ISPs Are Now Forcing Cord Cutters To Subscribe To TV If They Want To Avoid Usage Caps

from the damned-if-you-do dept

We've noted time and time again how broadband usage caps on fixed-line networks are arbitrary, unnecessary, and harm innovation. They're also a useful weapon against streaming video competitors, and the natural evolution of TV competition. Caps can be used to either punish users who try and cut the cord with higher prices, but they also allow ISPs to exempt their own streaming services from said caps (something currently being done by both Verizon and Comcast), thereby giving these services a distinct and unfair advantage in the market.

But broadband ISPs are now coming up with a new way of attacking cord cutters: forcing them to subscribe to television if they want to avoid usage caps.

Back in January, AT&T announced that the company would be happy to remove usage caps on its wireless network, but only if you subscribe to DirecTV or U-verse TV service. Then last month, AT&T carried this idea over to its fixed-line broadband network, announcing that it would be imposing new usage caps on its broadband users starting May 23. While AT&T says it will generously allow users to pay $30 more per month to avoid usage caps entirely, it also announced that users who subscribe to its TV services will be able to avoid usage caps entirely.

This month, an Oregon company by the name of Bend Broadband followed suit, informing its users that it would be happy to remove its usage caps (ranging from 150 GB to 500 GB), but only if users subscribe to television service. Bend offers up a misleading explanation for why caps are necessary in the first place in a company FAQ:
"The continued migration of Netflix usage from mailed DVD to Internet streaming/download, as well as other data intensive uses of the Internet, are impacting all providers of high-speed Internet service. While we certainly acknowledge and appreciate that content rich services like Netflix make our high-speed offering more valuable to the end user, the volume of data associated with this content drives significant incremental investment in the network and the need to purchase more bandwidth in order to maintain the user experience and this must be funded."
Right, but that's bullshit. U.S. residents already pay some of the highest prices for broadband in the developed world; money that any earnings report will clearly illustrate is more than enough to offset what at this point is only modest network upgrades. As one cable CEO recently noted, most of the heavy investment is over, and the name of the game now is milking these uncompetitive markets for all they're worth until either broadband competition magically sprouts from the ether, or regulators wake up from a deep slumber and shut down the price gouging party.

Usage caps on fixed-line networks are nothing more than rate hikes on uncompetitive markets, and anybody claiming otherwise either has been swindled by a good salesman, or is selling you something themselves.

There's absolutely nothing good about this trend. ISPs are using a lack of competition in the broadband space to impose usage caps. They're then using caps to force subscribers to sign up for TV services they may or may not actually want. It's a mammoth, misleading and anti-competitive abuse of two markets simultaneously, all sold to consumers under the lie that ISPs need even more revenue to keep funding unprecedented investment and innovation. In reality, the entire push may just be one of the largest cons ever perpetrated on consumers in the modern communications era.

Filed Under: broadband, bundling, cord cutting, data caps, isps, tv, tying, usage caps


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  1. identicon
    Anonymous Coward, 13 May 2016 @ 9:45am

    Re:

    I'm with Derek on this. After digging into the financials for the parent company of Bend Broadband (which also owns US Cellular, FWIW), I see a company that reinvests a substantial amount of its net cash flow back into its infrastructure. In the first quarter, the company basically had no earnings. Add back non-cash expenses like depreciation and this $9.4 billion dollar company generates an annualized $260 million in free cash flow (not profits). That's about 3% of the company's assets. Not exactly the kind of "excess returns" you'd expect from a price gouger. I can get more than that from an investment-grade bond fund with a helluva lot less risk.

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