Bullshit Broadband Usage Caps Are Hugely Profitable During A Pandemic

from the fancy-that dept

We’ve noted for years how broadband providers have increasingly imposed arbitrary, confusing, and punitive usage caps and overage fees to cash in on the lack of competition in US broadband. Not only have industry executives admitted these limits aren’t technically necessary, they’ve increasingly been abused to hamstring competitors. AT&T, for example, doesn’t impose the limits on its broadband customers who use its streaming video service (AT&T Now), but will impose the added charges if you use a competitor like Netflix.

For more than a decade ISPs have slowly but surely imposed such limits hoping that consumers wouldn’t notice (think of the frog in the pot of boiling water metaphor with you as the frog). But with most folks stuck at home during an historic health and economic crisis, bandwidth usage (and thereby profits gleaned by usage caps) has grown significantly. In fact, data from OpenVault indicates that the number of broadband “power users,” or users who consume more than a terabyte per month, has doubled over the past year:

“In Q3 2020, 8.8 percent of broadband subscribers used at least 1TB per month, up from 4.2 percent in Q3 2019, according to a study released yesterday by OpenVault. OpenVault is a vendor that sells a data-usage tracking platform to cable, fiber, and wireless ISPs and has 150 operators as customers worldwide. The 8.8- and 4.2-percent figures refer to US customers only, an OpenVault spokesperson told Ars.”

Cross this phony threshold and you wind up owing your ISP even more money, despite Americans already paying some of the highest prices for broadband in the developed world — a notorious metric that doesn’t even include the additional costs incurred by usage caps, overage fees, and other nonsensical surcharges the industry uses to falsely advertise a lower rate. If you’re a telecom monopoly, this is all great. If you’re an American struggling to pay your broadband bill, suddenly higher due to household video streaming, gaming, school work, regular work, and video conferencing, it’s decidedly less so.

OpenVault of course advises ISPs to embrace caps because it means more users will be paying more money over time than ISPs that don’t:

“In potentially bad news for customers, OpenVault seems to be urging ISPs that haven’t imposed data caps to adopt them. “The goal for network operators is to ensure that subscribers who consume the most bandwidth are in faster, higher ARPU [average revenue per user] speed tiers,” OpenVault said. “Usage-based billing operators are achieving this goal more, on average, than network operators who utilize flat-rate unlimited billing.”

But again, the problem is that such restrictions are bullshit. They do not manage congestion. They aren’t required for network management because they don’t really help network strain. They’re glorified price hikes by natural monopolies on captive customers who can’t vote with their wallets. They’re not even necessary as a product differentiator, as the heaviest users can already be shoved toward business-class tiers. They exist solely to extract an additional pound of flesh from uncompetitive U.S. broadband markets. And now they’re being exploited during a national crisis.

The Trump FCC made some performative, empty gestures toward this problem earlier this year when it announced an entirely voluntary pledge with ISPs, who agreed they’d temporarily stop charging late fees or imposing usage caps. Many ISPs not only ignored their promise, but it was only a few months before most ISPs returned to business as usual, hitting struggling Americans with all manner of spurious additional charges.

Of course you’d never realize such limits are bullshit reading outlets like the Wall Street Journal, which recently parroted industry claims like caps are necessary to “keep the prices of internet packages stable by shifting the extra cost to heavy users,” (nonsense, everybody pays more under such a model as the average usage rate creeps skyward), or “protect the majority of subscribers from having rates raised every year” (also nonsense, given U.S. broadband flat rate prices and other fees routinely increase your costs either way).

It’s just monopolies being monopolies, and there’s a sizeable industry of think tankers, consultants, academics, and lobbying firms funded by the U.S. telecom sector whose entire job is to pretend that’s not actually a problem.

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Comments on “Bullshit Broadband Usage Caps Are Hugely Profitable During A Pandemic”

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14 Comments
Anonymous Coward says:

Eventually we (Americans) will demand local competition in the ISP space in every major US city. It’ll be like how we have local gas station competition in every (if not all) US cities. Each time a new gas station is built, they don’t have to rebuild the Alaska pipeline (hyperbole, I know, but you get it); they just tie into whatever fuel infrastructure that’s already there, and people just choose between BP/Valero/Wawa/Shell/etc. As such, in my imaginary future cities where you’ll be able to choose between Comcast/Cox/Cablevision/Fios/etc., the ISPs will just tie into whatever fiber/telco infrastructure that’s already there.
If it can be done with oil, then it can also be done with fiber…the lobbyist just have to get paid first.

ECA (profile) says:

And.

My suggestion to let students and remote locations have tethering?

There is a USE for Caps.
Its part of the idea they dont want 100% usage.
Phone system in Portland Or, was at 6% before the internet hit.

The Cellphone system Loves to Slow things down, and NOT add anything they are NOT forced to. If you took the caps off, and let people Tether to computers and other devices, It would drag the system into the dirt.

I would also Love to see if the FCC has ever gone out and checked the different sections of backbone. I would think that the Corps have cut LOTS of corners, even after being Paid multiple times to UPGRADE/UPDATE.

rkhalloran (profile) says:

AT&T removed caps for faster tiers

One of the reasons we had delayed cord-cutting from our “triple-play” FTTH/VoIP/DirecTV bundle with the Deathstar was that having the dish-based TV got us a waiver from their data cap on the fiber ‘Net service. As of 3Q they’ve removed it from their gig-speed service (at least) and thrown in HBO Max as a perk (no doubt to try and raise subscriber numbers since they hadn’t cut deals with the bigger streaming platforms).

RickY (profile) says:

Broadband Providers have costs too

You have to understand how a business works, and specifically how the broadband business works, to know that the opinions expressed in this article are actually what is B.S. I’m not saying that some operators might not be taking advantage of a lack of competition, or Covid, although a lot of providers stepped up and removed data caps and usage charges during the pandemic.

It’s simple. An ISP sells access to the Internet. How much data their subscriber’s use is what determines their cost. The more usage there is, the more expensive their connection is to the backbone, and the more equipment they need in their headend. As usage goes up, they have to increase and upgrade both.

They have a few choices. One, they can charge everyone the same amount, and try to average that out. That’s kind of like the Post Office. You can mail a letter across town or to Alaska for fifty cents. It costs the Post Office a lot more than fifty cents to deliver that letter to Alaska, and I assume less than fifty cents to send it across town looking at volume. So, ISPs that don’t charge an overage will have to charge every customer a little more, including those that don’t have much usage, in order to account for those people who are going to have a lot of usage.

The other option is charging everyone based only on the amount they transfer (charged some amount for every byte). This is like the water department. You’re charged by the gallon. If you’re single and don’t use that much water and are careful, your water bill is lower. If your neighbor has three teenagers, with a mom doing five loads of laundry a week, dad watering the lawn, and everyone taking long showers and washing their cars, their bill is going to be higher. The water company could charge you more and them less, but would you want your water bill a lot higher to subsidize their usage?

Another option is to give everyone a certain amount of usage for a set price, and then if you exceed that, you are charged more. If you are single, are at work most days, and maybe watch something on Netflix every other night, you will probably fall in the base usage amount. Your neighbor with the three teenagers exceeds the limit because they all watch several HD movies and shows on NetFlix and Disney+ every night.

As far as an ISP like AT&T not counting usage for a streaming video service that they provide, that makes sense too. They are getting revenue from that subscriber for the broadband connection, AND they are getting additional revenue from that subscriber for the video service. So, they can bake that additional usage into the cost of their video service. Even if they are just breaking even and covering their costs, which is often the case with Pay TV, it’s additional top-line revenue. But, they get no additional revenue from the family that’s watching Netflix and Disney+. That is just additional usage costs for them with no upside.

nasch (profile) says:

Re: Broadband Providers have costs too

How much data their subscriber’s use is what determines their cost.

Their costs are almost entirely fixed.

"Calculations based on Internet transit costs, as detailed below, suggest an ISP cost per gigabyte measured in fractions of a penny. "

https://broadbandnow.com/report/much-data-really-cost-isps/

If their network can handle the peak load, then they’re fine. If it can’t, they need to spend money to upgrade the network. And monthly usage caps do nothing to manage peak load. ISPs themselves, when they are forced to tell the truth or face criminal penalties (on earnings calls with investors) admit that the caps are not necessary to manage the network, and are just there as a revenue enhancement tool.

As far as an ISP like AT&T not counting usage for a streaming video service that they provide, that makes sense too.

Yeah it makes sense. And it’s a network neutrality violation.

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