Broadband CEOs Admit Usage Caps Are Nothing More Than A Toll On Uncompetitive Markets

from the pay-more-for-less dept

Time and time again, we’ve noted how the broadband industry’s justifications for usage caps just don’t hold water. And while the industry used to falsely claim that caps were necessary due to congestion or to save us all from the bullshit “exaflood,” the industry has slowly but surely stopped using any justification at all for what’s really just glorified rate hikes on uncompetitive markets. These days, big ISPs like AT&T and Comcast looking to impose usage caps either give no justification whatsoever, or pretend they’re doing consumers a favor by providing more “choice and flexibility.”

But over the last year, we’ve seen more and more broadband industry executives making it abundantly clear that usage caps just aren’t necessary. For example, Dane Jasper, CEO of independent California ISP Sonic, this week made it clear that there’s simply no good justification for caps as the cost to provide broadband services continues to drop. Apparently, you’ll be shocked to learn, the “exaflood” was just a bogus bogeyman concocted to help ISPs scare regulators into turning a blind eye to price gouging:

“The cost of increasing [broadband] capacity has declined much faster than the increase in data traffic,” says Dane Jasper, CEO of Sonic, an independent ISP based in Santa Rosa, Calif.

Jasper, of course, has reason to challenge his much larger rivals. However, he also backed up his argument with real numbers. A few years ago Sonic (formerly Sonic.net) spent about 20 percent of its revenue on basic infrastructure. Since then, the cost of routers, switching equipment and other related gear declined so much that Jasper says the company’s infrastructure costs are now only a bit more than 1.5 percent of its revenue.

For this reason, Sonic has no plans to impose data caps, according to Jasper.

And though Sonic tends to have more consumer friendly policies overall, Jasper’s not alone in admitting this. Frontier Communications, growing at an astounding rate after recently acquiring Verizon’s unwanted Texas, California, and Florida broadband customers, this week stated it also has no plans to impose caps anytime soon. Why? Well one reason is they bungled the merger so badly they’re walking a PR tight rope right now. But company CEO Dan McCarthy also makes it clear the cost to deliver broadband is dropping, making caps unnecessary:

“We want to make sure our products meet the needs of customers for what they want to do and it does not inhibit them or force them to make decisions on how they want to use the product. The nice part of technology and what has happened is that transport costs continue to decline and by putting in the packet optical fabric it takes away a lot of those constraints,” McCarthy said. “There may be a time when usage-based pricing is the right solution for the market, but I really don’t see that as a path the market is taking at this point in time.”

Even companies that do plan to impose usage caps have occasionally admitted that caps are completely untethered from network or financial realities.

St. Louis-based cable operator Suddenlink has caps ranging from 250 GB to 550 GB, depending on speed. Its customers pay the increasingly-standard $10 per each additional 50 GB consumed, and have the “option” of paying an additional fee to avoid usage caps entirely. Yet outgoing Suddenlink CEO Jerry Kent made it abundantly clear on a conference call last fall that the days of investing serious amounts of capital into the network are long gone (especially for cable, where DOCSIS upgrades are relatively inexpensive). These days, the name of the game is milking your captive customers for all they’re worth:

“I think one of the things people don?t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,? Kent said. ?Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”

These are three CEO admissions worth remembering as companies like AT&T (which just started heavily capping its customers last month) and Comcast (whose usage cap “trials” expand at a rabid clip) push whatever bullshit, half-baked excuse is in vogue this month for what’s effectively just a toll on captive broadband customers.

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Companies: at&t, comcast, frontier communications, sonic, suddenlink

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Comments on “Broadband CEOs Admit Usage Caps Are Nothing More Than A Toll On Uncompetitive Markets”

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30 Comments
Jeremy Lyman (profile) says:

Uncompetitive competition.

Yes, these ISPs are operating uncompetitive markets in that their customers don’t have a choice of Internet providers; that’s why they can get away with it. But I’d posit that the “toll” is actually on the competitive market of content.

These ISPs are also content companies who are (rightly) terrified that consumers are more able to get their entertainment from other sources. They are leveraging their infrastructure control to make those competitors’ services less appealing and more expensive.

It’s worse than just a rate hike on uncompetitive cable TV, they’re preventing the transition to new distribution methods because those methods allow competition.

JBDragon (profile) says:

Re: Uncompetitive competition.

I was getting 105Mbps Internet service from Comcast for $50 a month, for the 1 year period, it expired and jumped to over $80. Now I’m on a new bundle getting 75Mbps service (Still testing out over 100) plus HBO and some basic cable channels and Comcast streaming service, whatever it’s called I’ll never use for just over $45 a month. I didn’t want HBO or the other TV stuff, but it was cheaper to get this then Internet Only.

I’m still getting most of my TV from the Antenna and Using Netflix, but Now I can just use HBOGo on one of my many devices to get HBO. I’ll see what happens after this year deal is up and go with something else to keep the price down. They’re doing whatever they can to keep their TV stuff relevant I guess. Keep people on these TV service plans. I’d toss it if it was cheaper to have Internet Only.

After the year is up and they try to keep me on HBO, Nope, don’t really need it. What’s the new deal to keep my price down low? The point is. Don’t sit there every year paying full price on your cable bill month after month. See what kind of deal you can make to save some money. I’m saving about $35-$40 a month, getting HBO for free and the other stuff I don’t care about with slightly slower speed which was really overkill before anyway. That’s around $420-$480 in savings for the year. Or that much more I’d be paying if I didn’t make the call. That’s the point!!!

PaulT (profile) says:

Re: Re: Uncompetitive competition.

That kinda proves the point though. You’ve chose a package with TV because it’s cheaper than the one without. You’re paying for the TV either way, even if you chose the cheapest package. That stops people from seriously shopping around (assuming there is competition) and it allows Comcast to have a larger number of TV subscribers than they would if the internet-only was cheaper.

In turn, they’re trying to leverage these numbers to pretend that cord cutting isn’t really happening and impact net neutrality and the performance of competing services.

“That’s around $420-$480 in savings for the year”

Imagine how much you’d save if you weren’t paying for extra services you don’t use. Just because Comcast decided to price the TV package lower than the internet one, that doesn’t mean you’re not still paying for the TV services.

Robert Cook says:

Re: Re: Re: Uncompetitive competition.

They cheapen internet price when you take TV because if you don’t take tv, then they lose the numbers of TV viewers they use to represent their reach to the people who advertise on the TV.

If people shed the TV they cant show strong numbers to advertisers so they can charge them higher prices for ads.

It just makes more financial sense to discount your bundle for them because they make that back and more in selling ad time.

jufnitz (profile) says:

Re: Re: Re: Re:

So-called “crony capitalism” is still capitalism.

You’re getting straight to the heart of what’s both infuriating and hilarious about the predominant liberal capitalist approach to stories like this one. If for-profit companies can make more money by monopolizing the market and buying politicians and so on, what sacred principle of capitalism is supposed to grab them and tell them “no, you can’t do that”? The supposedly real or true capitalism that people fetishize in contrast to “crony capitalism” is basically just capitalism at an earlier stage in its development, a stage that if left to its own devices will logically progress toward monopolistic “crony capitalism”. And for the past 40-odd years in Western societies, the political trend has been toward revoking government’s ability to put a check on this progression. So condemn broadband/cable CEOs if you must, but don’t pretend they’re doing anything the logic of capitalism isn’t telling them to do.

MikeW_CA (profile) says:

Re: B4$%s making profit

Really sums up what’s gone wrong with this country over the last 30-40 years. Before then, businesses used to make profits by pleasing their customers. Now, more and more businesses depend on making their profits by jacking their customers. Business ethics have become extinct, especially in the C Suites.

Anonymous Coward says:

There is no practical limit on landline capacity at this time

There is no practical limit on landline capacity today. The limits are, as you stated, solely to milk captive subscribers. We have what amounts to tacit collusion between broadband providers. They provide low speed, low data cap connections for an extraordinary amount of money.

While I am not big on regulation, when you have government granted monopolies and duopolies then we need some regulation. These low speeds and data limits will ultimately slow down innovation. Same goes for wireless. People would use technology differently without the artificial limits. And we haven’t even gotten started on the internet of things. If this country wants to continue at the forefront of technology, they better get the ISPs in line.

Anonymous Coward says:

Re: Re: Re: There is no practical limit on landline capacity at this time

And you’re free to use whatever definitions you’d like. But if you don’t want to confuse people, you’re using the wrong term because most people will read that as “wired telephone line”.

Sorry, I meant you’re using the correct term. But when I say ‘correct’, I mean ‘wrong’.

Anonymous Coward says:

Re: Re: Re:2 There is no practical limit on landline capacity at this time

You weren’t confused, you knew exactly what I meant. If you look up the term landline it also means a cable connecting two points so it is not necessarily specific to a phone line. But please continue this line of thought as it is adding nothing to the discussion.

Sean Larabee says:

AT&T Using Cap to double cost of low speed internet.

The worst part is what AT&T is currently doing is states like Michigan. My ex-wife and my daughter at college live in Michigan and I pay for their internet. Two U-verse (DSL) accounts. The started a new data cap last month. 300gb. It is designed in a manner that if you have kids etc… you will go over. An Xbox will put you way over the limit. So it effectively raised the price of 3mbps internet to $77 per month!!!

So the have nearly quadrupled the cost of their service (from where it was priced 5 years ago) and are still providing the low sped from 5 years ago.

They are the worst of the worst.

Anonymous Coward says:

They are passing on the cost of spying on you

Since we know that the large internet providers have been granted retroactive immunity for providing access to the backbones of their networks and also know that they can sell any and all data collected on us to the highest bidder, they could be paying for storage to keep copies of your internet use. If a persons use goes above the budgeted storage space, they now can pass that increase directly on to us! Brilliant!

Jeffrey Nonken (profile) says:

Oh, hey! I’m on Sonic. AT&T owns the wires, Sonic rents them and resells to a local ISP called Omsoft.

Omsoft imposes neither data caps nor artificial bandwidth restrictions. When you call AT&T, they’ll sell you 6mb down, 768k up. Possibly 12mb down (for more money). And they’ll restrict you to those numbers. Omsoft just opens the floodgates; I get what I get depending on line quality and distance from the nearest switch station or whatever it’s called.

…I had more about Omsoft, but this was supposed to be about Sonic. I’ll just say if you’re on AT&T in the Sacramento/Davis/Woodland area, look them up. I’ve only dealt with Sonic indirectly, but as far as I can tell, they’re friendly and helpful in their own way. And OBTW, no data restrictions.

rapnel (profile) says:

I hate this shit. If you’re wired there’s no good reason to impose throttles or caps or any other market coercion tactic they can dream up – all from the comfort of their captured market. It’s a network not an oil well. Light? Check. Sound? Check. Route? Check. If you’re running a high collision domain you invest. These motherfuckers are taking us for a walk in the park every 28.87 days.

Free the last mile. And get off my lawn.

Anonymous Coward says:

Re: Re:

Power (as in electricity) consumption is a limit. But that’s already metered and accounted for. Not to mention irrelevant to the issue at hand.

Shit like this will basically stop when America (well, the U.S at least) realizes that social policies are not the devil and the current approach of “winners take all”, “you must be this wealthy to ride” won’t last much longer.

But then again that’s The American Way™.

Quote from a professional doucheonomist on the TTP:
http://equitablegrowth.org/thinking-tpp-tatip-free-trade

Alternatively, if […] stronger copyright protections are actually bad for the world, it will benefit the United States to receive higher rents from our past and future investments in intellectual property, and the United States ought to exert its bargaining power to get a better deal for us.

GOONIERAG says:

Suddenlink/altice ripoff in WV

Whats bad is what suddenlink/altice is doing in WV since altice bought out suddenlink. First altice/french should not of been able to buy American broadband isp’s without any condition, but the fcc let them buy both suddenlink and cablevision without any conditions. Its like they got a free pass cause they are a foreign company. Any american isp’s that buy or merge with other broadband isp’s/cable company’s there are conditions.

Anyways what they are doing in WV where only competition is frontier and you read the horror storie’s about frontier in WV. First suddenlink made the lowest speed in WV 50/5 250 cap. But when altice bought suddenlink they since the others did made it so you can get unlimited for a price but they added restrictions to theirs, First they made it you can’t pay the extra for the unlimited unless they offer 100/7.5 in your area. In parts of WV they only have 50/5 250 gig and 75/7.5 350 gig. So these people are stuck paying for overages. If one of them have 50/5 250 cap $39 and use 700 gig in a month they have to pay $39 plus another $90 dollars just for the broadband an 700 gig is not excessive use. But they also have area’s in WV that also can get the 100/7.5 and higher like mine we have 3 speed 50/5,75/7.5 and 100/7.5 so I can pay extra $15 for the unlimited over next 24 months but first I would have to pay $20 to move from the 50/5 I’m satisfied with to the 100/7.5 which would raise my broadband only to $59 then at the 24 month mark $74 mark and they are talking about a $3.50 raise in their broadband in WV, So my broadband only will be $78 if they do. Unlike the other isp’s at&t uverse they raised their caps to 600 gig and they added unlimited for a price to all tiers and comcast raised their caps to 1 terabyte and made you can get the unlimited on all tiers for a price. But suddenlink/altice kept their low caps on their 2 lowest speeds 50/5 250 cap and 75/7.5 350 cap and made their unlimited only availible on 100/7.5 and higher.

Nothing like their press release said, they lied on that, it said that you could get unlimited on the two highes tiers in your area. So why can I only get the unlimited on the 100/7.5 and not the second highest also 75/7.5. Reason they did the restrictions way they did is they know lots of people in WV use OTA antenna and the broadband is there to supplement their viewing with stuff like sling,vue,netflix,hulu,etc. They are telling people that live were can’t get unlimited with the lowest caps in broadband isp’s now, that if you don’t get our cable we’re going to make you pay for it anyways.

What they are doing in their uncompetitive areas like WV with their caps and unlimited set up is telling the people you are going to pay us what we want and your not going to get competition to our cable. Cause we don’t have to let you.

The fcc,ftc and ag’s need to crack down on what the isp’s are doing expecially what suddenlink/altice is doing is legalized robbery. Also not going to look good on the fcc,ftc and ag’s once the people see what they let a foreign company get away with to americans on american soil. With the no conditions to altice buying suddenlink and cablevision and soon more smaller isp’s.

Anonymous Coward says:

Re: Suddenlink/altice ripoff in WV

What they are doing in their uncompetitive areas like WV with their caps and unlimited set up is telling the people you are going to pay us what we want and your not going to get competition to our cable. Cause we don’t have to let you.

Sounds like you just don’t like good old capitalism, comrade.

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