Bandwidth Caps: Round 27

Mari Silbey —  April 16, 2009 — 13 Comments

bandwidth-caps

Get used to it. We’re going to be talking about bandwidth caps for a long time to come. To sum up the latest happenings, Time Warner Cable sparked fresh outrage with the recent news that it would be testing consumption-based billing beyond Beaumont Texas. Then lots of other cable operator folks jumped in with their two cents on metered broadband and whether they would or would not consider it. Now NCTA president Kyle McSlarrow weighs in with his perspective that testing a new form of pricing is just that, a test. Let the experiment play out and continue to have open dialogue.

I have pretty strong opinions on cable and Internet video because I work in the business. (NOTE: My opinions do not reflect those of my employer Motorola.) However, I don’t  come down squarely on either side of the issue. I don’t like bandwidth caps, and would prefer not to have them, but at the same time I don’t believe that operators are trying to protect their television turf by inhibiting online video. Among several other reasons, many of the content companies out there aren’t going to suddenly slide in line with the everything-for-free-on-the-Web approach. These companies like the revenue they get from cable licensing agreements. Unlike over-the-air broadcast networks, they depend on cable revenue in addition to the income they bring in from advertising. So everything you want to see isn’t going to end up on Hulu or TV.com. (Try to find full episodes of Mythbusters, Dirty Jobs or Trading Spaces online, not to mention ESPN content) And that takes away a lot of the threat to the cable subscription model.

I do believe, on the other hand, that cable operators want to set a precedent now with metered billing to get consumers used to the idea that bandwidth isn’t free. As I said, I don’t like caps, and as a consumer I don’t want them, but reasonable caps are, well, reasonable. For example, Comcast’s 250GB cap completely satisfies my needs today. I want to believe that the cap will go up as my demand goes up, and if the cap ceiling rises so that it’s always the equivalent of what 250GB gives me today, then I’m okay with that. There will always be arguments about what’s “reasonable”, and I’m okay with that too. Let’s continue to debate it.

I also understand the innovation argument and agree there should be room under the cap for continued innovation. Again, how much room? What’s reasonable? We should continue to ask those questions.

Bandwidth caps aren’t likely to disappear, so it’s good that they inspire such public debate. One motion I can get behind: Please give us effective bandwidth meters! If an operator’s going to cap my broadband usage, I should at least be able to measure it.

13 responses to Bandwidth Caps: Round 27

  1. Tiered pricing or data consumption pricing isn’t new. In fact, it’s archaic and where we started way back when. Perhaps it’s needed to fend off abuse and/or generate additional revenue. Which is OK, as long as the caps are indeed “reasonable.” Comcast’s 250GB should cover must home users most of the time. My issue is that there’s no specific growth plan locked in. How about saying it’s 250GB in 2009 and will rise 20% a year. Also, how about a higher tier or overage charges for offenders instead of threats of disconnection. And where is that usage meter? Lastly, I wonder if all these cable industry “tests” are in fiber/FiOS-free zones?

  2. I promise you, every company implementing bandwidth caps and providing no way to monitor consumption will find themselves in court staring at a massive class action law suit…without the benefit of paid lobbyist or “in pocket” FCC/FTC chairmen.

    So yeah, the next year or so we will all have to endure these crimes, but be sure to keep your monthly paper bills in a safe place, have a notary mark all the overages you incur, etc. it will makes for some damning evidence.

    Flash forward to late 2012. You cable company bill:

    “…Ms. Silbey, as a plaintiff in the class action suit, The United States vs. the cable industry, please note the $2,431.95 credit applied to this month’s statement. You and the 31 million other valued customers that successfully sued, and won, your case in court have all been given this account credit per the Federal Judges ruling…”

  3. Time Warner Cable says we need per-consumption Internet pricing for fairness: why should email-only-Emily subsidize Torrent-toting-Timmy?

    I say fine, just as soon as they offer pay TV on an a la carte basis. After all, why should I subsidize my neighbor’s addition to ESPN? I only watch Comedy Central.

  4. Dave: Yes, the Time Warner tests are in fiber/FIOS-free areas. The cap opponents are definitely make a big deal of this fact.

    Time Warner says that they will begin providing a meter a few months before the caps go into effect.

    It’s worth mention that Time Warner’s proposed caps begin at a much lower usage rate than Comcast’s.

  5. Ultimately, TWC will do whatever it wants, it’s the only true broadband service in my town. If there were competitors, I’d be ok with it.

    If TWC offered an off-site backup service, or partnered with Carbonite or S3 to provide a cap-exempt solution, I’d be ok with it.

    The last time I had a cap on internet usage, AOL was getting $150+ a month from me – if TWC offered an unlimited* plan for >$200, I’d be ok with it.

    I don’t currently use TWC for anything other than internet. If they offered a compelling reason for me to switch from DirecTV and including unlimited* bandwidth as part of a package, I’d be ok with it.

    *500GB per month or more and sliding upward each month like the bandwidth allowance on my hosting account

  6. Interesting update: Time Warner is apparently backing down.
    http://www.dslreports.com/shownews/101948

  7. With all due respect Mari, I believe there is a little Koolaid sipping when you say:

    “I don’t believe that operators are trying to protect their television turf by inhibiting online video”

    Is it possible that you are TOO close to the industry here? Pardon me for being cynical but I’ve lived 44 years now with telcos and cablecos taking every step they can to squeeze every last penny out of their customer’s pockets while offering enhancements ONLY when forced by externalities.

    I’m not opposed to tiered pricing. In fact I’ve been in favour of FAIR tiered pricing from day 1. It is NOT fair to have the kinds of tiered models that telcos have foisted on us for years and that cablecos are about to embrace. That of a tier where consumers are exposed to unlimited fees when they breach their cap. Fairness would dictate that consumers should have to pay no more than the next tier up when they go over their cap – as opposed to the typical 2 to 3 dollars per Gig exceeded with NO cap on the excess fees.

    I also don’t understand why you assume that the average consumer expects:

    “.. content companies out there … to suddenly slide in line with the everything-for-free-on-the-Web approach”

    I’m not suggesting that. I fully expect content companies to charge me for content I purchase over the Internet. Indeed, I look forward to that. I want, for the first time in my life, real competition for content to my television, rather than one single option from my cableco. I want to purchase TV and movies from the Apple TV’s, Xbox, Netflix, TiVos and PS3 services in the world.

    I DO NOT want inflated fees attached to overages from ridiculously low caps to inhibit that.

    AND I DO BELIEVE THAT IS EXACTLY WHAT THE CABLE INDUSTRY HAS IN MIND. They want to make it cost prohibitive for me to obtain my content from anyone other than them. They do not want to be the providers of bit pipes.

    There are typically at most two duopolstic, ‘competitors’ in any given market each trying to protect their turf for their content/voice offerings. Given their history, why should we expect anything different. They make their money by making us pay for endless content we DON’T want for the few stations and shows we do.

    They are doing what they perceive to be their job – maximizing short-term revenue for their shareholders. Fine. But let’s not kid ourselves and pretend that what they are ‘testing’ is anything more than the same.

    There is a forest not being seen here given the trees.

    …Dale

  8. “…It is clear from the public response over the last two weeks that there is a great deal of misunderstanding about our plans to roll out additional tests on consumption based billing. As a result, we will not proceed with implementation of additional tests until further consultation with our customers and other interested parties, ensuring that community needs are being met…we are making measurement tools available as quickly as possible. These tools will help customers understand how much bandwidth they consume and aid in the dialog going forward. ”

    - Glenn Britt CEO Time Warner Cable

  9. Dale- It’s not that I believe the cable industry isn’t protecting its current model out of any sense of altruism. I just don’t believe Internet video is that much of a threat. A lot of content providers have it too good now to embark on a new venture that includes trying to get enough of an online, paying audience to support production and distribution costs. Great that you’ll pay to see something regularly online, but right now you’re in a huge minority of folks who wouldn’t rather see a program with a click of the remote control, or browse through programming in a traditional channel-up-channel-down manner. And speaking of costs, ultimately content owners have to pay for distribution one way or another. If everything miraculously does shift to the web, the power will just move from cable/telco operators to CDNs. Content owners still end up paying a lot of money, and for a distribution model that hasn’t yet proven it can deliver returns.

    And all of this is aside from the fact that the Internet wasn’t built to deliver broadcast-scale video. Why abandon networks that were built for the purpose?

    Don’t get me wrong. I love online video. And I love that it’s been and will continue to be a great disruptor. But I’m also a pragmatist. The cable and telco industries are in a strong position even without capping Internet usage. There may be some middle managers here and there who think capping protects their video business, but I don’t believe any of the execs who know what they’re doing are implementing bandwidth caps for that reason. It’s not logical.

    All that said— Call me out on drinking the koolaid any time. I don’t want to get insulated or complacent, and I love a good debate. :)

  10. Hi Mari:

    You make good points. Perhaps I wasn’t clear. I don’t expect an immediate shift. I expect a gradual shift. I don’t believe the cablecos will die any more than the Baby Bell’s died after AT&T and its prodginy were forced to open up and compete.

    I do believe the cablecos have seen what has happened to the music industry and certainly have that in mind when instituting these caps.

    Being realistic, what do the caps stop? Right now Bittorrent – their nightmare. Later on, legitimate competitors.

    I guess we disagree to some degree on what is motivating their actions. We both can agree its profit maximization. I think we can also agree that providing consumers with constantly improved service isn’t a motivating factor outside of competition that forces them to do so.

    That’s another reason why I’m a tech lawyer and why I love the tech/computer industry. There is an ethos about changing the world for the better, bringing constantly better products to the marketplace to help people that I love about the industry and what is almost wholly absent from the telco, cableco, movie and music industries.

    Sad really because I was, and am, a huge movie fan. Wanted to be a part of if for a long time. But I grew very disappointed with the industry as I ‘grew up’ and realized that I could not, in good conscience, work for the tv/movie/music content production and traditional distribution sides of the industry.

    The only content industry I believe in is the video game industry. It’s governing ethos is still much closer to the computer/software industry than the other big three. I hope it stays that way. I like feeling good about the work I do. :)

    …Dale

  11. Mari:

    You miss the point about the threat to content providers. Sure, they would prefer easy licensing to TV networks. But the caps are coming because CABLE companies are losing money when people start cutting back on their cable TV because of surfing the internet/online videos. I can live without cable tv. I can’t live without broadband.

    The other reason the caps are in the news is cable companies are under political pressure to expand broadband usage. This is bad government policy. Broadband in rural areas is a function of geography and how expensive internet access is to ISP outside of metro areas. What we need is cheaper broadband, not faster or deeper. Six years ago my cable internet cost $45.00 a month, now it costs $56, and it should cost $19.99. Cable companies can’t do pricing tiers because almost everyone would move to the lower tier; if they do the cap thing they can make an argument for a $15 a month plan that nobody will want.

  12. Metered broadband as proposed is a joke. In all the years I’ve had Comcast the price has dropped … never. This is despite the fact that the costs to deliver that service have dropped a lot. There is zero justification to talk about metered broadband plans when:

    1. Virtually everywhere there is no real competition. Outside of FiOS there is nothing and FiOS has a very small footprint. Here in Seattle, it’s 6-16Mpbs Comcast or 1.5 Mbps from Qwest via DSL (which requires paying for a landline)

    2. The current tiers are a joke. They are designed to keep everyone paying what they do now while facilitating massive monthly cost increases for people who use more. Given the wide variety of LEGAL ways one can consume bandwidth now, I’m not interested in paying 4x what I once did because the cable company decided that a few people abusing torrent sites has made managing their networks hard (something they have yet to provide any true evidence of, by the way).

    3. No meters for monitoring usage. If there were meters, how will customers know they are accurate? How would you dispute perceived errors? Or are we just taking the word of the very people who stand to benefit from you going over? Is it fair to “pay” toward your cap for all the streaming video ads that sites put up?

    4. If cable companies can provide a technology that allows them to deliver 100+, 24-hour a day TV channels as “all you can eat”, why is Internet suddenly so different? It all comes in on the same pipe, along with their overpriced “talk all you want” digital phone plans. This is clearly a strategy to blame some miniscule number of users abusing the system to justify making a radical, and profit-zooming change to the system we have now, which is not even that good.

    Tiered pricing should be not permitted until questions like these are answered. I think it’s easier to make the argument that internet access is now a utility and a certain level of service should be regulated to maintain reasonable pricing. I don’t have a choice in electricity companies or water companies and as a result they can’t make shifty price moves at a whim.

    What I don’t want is a situation where I am having to manage my internet usage like my cell phone. THAT is a business model not worth following.

    The bottom line is that lack of competition is what kills progress. Cable co’s have no incentive to do anything until Fios moves into town right now. Without a true market, consumers always, always lose.

    As for not fearing that cable companies are worried about video, I think you’re off base. There have already been several articles stating that cable companies are developing Hulu-like sites where you’ll have to be a cable TV subscriber to be able to access the content. Perfect: an unwanted middleman between the content creators/networks and the end user.

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