FCC Boss: Broadband Caps Are Good… No, Bad… No, Good… Wait, Who Am I Talking To Again?

from the politics dept

For many years, we’ve talked about why metered and capped broadband is bad for innovation. Beyond the fact that it introduces serious mental transaction costs (“do I really want to watch that video, or will I hit my broadband cap?”), it creates the exact wrong incentives for broadband companies. They have incentives to keep the caps low and to not invest in infrastructure improvements. Of course, as with the net neutrality fight, the appearance of meters and caps are really a symptom of a larger problem, not the problem itself. The real problem: a serious lack of competition. Meters and caps don’t do anything that a user wants. Quite the opposite. They only serve the needs of the broadband provider. If there were real competition, then broadband providers wouldn’t be able to get away with caps and meters, because customers would quickly move elsewhere, and companies that focused on not limiting users would be winners in the marketplace.

Over at Broadband Reports, they’ve been chronicling FCC boss Julius Genachowski’s constant flip-flopping on whether or not broadband caps are good or bad. Tellingly, it seems to depend, in part, on what audience he’s speaking to.

FCC boss Julius Genachowski has been busy lately paying lip service to Silicon Valley, most recently telling a bunch of Silicon Valley conference attendees that caps were something we should be “concerned” about, after telling cable companies just a few months earlier he thought caps and overages are nifty and innovative. Speaking again to Silicon Valley folks yesterday at a speech at Vox Media headquarters, Genachowski hashed out his muddy position a little further, again insisting he was “concerned” about caps — sort of — maybe

As the article makes clear, beyond tailoring his remarks to his audience, Genachowski seems to be discussing things as if we were in a world where there was real competition, where meters and caps were used to offer lower prices, where the meters actually worked, where money from these activities goes into greater broadband investment and where such things were needed to make broadband profitable. The problem: exactly none of those things appear to be true. It’s kind of tough to make competent policy when all of your assumptions are basically wrong. More from Broadband Reports:

One, caps (and especially usage fees) are not technically or economically necessary whatsoever. Flat-rate broadband is perfectly profitable and despite doomsday prognostications designed to scare regulators (it apparently worked), most networks consistently keep pace with demand thanks to dropping bandwidth and hardware prices and improved engineering. Ten years of ISP earnings reports are proof the flat-rate pricing model is sustainable.

Two, they’re not being imposed in a “competitive market”; they’re just price hikes on already-expensive service, designed to protect TV revenues from Internet video — and they’re made possible specifically because of limited wireline competition, a problem the FCC refuses to seriously tackle. Most modern, well-managed wired broadband networks don’t see much congestion. Caps and overages are an executive and investor pipe dream; an entirely new unnecessary fee system layered on top of what is already some of the most expensive broadband service in the developed world (OECD data).

Genachowski appears to have swallowed the lie that money gleaned from overages goes back into the network; yet CAPEX and wired network investment is dropping like a stone for most incumbents, and most of the cash gleaned goes into the pockets of CEOs and investors. While that’s the public corporation’s primary objective, pretending that caps are helping to create the networks of tomorrow is not supported by the facts. If the money from overage fees actually went back into the network, Canada would have some of the most advanced residential broadband networks in the world. Go ask our Canadian forum users exactly what caps have done to improve the quality of their services.

These things are important if we’re going to actually get broadband policy right. The FCC has often seemed way too timid in recognizing that what the telcos tell them is often a complete fabrication. Given how that’s been the case for decades, you’d think sooner or later someone would pick up on it and use it to try to fix things, rather than kowtowing to their latest talking points.

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Comments on “FCC Boss: Broadband Caps Are Good… No, Bad… No, Good… Wait, Who Am I Talking To Again?”

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Gothenem (profile) says:

Caps on other things?

I find it funny how CEO’s and other people in big business love the idea of meters and caps when it affects us, but they change their tone when it affects them.

For example, the US Government wants to increase taxes on the rich, which is essentially the same thing (if you make over X amount of dollars, you must pay an ‘overage’ tax).

Funny how they fight that tooth and nail, and then tell us that meters and caps are good for innovation.


Rick Smith (profile) says:

My 2-cents

The solution to this is to separate the Service and the Access.

What I mean is to simply not allow any company to be engaged in both providing communication bandwidth and a service over that bandwidth. The Access is by far the more costly of the two, since you have to build and maintain something physical. Like most other industries that must build and maintain access points (water, electricity, sewage) the Access company(s) should be granted monopoly rights but regulated. Having only one set of physical items to maintain should actually help to reduce costs. We would have to give public grants in order to extend coverage to lowly populated areas, but they aren’t served well even now.

Almost everyone reading here understands the difference between the two, but I believe that most people still do not realize that all of these ?different? communication services (TV, Phone, Internet, etc.) are essentially delivered using the exact same network. Once enough people do, I think we will see more demand for the Services and the Access to be split.

Once this split occurs, it then makes sense for the Access to be sold mainly by throughput with no caps. Also this separation means that the company selling you access has no interest in how the communication is used and the whole mess with net neutrality should become a non-issue.

As for the Service side of things, they can continue to sell the services that they currently do, without having to deal with the actual network. I do believe that the market would adjust and that the service choices would need to adapt, but that is just a normal changing market. The current companies won?t be happy but would still be plenty of opportunity for them.

Baldaur Regis (profile) says:

Leapfrogging Infrastructure

IIRC, the US is burdened with a legacy telco infrastrucure, with the majority of homes wired for Plain Old Telephone Service (POTS) – twisted pairs of copper wire. There’s a physical limitation to how much data can be stuffed down these skinny pipes. Cable provides a fatter pipe, but the problem is cablecos are content providers, so there is little incentive for them to provide access to competing content from that Internet thingy.

The infrastructure in the US is perfectly set up for what is was designed for – low-bandwidth speech via copper, one-way video via cable. In essence, internet access is being piggy-backed on systems not designed for it. And, again, there is little incentive for these companies to upgrade their hardware so their content competitors can use their pipes.

In contrast, developing nations can bypass this old technology and go directly to fiber and/or tower transmission, with the toothless legacy players unable to block the buildout.

ShellMG says:

“Beyond the fact that it introduces serious mental transaction costs (“do I really want to watch that video, or will I hit my broadband cap?”)…”

Often that “I” in that statement is a “we.” Satellite broadband has had excruciatingly low caps, and 7.5GB a month is not enough for the average family of four, especially if you have teens. Trying to keep track of who uses how many MB is preposterous, if not impossible. You get whining, complaining, griping, “I didn’t download anything…!” and on and on and on, all of which ends up with a headache for the poor cap cop. That is one thankless job. It’s almost easier to just screw the service and drop it because it’s more of a pain than it’s worth.

I’d like to lock some of these execs, including Mr. FCC, in a room for a month and give ’em a tiny cap. See how THEY like it.

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