If Per Byte Pricing Is 'Only Fair' Why Have Telcos Ditched It For Mobile Data Plans?

from the hypocrisy-in-action dept

For the past couple of years, telcos and cable companies have been pushing for metered broadband, usually with the bogus claim that "it's not fair" for a light user to be subsidizing a heavy user. This is a neat little disingenuous trick that implies "light users" would see their bills decrease under metered billing plans. However, the same telcos pushing for metered broadband on connections are the same telcos who have wireless operators as well... and for mobile users, they're doing away with the metered billing option at the lower end, forcing everyone into a much higher priced all-you-can-eat model. Oops. Metered billing has nothing to do with fairness. It's an attempt by telcos to squeeze more money out of customers in a market where they often have little in the way of competitive options. Because, as we've seen, when there's real competition, it's a lot more difficult for providers to offer such plans.

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If You're Going To Meter Or Cap Broadband, Shouldn't You Provide A Meter?

from the where's-the-problem? dept

With various ISPs implementing forms of capped or metered broadband, you would think it would be standard (if not required) that they also provide consumers with the tools to measure their consumption. Otherwise it seems a bit unfair to say you can only use x amount, but you have no way to know when you've actually done so. But, it seems that hasn't really stopped various ISPs. News.com is noticing that despite capping broadband connections at 250 gigs/month for many months (and rumors and screenshots of it), Comcast still refuses to deliver a broadband monitoring solution for users. If that's the case, it makes you wonder how accurate/reliable its own internal monitors are, and how it can guarantee that users actually get the 250 gigs they're promised. Perhaps I'm missing something, but is it really that difficult to measure broadband usage? If so, that would seem to be yet another reason that ISPs might want to stay away from metered broadband: the cost of developing a system to actually track it.

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If You're Going To Meter Broadband, Shouldn't You At Least Make Sure The Meters Work?

from the it's-the-little-things dept

One of the things that's left out of the discussion about all these attempts to move to "metered billing" for broadband is the massive overhead increases it will put on broadband providers. In the past, with straight flat-rate plans, there wasn't much to monitor or adjust by the company (and fewer customer disputes over how much was used). But, as soon as you add in the meters, all that goes out the window -- and I'd bet the expense greatly outweighs any supposed "benefit" to the cable company.

Take, for example, Canadian cable provider Cogeco, who apparently has started offering metered billing, but whose "meters" apparently don't work. Customers are reporting very inaccurate readings on the tool provided by Cogeco for customers to watch their own bandwidth, and they're receiving usage emails from the company that don't match up with what the online tool says at all. So, now Cogeco's going to have a bunch of folks complaining, and will need to spend more time fixing its meter tool. Good decision, huh?

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As Expected, Bill Introduced To Outlaw Tiered Bandwidth Pricing

from the this-won't-go-far dept

As was widely expected, Rep. Eric Massa has introduced a bill that would outlaw metered billing and create a bunch of other regulatory hoops ISPs need to jump through on pricing plans. We're no fans of metered broadband by any stretch of the imagination. It stifles innovation and limits the usefulness of the internet. Contrary to what some broadband providers will claim, it's not at all necessary and has nothing to do with preventing the network from being overrun or to stop part-time users from "subsidizing" everyone else. The Broadband Reports link above walks through how silly each of those arguments are. It also explains why this is a pure money grab. Flat-rate pricing has been quite profitable for the providers, but they want more. Note that nowhere in these usage plans do they talk about cheaper tiers. Beyond just being about a straight money grab, part of the desire is to use this to reduce competition for online video by making it more expensive for anyone other than the ISP to deliver video services.

That said... this bill seems laughable and is unlikely to go anywhere. The real issue here (as it has been all along) is the lack of meaningful competition in the broadband space. Get meaningful competition into the market, and this whole issue goes away. But that's not what Massa's bill does. It just adds regulatory burdens to ISPs without doing much to get at the root of the issue.

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Who Will Monitor And Audit Broadband Metering?

from the questions,-questions dept

With all the recent talk of metered broadband, there are some questions raised: such as how will the usage actually be metered? As that report notes, broadband providers should not be allowed to meter the broadband themselves, because that represents an obvious conflict of interest -- and when it comes to things like electricity and gas pumps, regulations require third party inspectors or equipment to make sure that the meters are accurate and not subject to tampering by the company. So wouldn't broadband require the same thing?

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Time Warner Backs Off Metered Billing... Until It Can Figure Out A Way To Not Look So Stupid Presenting It

from the we're-sorry-for-the-misunderstanding dept

After a few weeks of getting hit back and forth by pretty much everyone concerning its plans to expand metered broadband with incredibly low caps and ridiculously high profits (even as its own costs were dropping, and the growth rate of broadband was slowing), Time Warner Cable has now agreed to back off from implementing the plan... for now. From the wording, it's quite clear that the company isn't backing off because it realized that it was a bad idea, but it's retreating because it wants to rethink how it pitches the caps:

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.

Translation: because you crazy consumers were being so loud, we need to make it look like we're listening to feedback, and hopefully we'll get to roll this out at a later date when you're more focused on other stuff, maybe by calling it something that sounds more innocuous.

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Well, That's One Argument Against Metered Broadband

from the grasping-at-straws dept

There's been quite a bit of uproar over some ISPs' boneheaded plans to introduce broadband traffic caps and charge customers based on the amount of data that travels across their broadband connection. Already, the pushback against Time Warner's plans to expand its use of the caps has led another ISP, Frontier Communications, to reconsider its plans to introduce them, illustrating how competition could take care of this issue. Still, some politicians see it as a chance to wade in and drum up some publicity, such as a New York congressman, who (among other things) says the caps raise "broad and sweeping First Amendment issues." Erm, well, these caps aren't so impressive, but to imply they're unconstitutional seems like a bit of a stretch. But the rhetoric is -- unfortunately -- typical of politicians' positions on these issues. The rep says he'll take "a leadership role in stopping this outrageous, job killing initiative", which is nice and sure to grab some headlines in his hometown paper, but it ignores the real issue at play: a lack of true competition in the broadband market. Politicians jump on whatever hot internet issue pops up, whether it's these caps, or something like net neutrality, talking about the need for new laws and rules. If they'd do more to engender actual, meaningful competition in the broadband market, all of these issues would take care of themselves. But that doesn't make for nearly as great a sound bite, apparently.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Why Metered Broadband Slows Internet Innovation

from the how-to-slow-internet-innovation dept

It's been a while since there's been much debate over the issue of metered vs. flat-rate internet access plans, but it's flaring up for a variety of reasons these days. First, Adam Thierer posted a long essay over at the Technology Liberation Front arguing that piggybacking on WiFi has real costs and that metered broadband would solve many of the problems by convincing access point owners to secure their broadband. This seemed like an odd argument -- adding a significant cost as a method of signaling that there was, in a few very specific circumstances, a tiny little marginal cost associated with some WiFi piggybacking. The second thing thing that's given new life to the metered broadband argument is the sudden reappearance of stories about Comcast's unpublished usage caps. This is an old, old story that's been talked about for many years, but pops up every now and again. Basically, Comcast (and some other ISPs) will cut off certain customers who are using too much bandwidth. The real problem, honestly, isn't that Comcast is cutting off these users, but that they're not at all transparent about it. The services are promoted as "unlimited" and then the usage caps are kept a secret... until you've been kicked off.

Anyway, with the latest barrage of stories about these usage caps, it's common for those supporting ISPs to blame the concept of flat-rate pricing, because it only opens up an opportunity for people to abuse the system. That, inevitably, leads to a discussion about bringing back metered broadband offerings (which are found around the world, but rarely in the US). This is a bad idea for a variety of reasons. First of all, most of these problems would go away if the ISPs in question were more open about their caps. However, much more importantly, if you want to encourage innovation online, it's important to leave flat-rate pricing in place. The second you set up metered broadband, it adds significant transaction costs for both the ISPs and anyone trying to do anything or try anything online. For ISPs, they now have to put in place significantly more tracking equipment and then need to manage the various different levels of service, differential billing and more customer service costs in dealing with customer confusion (or anger if a bill seems too high).

However, the bigger problem is the transaction costs it introduces for users. Suddenly, internet surfers really need to see any particular website or service as being worthwhile. Just the act of making them debate whether or not it's worthwhile to pay up to do something represents a mental transaction cost that will slow down adoption of new services. Furthermore, as bandwidth has increased, many of the newer innovative services have come about to make use of that bandwidth -- which only drives further investment in more bandwidth, driving more innovative uses. It's a virtuous circle. Yet, by metering broadband connections, slowing down adoption of these new services, you slow down the innovation and hold people back from trying out or even creating new, innovative and useful services that would require more bandwidth. It's a recipe for slowing innovation online.

While an executive for the CTIA says that flat-rate pricing only made sense when the internet was first getting off the ground, that represents a false belief that innovation on the internet has slowed down and the internet is now somehow "mature." Instead, internet innovation has been increasing as new apps and services are built on top of older apps and services, leading to greater and greater innovation. If the CTIA exec gets his way and convinces providers to move more to metered bandwidth, then his belief that the internet has plateaued may become a self-fulfilling prophecy, as it'll undoubtedly slow the pace of innovation online. Imagine, for example, that metered bandwidth was common when YouTube first hit the scene? It would absolutely have slowed adoption, because video uses quite a bit of bandwidth and people would have been a lot less likely to test it out. In fact, the same could be said for any kind of non-text multimedia. Podcasts? Why waste that bandwidth? Streaming radio? iTunes would also be more expensive, as every download doesn't just cost $0.99, but your metered bandwidth charge. If you look at history of innovative services, you'll see they tend to move more and more towards flat rate offerings, as it encourages usage and encourages innovation. Phone service and mobile phone service have both trended in exactly this direction -- and in both cases it's because it's opened up a much larger overall market, even if it means less per customer. So, why are we suddenly trying to go the other way with broadband?

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