/internet-tolls-and-case-for-strong-net.html
Among other things, Hastings says ” [ISP’s] must provide sufficient access to their network without charge,” and “When an ISP sells a consumer a 10 or 50 megabits-per-second Internet package, the consumer should get that rate, no matter where the data is coming from.”

He is saying senders shouldn’t have to pay, but instead should be subsidized by ISP subscriber fees. What if I want to receive 10 mbps from a friend who has a 1 mbps connection to the Internet? Does that mean my ISP is obligated to upgrade his connection without charge, because I have already paid to receive 10 mbps? No, my friend must also pay for a 10 Mbps connection my ISP. Or, if he doesn’t connect to my ISP directly, he needs to pay some other 3rd party aggregator who does. That’s the only way it can work, because only senders have control over network load. Only if loads are light, or close to symmetric, are connections made “settlement free.” That hardly applies when Netflix accounts for 30% of network traffic. They need to start paying for that. Why should people who don’t watch Netflix pay for the capacity necessary to handle that traffic?

Shenan

Sheesh, when did this site become flooded by industry shills? Again, I presume that this is also the case here because this comment, like many others here, throws out an unrelated, inaccurate jab at Netflix. Where’s your evidence for this claim: “Imagine if Netflix had their way and YOU were paying for the data they sent you”?

In fact, customers already pay for the data they receive from Netflix, AND Netflix already pays for the data they send to their customers. They have both always paid for it, since the beginning. All that Netflix has complained about is now all of a sudden having to pay for other stops that that data makes along the way from them to the viewer, which is against the way that the internet has always operated. In addition, they even provide easy solutions for internet providers to mitigate increases in traffic caused by Netflix, but some providers refuse those simple measures, again against the way that the internet has always operated.

By the way, before anyone makes any such claims, I have no relationship with Netflix other than paying them for both streaming and DVD by mail plan. My interest in making these posts is purely to protect consumer interests and internet freedoms.

Tim

The inability for consumers to recognize or control how much data they are receiving is one of the main reasons why the Internet is based on a “sender pays” model. Because www sites pay by the volume of data they send, they are motivated to send only what the receiver will value (plus a few ads to pay the bills). Imagine if Netflix had their way and YOU were paying for the data they sent you. You would need a little meter on your www browser to tell you which sites are running up your bill and to weigh that against the value you perceive.

It is also the reason why gross caps are preferable to more precise metering. The alternative to either of these approaches is just to limit the connection speed, and let you use it 24/7 if you please. However, based on typical ISP provisioning, this would cut your connection speed by a factor of at least 20. Most people would rather than 1 Mbps that they can use in bursts when they need it rather than 50 kbps they can use around the clock without caps. Traditional www usage is very bursty: you want to load the page as quickly as possible, and then your connection is idle while you read it. Long form video streaming is an entirely different usage pattern that will require network upgrades to support large numbers of simultaneous users. It makes sense for those users to pay for it, even if the early adopters got a free ride on their neighbor’s idle capacity.

Chris

The big issue with this blog post is you are intentionally misleading people by perpetuating this nonsensical label of “cap” as populist rhetoric. Nobody is capping your usage, you can basically buy what you need, just like you don’t get capped at a dozen eggs by your grocery store. An example of capping would be netflix, who limits how many concurrent users can access an account.

Agree there needs to be a clear way for people to know what they use and just like cars are rated for mpg and appliances for energy consumption, applications have a role to play here in stating how much bandwidth their services require. Maybe the Department of Weights and Measures could help you there.

How do you know if you really bought a gallon of gas or used 4.31 kilowatts or paid for a 16 oz sirloin?

shenan

Populist rhetoric? You fail to mention what we should “caps” instead. Market-based incentives? Corporate profit enhancers?

I would have no problem with caps if they offered lower ones for people that only use a tiny bit (say 10GB for $5/month), or even if did a metered service starting near $0 and completely based on usage, but especially if they made their caps and fees and all that clear and up front.

When I was thinking of switching ISPs to my cable company, I had to contact and probe their customer service rep to get them to reveal the actual cap. Same thing with the actual monthly price for the service after the initial promotional rate. Talk about leaving a bad taste and discouraging me from going with their service.

By the way, twisting this back to say that Netflix is actually the example of capping only leads me to believe that you’re a paid shill for the cable and/or telecom companies.

Chris

Does it really matter if I am a paid shill or not? I could be a cat walking on a keyboard but it doesn’t change what a “cap” is, and is not. From the looks of things there is only one party here being paid, and the bloggers here are paid to write opinions that generate page views. Populist hyperbole and link baiting are two of the most economically efficient ways to run that type of business, and I assume this site exists to make money and the bloggers aren’t blogging for free. Btw by its bloggers’ own definitions, this site is “capping” its customers at 1K ad impressions and making them buy more if they want more. Why not sell unlimited ad inventory for a single price if it’s such a great idea?

It’s ironic that you talk about switching your ISP and want to defend Netflix. You can switch your ISP and still watch House of Cards on Netflix, but you cannot switch from Netflix to one of their competitors and still watch House of Cards. It’s a show Netflix licensed exclusively from the people that produced it for the express intention of creating barriers for their competitors. Imagine if Comcast did that… well, they cannot because they signed a consent decree for the NBCU transaction that legally prohibits them from doing so. So Netflix caps you on number of streams, they use their scale to lock up exclusive content and make it unavailable to its competition, they have more video subscribers than Comcast, and they just increased their price by 12%. If Comcast locked up HBO and then increased their price to put the cost of creating barriers to entry for their competition onto the backs of its customers, blogs like this would be spewing all sorts of hate.

Shenan

Yes, it does matter if you are a paid shill when you challenge a term that has long and widely used to describe a limit on the amount of data that a customer can download through their ISP before they have to pay more. How is it populist rhetoric and link baiting if they are using the commonly used term for that practice?

You are conflating suppliers of product and suppliers of infrastructure. A supplier of product (Netflix) has a lot more liberty to do whatever they want with the product that they produce, including limiting the products that they paid to make to only be viewable by their subscribers.

Suppliers of infrastructure (last-mile internet providers like comcast, verizon, et al), on the other hand, have additional duties to the public because they provide vital infrastructure and because they have taken advantage of many concessions made by the public to them in the first place (such as decades of exclusive territorial franchises). In addition these same internet providers actively fight any attempt by the public to create alternatives, such as municipal broadband.

In the case of Comcast, who is a supplier of both product and infrastructure, of course they should not be allowed the same freedoms as a pure supplier of product, because they have the power to kill competitors through unfair means, by leveraging their power in infrastructure to promote their products, and vice versa.

Chris

“Cap” is a straw man term used for populist reasons because screaming calamity about paying more if you use more would sound pretty stupid. The ideologues won’t let go of the term because it’s a foundational element of a lot of their grievances. There are no obvious precedents to support your argument that we should get unlimited Internet for one flat price just because it is critical. We don’t get unlimited food, electricity, gasoline, postage, band aids, or housing, and those are important, too. As much as I love your idea of being able to add as many new rooms to my home as I want without incurring any additional cost, I just don’t agree that it’s reasonable and it’s not supported by any logical outcome aside from just hating ISPs and not wanting to see them do well. I also don’t think it is a reasonable or logical argument to make that states a single person household that is a casual user of bandwidth be forced to pay the same price as the home next door with 4 teenagers and mom in the basement streaming Family Ties reruns on Netflix all day long.

Shenan

Here’s another term for you: artificial scarcity. All the examples that you list are much more scarce than bandwidth. Some questions: why didn’t the major US ISPs start capping data amounts until a year or two ago? Why do most European ISPs (and in many other countries/continents) still operate without such caps (and also with higher speeds for lower prices)? Why do the caps on these ISPs (who also happen to provide TV services that would suffer with the success of Netflix) happen to be just the right size to interfere with someone being a TV cord-cutter? Why don’t they offer tiered bandwidth limits from the get-go, starting from small for light user, up to large for heavy users?

The answers to these questions seem to indicate that the caps (as they are currently setup) are a pure money grab, a way to protect and maximize profits. I would have much more respect for them if they had a metered service for reasonable rates commensurate with the cost of providing the service, like electricity is billed. The plain truth is that these ISPs need to be classified as utilities.

Tim

There is an element of “artificial scarcity” in the bandwidth business because it takes large capital investment to build out a network. Once the network is built, it doesn’t cost much to use it, so limiting access does seem artificial. But, that is sort of like saying food on the shelves of a supermarket should be free because it’s already there and doesn’t cost any more for you to walk off with it. The people who paid to get it there need to get paid back.

The problem with metered service is pointed out by this article, how difficult it is for consumers to understand how much bandwidth they are using. That’s why it makes more sense to put the meter on the sending side. Then, let the content provider charge that back to the end customer. Otherwise, you have the ISP’s in the business of deciding which content to subsidize with subscriber fees, as in the AOL model.

Chris

Nice try. Your reference to Europe is another straw man that you’re putting up which isn’t true. Usage based pricing is very prevalent and accepted there in many countries… just be sure to look at actual consumer offers from service providers like Telenet rather than repeat what you saw on a blog. I may be aging myself but your comment about never charging based on usage is also false. I can remember paying Compuserve by the hour; nobody was claiming their human rights were being stripped back then.

I don’t want my Internet prices to go up so that you can stream Netflix. If they outlaw usage based pricing, that’s exactly what will happen for most consumers when the market switches to a greatest common denominator price by distributing the cost of heavy users onto the backs of everyone (which they won’t because the silly arguments being made in support of it will fall on their face in a court of law). The funniest part of all is that flat rate all you can eat pricing were enforced by law, ISPs would win heartily because they could charge everyone instead of just charging heavy users, and that would blow the stacks of a lot of the same minded folks here that think they are sticking it to the ISP and bringing them to heel.

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