Even Light Users Would Look For Alternatives If Their ISP Uses Broadband Caps

from the would-certainly-help-if-there-was-competition dept

Longtime readers know that I'm no fan of metered broadband or it's half-sibling "broadband caps." They're not the worst thing in the world, but they set in place the wrong incentives, making an internet connection a lot less valuable. There are certainly those who disagree, but we've lived in worlds with metered internet access and phone systems before, and it leads to decreased overall usage -- and that's not a good thing. It acts as disincentive to creating the next great internet service that could be a boon to the economy.

Customers recognize this implicitly. They hate the idea of any sort of mental transaction cost associated with "watching" their bandwidth usage -- especially since they have no clue how much bandwidth they really use. A recent study highlights this pretty clearly. 83% had no idea how much bandwidth they use -- with many not even having an idea of how much data one gigabyte represented. 81% of those surveyed stated they were against the caps, and 51% said they'd look for alternative providers if their ISPs implemented such a cap. Interestingly, even light users were against such plans. That seems to go against what ISPs tell everyone, claiming that light users would be able to get cheaper access. Yet, those light users recognize that it would more likely end up with them keeping the same price, but with more limits.

Now, some will be quick to respond that of course people surveyed will hate broadband caps. It's like asking people if they want to get less for the same price. But the key point here is how many people would look for alternative providers, combined with the fact that, for most users, there really aren't many choices. Once again, this highlights the key problem with US broadband: there's almost no real competition. You have the duopoly of the telcos and cablecos, and not much else that represents real competition. Most of the biggest providers (Comcast, AT&T, Time Warner Cable) have made it clear that they intend to cap broadband. The only really big holdout is Verizon, who is betting that its FiOS offering won't require similar caps. But FiOS is still limited in its footprint, and it will be worth watching what happens over time. So while there are plenty of skirmishes about things like net neutrality and broadband caps, don't lose site of the real issue: the lack of significant competition for broadband in most markets.


Reader Comments (rss)

(Flattened / Threaded)

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    identicon
    Nick, Sep 30th, 2008 @ 6:08pm

    It's all about last mile cost

    Mike, you might want to step back from this drum (you beat on it a lot) and take a long hard look at last mile access costs. DSLAM and CMTS equipment is very expensive, and deploying it on a massive scale costs a lot of money.

    What it comes down to is picking between:

    1) Allow people to use up as much as they want, and then listen to everyone complain about network congestion.

    or

    2) Limit access a bit such that the limits will cover the majority of subscribers, and listen to the 20% of users that consume 80% of the resources complain.

    or

    3) Build out the network to meet the demands of a minority of users. Increase prices for all users to pay for it, then listen to everyone complain.

    From a business perspective, pick one... I'd pick #2 - fewest complaints and highest number of satisfied customers.

     

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      some old guy, Sep 30th, 2008 @ 6:21pm

      Re: It's all about last mile cost

      Except the only acceptable answer is #3. And it doesn't require an increase in costs at all. But it does lower profit margins. And that's why the cablecos go with #2.

      Because they want more than anything else to protect the totally awe inspiring profit margins they make off of cable tv services. Same is true for those cablecos that also deal in voice services. If they can convince people to maintain 2 or 3 services on their bill, they are happy.

      But as people realize they can simulate "good enough" video and voice service over the internet, they have a tendency to cancel video and voice. That leaves the cablecos with nothing but the lower profit margin service, and a dire need to actually build out the infrastructure to support the demands of their customers (that they already sold to the customer).

       

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        Nick, Sep 30th, 2008 @ 8:14pm

        Re: Re: It's all about last mile cost

        That's just your opinion. I understand where these people are coming from. That equipment costs money - they're probably still paying off their equipment investments from the first round of broadband. Now you want them to go millions of dollars in debt again?

        Price some gear. See what the support contracts cost, and what it takes to maintaining, and you'll understand that it's not so much profit!

         

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      hegemon13, Sep 30th, 2008 @ 6:54pm

      Re: It's all about last mile cost

      Um, how about they quit manufacturing myths about bandwidth shortages and just continue business as usual. Right now, their model is to offer ultra-high-speed plans for the heavy users. That plan uses the existing infrastructure, so it costs them no more. However, they can charge significantly more, so it is pretty much pure profit. Perfect plan. The users are happy and they voluntarily pay more for more usage. That plan worked fine until they started getting worked up about a non-existent bandwidth shortage.

       

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        Nick, Sep 30th, 2008 @ 8:04pm

        Re: Re: It's all about last mile cost

        I wonder when people are going to quit spewing bile like this?

        Bandwidth costs those ISP's real money. It's not infinite and free. A DS3 would cost an ISP in a place like, say, Wichita or Topeka about $5,000/mo (more in smaller towns).

        So you're saying I would need to double that? triple that? Keeping the same number of customers.... and not increasing my price?

        Horse (*#$.

        Take some econ and business classes, come run an ISP (like I do). THEN you can argue with what I have to say.

         

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          Mason, Sep 30th, 2008 @ 8:48pm

          Re: Re: Re: It's all about last mile cost

          for A small ISP I can see your point but most US ISP are one of the big 8 and a lot of them own their own networks and the cost is not the same for them to have a DS3. Come on that is really a small pipe for an ISP when the big dogs have OC-48 to OC-192 networks. They have peering agreements that keep cost down because they'll carry bandwidth from other networks on theirs and the other ISP does the same. They own the networks so the cost is very low once it is already paid for. They are not renting from someone else each month they own their network.

           

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          Morley, Sep 30th, 2008 @ 9:08pm

          Re: Re: Re: It's all about last mile cost

          So? These larger providers became monopolies, why is it that we need to pay the price for their greed? If they can't afford the upkeep, then they should not have taken over such a large territory. Run 'em dry, I say.

          Maybe you need to take an econ and business class and learn how to budget a business. Don't take on a million customers if you can only support a 1000. You will not get my sympathy because you put more on your plate than you could eat.

           

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            Nick, Sep 30th, 2008 @ 9:54pm

            Re: Re: Re: Re: It's all about last mile cost

            *sigh* no matter how much I try to explain it, people like you will never understand.

            Equipment is not free. Salaries for thousands of employees are not free. Truck rolls are not free. Splicing fiber at 2am in a blizzard to restore an outage is not free. DSLAM's are not free. CMTS' are not free.

            It costs *MASSIVE* amounts of money to run businesses like that.

            Are you so blind as to not see that, to think that your $40 a month is "greed" and "pure profit"!?

             

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              Anonymous Coward, Oct 1st, 2008 @ 12:30am

              Re: Re: Re: Re: Re: It's all about last mile cost

              On topic, the case was that the US needs more broadband competition. Otherwise you're right; all of those things required to provide a good service are expensive, so why not cut them all back and raise prices if your consumers have no choice in who to use? Why not oversubscribe your capacity and do nothing when people bitch about it?

              That's the problem here. Nobody's trying to say you as an ISP can't make a profit (and if they are, they're a clown). They're saying you shouldn't be able to take the piss, which means there needs to be competition so that users have a choice if you do.

               

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              Kevin, Oct 13th, 2008 @ 3:31pm

              Re: Re: Re: Re: Re: It's all about last mile cost

              @ Nick - Oh give me a break! Cry me a river. I don't see them metering and capping tv. That uses bandwidth too so why aren't they capping how many PPV movies we can buy?

               

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      Anonymous Coward, Sep 30th, 2008 @ 9:02pm

      Re: It's all about last mile cost

      Allow people to use up as much as they want, and then listen to everyone complain about network congestion.

      That would make sense if there really were network congestion that wouldn't be solved by perfectly ordinary upgrades. It's like saying that people who drive more should be charged more for using roads, as a way to keep them off the roads, so you can stop doing road maintenance...

      Try reading the info in the links below...

      http://techdirt.com/articles/20080903/2020352161.shtml

      http://techdirt.com/articles/2 0060629/2236200.shtml

      http://techdirt.com/articles/20080703/1325301592.shtml

       

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        Nick, Sep 30th, 2008 @ 10:03pm

        Re: Re: It's all about last mile cost

        People that drive more *do* pay more. It's called "Gasoline Tax" and it goes into the Department of Transportations' budget.

         

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    Anonymous Coward, Sep 30th, 2008 @ 6:15pm

    A meter, please.

    Comcast begins my cap tomorrow and now more than ever I am going to hate and avoid flashy sites with ads and videos, spam, and all the other junk push content I will have to pay for. I can't afford to pay more for my connection, so the very first month I go over, I will have to cancel.
    It doesn't look like they are going to slow our data rate as we approach our cap, but they could, at least, have designed a meter for us to watch. Even the electric company let's us see how much we are using as we go along.

     

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      some old guy, Sep 30th, 2008 @ 6:24pm

      Re: A meter, please.

      I'm not sure what browser you are using, but I highly recommend Firefox with NoScript and AdBlock+ extensions.

      Set NoScript to block all 3rd party scripts and allow all 1st party and that will catch 99% of all bandwidth eating ads out there. AdBlock+ will catch the other 1%.

      You'd be amazed at just how much bandwidth you save that way. Also, since your browser will never be waiting on some crappy ads script, pages will all load significantly faster.

       

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      Michael Vilain, Sep 30th, 2008 @ 7:33pm

      Re: A meter, please.

      When Comcast announced this earlier, I found a bandwidth meter application for my Macintosh. It's "good enough" and shows aggregate daily and total usage of whatever interface you set. I have it monitoring my ethernet port and so far, I've used about 50GB for the month. That's with news groups, web movies, and other high bandwidth stuff. I suppose I could change the firmware in my router to get a more accurate measurement, but this is good enough.

      Basically, I didn't do anything differently this month than I normally do and I'm OK with regards to the 250GB cap. We'll see what happens when I _really_ start doing network heavy stuff.

       

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    I do not like ads, Sep 30th, 2008 @ 6:29pm

    They do not understand the market

    Yes, I agree with Mike.
    In addition, the ISP is shooting themselves in the foot by putting caps/metering in place. The user will be more aware of the cost associated with all the ads being downloaded and consuming their BW. The result, over time, would be more people using ad block and similar products. This would not go unnoticed, and would result in a reduction of the fees the websites could charge the advertisers. And since the ISPs are getting into the ad business, Phorm & NebuAd, they would be subject to this revenue reduction also.

    Would they then put a no block paragraph in their EULA ? How would they verify it ?

     

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    smack, Sep 30th, 2008 @ 6:52pm

    Caps won't result in cheaper plans. Instead, it will end up keeping the price the way it is, and result in ridiculous plans. Kinda like what Canada is facing now, which is BS.

    Besides, it won't easy to implement caps and such. What about IT companies in the USA and how they'll be affected, like Google, Microsoft, Facebook? Think about an entire sector.

     

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  •  
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    Brian Hayes, Sep 30th, 2008 @ 7:39pm

    Pipe Myths

    The world passes over us and we haven't found where the argument is. The Radio Act in 1914 hasn't been implemented yet. C'mon America, the spectrum isn't a prairie to homestead.

    Sprint culls my EVDO to 5G/month. Still says 'unlimited' in my contract. I must choose no audio, no video, tiny pdf, no flash, no data sets, no book preview, no software downloads, etc. etc. Everything script and feature is turned off.

    It's so much fun to look over a link in fear I'll be cut off. Oh yeh, like walking out in the morning hoping my dog won't poop.

     

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    Michael Br, Sep 30th, 2008 @ 7:54pm

    All About Limiting Competition on the Non-Internet Side

    I think people need to face the fact that the ISPs like Comcast and the rest are actually limiting bandwidth usage not so much because it causes network congestion but that it allows companies like Netflix, Apple and others to provide streaming music, video and movies which totally runs against the provider's NON-Internet business, like Comcast's OnDemand. For example, for $17.99 a month I get unlimited Netflix DVDs plus unlimited use of their streaming video library with no 24-hour "rental" period, etc. If I buy a $100 NetFlix box, I can watch them on my TV! Does that sound like something Comcast wants to promote, much less be the enabling technology for? Of course not! It will cut into their core business... cable TV. Same goes for Apple with Apple TV and anyone else who dares encroach into the cable or phone provider's territory. Now, do you think that Comcast will limit you when you use THEIR OnDemand service? Nope! Watch (and pay for) as much as you want!

    I've already filed a complaint against Comcast with the FCC, on the grounds that (a) they contracted with me for UNLIMITED Internet access (so it'sd consumer fraud) and (b) they are limiting competition unfairly.

    They LOVE their money!

     

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    Clueby4, Sep 30th, 2008 @ 8:14pm

    It's all about last mile cost, No its not

    How about option 4: ISP cannot sell additional access if they are "managing" traffic and/or experiencing capacity issues.

    Gambling that all your users won't be using their connection should not be an excuse/defense to scam. Fractional reserves is a scam in banking as well is network management.

    Metered/Caps are inherently flawed due to the following:
    - DNS redirections
    - no control of incoming traffic
    - usage data discrepancies
    - popups
    - spam
    - spyware/malware/dial-home apps
    - network mismanagement

     

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      identicon
      Anonymous Coward, Sep 30th, 2008 @ 8:51pm

      Re: It's all about last mile cost, No its not

      Wouldn't it be fun to send random data to a whole bunch of comcast IPs to make users go over their limit so they call and complain. Hmmmm

       

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      nasch, Oct 2nd, 2008 @ 7:41am

      Re: It's all about last mile cost, No its not

      How about option 4: ISP cannot sell additional access if they are "managing" traffic and/or experiencing capacity issues.

      That would be a terrible idea. Picture a market with two broadband providers for simplicity. If one of them hits capacity under your proposed rule, the other one can pretty much charge whatever it wants. This is because it is now the only option for not only new customers but its own existing customers, since the competitor cannot take on any new customers. If both of them hit capacity, 1) nobody new can get broadband now, so nobody will want to move to this location and 2) both providers can charge just about anything they want. Would you like paying $150/month for 200kb/s access? The only way this would work is if you combined it with some kind of provision guaranteeing low barriers to entry so competitors would quickly spring up to serve such a market. I have no idea what would accomplish that though.

       

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    identicon
    Thomas, Sep 30th, 2008 @ 8:15pm

    How much do I use?

    The whole question revolves around how much am I using now? I haven't a clue. I block ads and such, but I really think this is just a sneaky way for the ISPs to raise prices.

     

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    Brian Hayes, Sep 30th, 2008 @ 8:23pm

    Pipe Sympathy

    @Nick: Costs? Oh, we forget business factors. Sliding below 15th among nations, USA ISP margins require heroic defense! No sir.

    We require immediate offense. The spectrum is ours. Not to be divided among thieves or rationalized among managers, but delivered to everyone with no nation better. Uh, where you live?

     

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      Nick, Sep 30th, 2008 @ 10:10pm

      Re: Pipe Sympathy

      I applaud your sentament. I have been publicly stating for quite some time that the FCC needs to release some spectrum to people besides AT&T/Verizon/Sprint i.e. the companies that won't use it for anything truely useful, like last-mile fixed wireless broadband services to provide access options beyond cable/dsl.

      That still doesn't fix the fact that last mile is expensive, though ;) Did you know that a fully kitted out Breeezecom WiMAX tower will run you a cool half a million? And that's if you don't have to buy the tower! Now put one every 3km! That adds up FAST, and it's not even top of the line kit!

      Think about it in terms of context with respect to how internet access mediums work. We are 15th - behind countries that are smaller than most of our STATES. Of course they're beating us!

      In my opinion our position in the "rankings" is mostly a factor of geogrophy. Our landmass is just friggin huge.

      What I'd be more interested in knowing is how do we fair against a more even playing field? Russia? Canada? China? Australia?

      When you look at it for simmilar sized land masses, we may not be first, but we aren't doing /that/ bad.

       

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        Anonymous Coward, Oct 1st, 2008 @ 6:44am

        Re: Re: Pipe Sympathy

        I'm confused as to why you think every upgrade should be affordable and make profit immediately? You do understand basic economy for businesses this size, right? These upgrades you speak of will get paid over 10 to even 20 years. Hell, for a $1 million over 10 years, thats about service to 300 people to cover that cost. I have a feeling you either don't understand the numbers involved OR you're trying to use propaganda because you have ulterior motives.

         

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          nasch, Oct 2nd, 2008 @ 7:45am

          Re: Re: Re: Pipe Sympathy

          If I understand correctly, for a publicly traded company, long-term planning means thinking about the quarter after next. I'm exaggerating slightly, but really, the short-term profit pressure on public companies definitely interferes with long-term planning such as you're talking about. To what degree I don't know, and there are certainly other factors too.

           

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    Brian Hayes, Sep 30th, 2008 @ 10:10pm

    Defending Failing

    @Nick: So much cost? So much overhead? Factors cripple so many firms only the Third World is faster?

    Our pipes are profiteered and we know it. We opened the spectrum almost 100 years ago, a terrific number of years to deliver both capacity and profit. Price and cost are important factors, but so is promise and performance.

     

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    Brian Hayes, Sep 30th, 2008 @ 10:20pm

    Found a Chart

    @Nick: Your points are well taken. Factoring matters.

    I found a global broadband graphic. Canada is so-so but better than USA.

    This quote is no surprise, "In the first three years of the Bush administration, the United States dropped from 4th to 13th place in global rankings of broadband Internet usage."

    Pressure to improve our pipes is important. Nobody is suggesting firms be crippled. If others do it, why not we? There's a real question there. A fair question.

     

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    Anonymous Coward, Sep 30th, 2008 @ 11:44pm

    UK Broadband

    As a UK internet user, my broadband cap is 30GB per month. This is the largest monthly cap my ISP provides.
    Other, "unlimited", services in this country are so blatantly and cripplingly bent that they are not worth using in the slightest.

    I consider myself to be a high-bandwidth browser, but not a high-bandwidth downloader.
    My typical bandwidth demand is around 200-300MB per day, but that's without downloading any movies or other stuff.

    However, my ISP allows me the hours between midnight and eight a.m. unmetred and uncapped. *cough*

    I do get an 8Mbps connection, though, which I understand you guys rarely see.

    Just throwing out a comparison here, for anyone who's interested.

     

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      Anonymous Coward, Oct 1st, 2008 @ 12:35am

      Re: UK Broadband

      Some "unlimited" providers are actually providing unlimited services, actually. I've been with Be broadband on their unlimited plan in two different locations and I've never had any issues (and I do huge SVN checkouts, video streaming and the like regularly).

      Maybe some are less consumer friendly, but it's easy to change and there is a choice in the matter.

       

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    Brad, Oct 1st, 2008 @ 12:10am

    Australian Broadband

    30Gb cap, 1.5Mbits per second (on a good day - it's usually around a third of this. When the phones work), $69.99 per month. Sounds crap doesn't it? I'm 30kms (around 20 miles) from a major town and this is the best offer available. All other ISP's want to charge $129.99 for a similar service in this area.

    If you want broadband, or any sort of information service (including call centre operators that can speak the same language as you), don't move to Australia.

     

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    Anonymous Coward, Oct 1st, 2008 @ 2:26am

    Why do ISP's offer speeds they cannot sustain? Instead of forwarding fraudulent costs, how about offering speeds they can actually do. I have comcast, like 10-12Mbps. So why am I getting a 250GB cap? That is equal to less than 1Mbps sustained. Figure 12 hours a day, 2Mbps sustained.

    If you spend around 6 hours a day constantly surfing sites like YouTube, or other video sites like that, downloading at well over 2Mbps, and if not near 10Mbps, you'll go over that cap. WHY CAP.

    With places offering high def content like netflix streaming, media centers, etc.. what is going to happen when the large amount of people start going over/near 250GB?

    Charge more and introduce more caps? So retarded. They should charge for what they offer, but give what they offer. What's the point of having a highspeed connection if it can only be high speed a few hours a day?

    *pissed off at comcast*

     

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    erica, Oct 1st, 2008 @ 2:38am

    $215 internet access in 4 years

    Comcast needs to quit looking at today and playing the "we are saving those who do not max out money by rate limiting" and look at what it is going to cost us in the future by doing this.

    Here is prob the best article I have read on this and it includes the White Paper which explains what happens when Comcast (and others) forget to tell you if this takes the milestone to be the example for other ISPs.

    Do you want $215 internet access 4 years from now? Thank Comcast.. And now, because of this and other problems with Comcast fixing their problems (in which they repeatedly admit is their problem) I will happily go back to DSL. Enough is enough. They protect their ASSets, not ours.

    http://gigaom.com/2008/09/30/gigaom-white-paper-the-facts-fiction-of-bandwidth-caps/

     

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    Twinrova, Oct 1st, 2008 @ 4:04am

    Hmmm....

    Excuse me, Mike, but if damn near every major company is placing caps, just where in the hell are people going to turn?

    Let's say company "X" doesn't cap. If everyone leaves for company "X", you can bet company "X" will cap.

    This is a perfect example of how Corporate America forces its decisions upon its consumers, leaving little choice for anyone.

    Of course, the way to fight back is to drop service altogether, but I can promise you another poll will tell you life without the internet is not an option.

    I'm betting not a single company is going to reduce its rates to customers for this cap, either.

     

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    Rob, Oct 1st, 2008 @ 10:40am

    Other countries?

    In the UK, I can choose any ISP in the country to provide the Internet-side bandwidth for ADSL, and these ISPs provide various different services in the following categories:

    1) Truly unmetered broadband, which is quite expensive

    2) Unmetered* broadband, which has a "fair use policy", which costs less

    3) Specific monthly limits (sometimes rolling, sometimes not) based on how much I buy as a bundle, with some sort of "top up" rate if I go over. Depending on the ISP, I either get billed for extra use (with email notification), or I get redirected (presumably via DNS interception) to make a further online payment

    I think this works really well. The market can sort the mess out.

    I think the difference here is that any ISP can provide the backhaul and this is mandated by the regulator. The company that looks after the physical phone lines (British Telecom) is required to sell DSL connectivity to homes (but not the Internet) wholesale to ISPs at a price that allows them to compete with BT's own full offering.


    Mike: it's interesting that you're trying to predict which of these customers would prefer when the market has already partially decided that here. Anecdotally I would say that option 2 above is what most people here have, but that is probably because that's what BT's full offering is - a considerable proportion of the population think that BT's full offering is the best choice because they provide the line without looking into it further.

     

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    ian young, Oct 2nd, 2008 @ 8:30am

    Already dumped comcast

    I got rid of comcasts broadband service right before the cap was put in place. The saves caller rep told me that he had no idea that comcast was going to put a bandwith cap on oct 1st.

     

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    Anonymous Coward, Oct 2nd, 2008 @ 9:38am

    Electricity

    I'm no fan of metered electricity either. It's not the worst thing in the world, but it sets in place the wrong incentives, making an electrical connection a lot less valuable. There are certainly those who disagree, but we've lived in worlds with metered internet access and phone systems before, and it leads to decreased overall usage -- and that's not a good thing. It acts as disincentive to creating the next great electric innovation that could be a boon to the economy (e.g. electric cars).

    Customers recognize this implicitly. They hate the idea of any sort of mental transaction cost associated with "watching" their electricity usage -- especially since they have no clue how much electricity they really use. Many even have no an idea of how much electrical energy one kilowatt-hour represents.

     

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