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Building a Broadband Superhighway 5 Miles Long: How Usage Caps Ruin Faster Speeds

Phillip “Tollbooths are not innovation” Dampier

Federal Communications Commission chairman Julius Genachowski last week wrote a guest editorial on TechCrunch espousing the benefits of faster broadband networks, but the advances he celebrates often come with innovation-killing usage caps and overlimit fees he continues to ignore.

We feel the need – the need for speed. As Tom Friedman and others have written, in this flat global economy a strategic bandwidth advantage will help keep the U.S. as the home and most desired destination for the world’s greatest innovators and entrepreneurs.

[...] But progress isn’t victory, particularly in this fast-moving sector. Challenges to U.S. leadership are real. This is a time to press harder on the gas pedal, not let up. The first challenge is the need for faster and more accessible broadband networks. We need to keep pushing because our global competitors aren’t slowing down. I’ve met with senior government officials and business leaders from every continent, and every one of them is focused on the broadband opportunity. If we in the U.S. don’t foster major investments to extend and expand our broadband infrastructure, somebody else will take the lead.

We need to keep pushing because innovators need next-generation bandwidth for next-generation innovations – genetic sequencing for cancer patients, immersive and creative software to help children learn, ways for small businesses to take advantage of Big Data, and speed- and capacity-heavy innovations we can’t yet imagine.

We need to remove bandwidth as a constraint on our innovators and entrepreneurs. In addition to steadily increasing broadband speed and capacity for consumers and businesses throughout the country, we need – as we said in our National Broadband Plan – “innovation hubs” with super-fast broadband, with speed measured in gigabits, not megabits.

[...]Some argue the private sector will solve these challenges itself, and that all government has to do is get out of the way. I disagree. The private sector must take the lead, but the public sector has a vital though limited role to play.

Among the policy levers government needs to use is the removal of barriers to broadband buildout, lowering the costs of infrastructure deployment with new policies like “Dig Once” that says you should lay fiber when you dig up roads. The President recently issued an Executive Order implementing this idea, suggested in our Broadband Plan. Government must promote competition, which drives innovation and network upgrades.

We must ensure the Internet remains an open platform that continues to enable innovation without permission.

Genachowski

Genachowski’s vision for faster broadband has the noble goal of maintaining competitiveness with the rest of the world and putting the United States back on top in broadband rankings and innovation. But while hobnobbing with his industry friends at recent industry conventions, he may have gotten too close to one of the biggest impediments holding us back — big cable and phone companies merrily working their magic to create a comfortable duopoly with pricing and service plans to match.

Back in the late 1990s, most cable operators thought of broadband as an ancillary service easy enough to operate, but probably hard to monetize. Just like digital cable radio services like Music Choice and DMX, “broadband” would likely appeal only to a tiny subset of customers.

“Back in the 1990s, Time Warner was primarily a TV company in a TV industry.  Broadband then was an innovating and radical thing, and a lot of people thought it was stupid and wouldn’t work,” Time Warner Cable CEO Glenn Britt said in April, 2009.

The launch of “Road Runner” was not the most auspicious marketing effort undertaken by the cable operator. In fact, the service was rarely targeted for price adjustments, hovering at around $40 a month for a decade.

When the Great Recession hit the United States, something unexpected happened. Cable operators discovered people were willing to cancel their cable and phone services, but not their broadband. In fact, as high bandwidth online video became an increasing part of our lives, the cable industry realized they were in the catbird seat to deliver the best broadband experience, and be well-paid for it. With little competition, increasing prices brought little risk and, thanks to the insatiable drive to boost revenue and reduce costs, implementing usage caps to control “excess” usage and costs were within their grasp.

In 2008, when Stop the Cap! launched, only a handful of ISPs had usage caps. Now most providers, with the exception of Time Warner Cable, Verizon, Cablevision, and a handful of others, all have usage allowances and overlimit fee Internet Overcharging schemes to further pad their bottom lines.

Innovation: Rationing Your Internet Experience — Stick to e-mail and web pages.

Genachowski has completely ignored the growing pervasiveness of usage caps, and even excused them as an experiment in marketplace innovation. But limits on broadband usage will also limit the broadband innovation revolution he wants, especially when most Americans have just one or two realistic choices for broadband service:

  1. Usage caps are the product of artificial scarcity. Rationing Internet usage, even with now-pervasive cost-effective upgrades like DOCSIS 3, simply does not make sense (but it will make dollars). Cable operators are switching off analog television service to free up bandwidth to provider faster Internet speed and fatten the pipeline that delivers it. They have plenty of capacity, but continue to proclaim they must limit usage for “fairness” reasons, without providing a single shred of evidence to prove the need for usage caps. Consumers will self-ration just to avoid the prospect of being cut off or handed a bill with overlimit fees.
  2. Usage caps make faster speeds irrelevant. Selling customers premium-priced, super fast broadband speed is hardly compelling when accompanied by usage caps that constrain the benefits of buying. Why pay $20-50 more for faster speeds when customers cannot take practical advantage of them. Customers using their Internet service to browse web pages and read e-mail have no interest in upgrading to 30+Mbps. Customers streaming video or moving large files do.
  3. Usage caps retard innovation. Google’s new 1Gbps fiber optic network was built on the premise that usage caps were unnecessary on a fiber-based network and would retard innovation. Developing the next generation of innovative apps that Genachowski celebrates will never happen if developers are discouraged by Internet usage toll booths and stop signs. The cost to provide the service is not largely dependent on customer usage. It is the initial price of last mile infrastructure that really matters. Both cable and phone companies have reduced their investments to upgrade their networks, and AT&T and Verizon both contemplate getting rid of their rural landlines. Most cable operators paid off their networks years ago.
  4. Usage caps create a whole new digital divide.  Time Warner Cable’s discounted Internet Essentials program delivers only a $5 discount with a harsh 5GB usage cap. For an income-challenged home compelled to switch to a provider’s budget plan, the result is a different Internet experience than the rest of us enjoy. Imagine if your home broadband account was limited to 5GB a month. What online services would you have to avoid to stay under the provider’s limit? Traditionally, operators sell the lowest speed tiers with the lowest usage allowances. Slower speeds already offer a disincentive to use high bandwidth services, but many providers typically drive that disincentive home even harder with a paltry allowance that will cost plenty to exceed.
  5. Usage caps harm our broadband standing. While Genachowski celebrates increasing broadband speeds, he ignores the fact the rest of the world is moving away from usage caps even as the United States moves towards them. Both Australia and New Zealand elected to construct their own national fiber networks in large part because the heavily usage-capped experience was holding both countries back. Usage caps are a product of a barely competitive market.

http://www.phillipdampier.com/video/Bandwidth Caps 7-2011.flv

Tech News Today debunks providers’ claims that usage caps are fair and control those who “overuse” their networks, noting the same phone companies (AT&T) pushing for usage caps are also moving voice calling to unlimited service plans. (August, 2011) (4 minutes)

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Currently there are 7 comments on this Article:

  1. James Cieloha says:

    Every internet broadband customer should be ashamed of all the internet broadband providers including Comcast, Time Warner Cable, Cox, Charter, Suddenlink, Mediacom, AT&T, Verizon, Centurylink, Frontier, and all the others that chose to impose internet usage caps to all the customers nationwide.

    I feel that all the internet broadband providers are trying to be way too big being like the Wal-Mart’s, the Neil Bogart’s of Casablanca Records fame of the 1970′s disco era, the Trinity Broadcasting Network’s, the David Smith (one of the Smith brothers from Sinclair Broadcast Group), the Harry Pappas as part of the Pappas Telecasting Companies, the Bernard Madoff’s, the Enron’s, the Worldcom’s, the Adelphia’s, the Tyco’s, and the Martha Stewart’s, of the 2000′s by letting greed get out of control so all of the head employees and bosses at all the internet broadband providers to be able to enjoy carefree lavishly spending to support carefree lavishly lifestyles with luxurious homes, luxurious jets, luxurious cars, join luxurious clubs, go to luxurious hotels, go to luxurious casinos to do gambling, and have other luxurious items just to make them very happy then trying and willingness to improve the quality of all the internet broadband services they owned and control and making the internet broadband customers very happy as well.

    I hope and I wish that all the internet broadband providers get scolded by both by the ACA and the FCC for making the internet broadband customers being forced to deal with usage caps because the internet broadband provider wants to be very greedy, very piggish, and very selfish permantly.

    I hope and I wish that all the internet broadband providers goes out of the internet broadband business for installing usage caps to the internet broadband customers. I feel that both all the internet broadband providers are trying to bribe like the General Tire/RKO General of the 1960′s and 1970′s by not being very honest of not only the internet broadband customers by making them deal with accepting usage caps and also on themselves.

    I hope and I wish that the FCC would force all the internet broadband providers to stop the usage caps without any interference, in the event all the internet broadband providers fails to stop the usage caps, then the FCC would allow all the internet broadband providers that has never ever impose usage caps to the internet broadband customers acquiring the ones from the providers that have impose usage caps being required to make a real big concession that they would promised not to have any difficulties with all the internet broadband providers competitors and their customers by not imposing usage caps and raising prices for them to put them out of business sooner and without any interference for 12 whole years straight.

    I feel that all the internet providers are way too big being way too busy being the Carly Rae Jepsen Call Me Maybe, Rebecca Black Friday, Double Take Hot Problems and Guns N Roses Axl Rose as well as trying be act like the Lyle and Erik Menendez’s as the greedy murderers, the Jeffrey Ireland’s, the Patrick Jones’s, and the Lindsay Lohan’s as the drunks, the Rodney Dangerfield’s, the John Belushi’s, and the Chris Farley’s as the comedians, the John Robert Ewing’s and the Cliff Barnes’s, the Charles Montgomery Burn’s, the Homer and Bart Simpson’s, the Peter Griffin’s, the Garfield cat’s, the Cookie Monster’s, the Miss Piggy’s, the Victor Newman’s of the internet broadband industry of preferring to impose usage caps to the internet broadband customers to rake in more revenue for the company and corporations themselves.

    I feel that all the internet broadband providers are trying to turn into the 1919 Chicago White Sox’s baseball team and the Southern Methodist University football of the 1980′s to force all the internet broadband customers to accept whether or not the customers will be willing to deal with internet usage caps very seriously. I urge all the internet broadband customers to boycott all the internet broadband providers including Comcast, Time Warner Cable, Cox, Charter, Suddenlink, Mediacom, AT&T, Verizon, Centurylink, Frontier, and all the others that chose to impose internet usage caps right now for making all the internet broadband customers suffer from having to deal with the mandatory usage caps being impose to their internet broadband service.

    I’m commented in response to all the internet broadband customers who are very sick of all of the internet broadband providers imposing usage caps to all the customers to make their internet experience suffer and to see it deteriorate very much rapidly in a heartbeat.

    • James Cieloha says:

      I gracefully would support all community internet broadband providers and would want all of them to be able to be allowed to provide the fastest internet speeds of up to 1GB very fairly by the communities being allowed to build their own fiber optics cable lines without interference from the big telecoms already providing internet broadband service.

      All the internet broadband providers that has engage with usage caps would be force to allow all the communites to build out their own fiber optic cable networks for their superior mega fast internet broadband service that beats out the big telecoms internet service and speeds.

  2. txpatriot says:

    It would be nice if the FCC had the power to order every cable & telco to deploy FTTH and provide basic uncapped 1 Gbps service to 100% of America, and every wireless provider to offer uncapped 1 Gbps LTE service to 100% of America, regardless of user density.

    Unfortunately, the Communications Act does not give the FCC the authority to do that. Maybe it’s time to rewrite the law.

    • The FCC does have the power to regulate broadband and begin to level the playing field the cable-telco duopoly is fashioning for itself. But Julius Genachowki has seen fit not to rankle the Republican House and has repeatedly caved in on building a foundation for sensible telecommunications oversight.

      By not defining broadband as a “telecommunications service,” the FCC has foolishly left itself completely vulnerable to the court challenges that quickly follow even the lightest regulations, with every indication the Commission will lose the case.

      The FCC is packed with smart lawyers, but even a lowly consumer like myself can see the inevitable outcome of a Commission living in denial. Perhaps that is exactly their intention.

      Opening the Telecom Act to revision is one great way to boost the economy, if you are a lobbyist. During the last revision, it was a veritable feeding frenzy of special interests, with just a handful of pro-consumer groups completely outspent and steamrolled by large telecom companies and their astroturf friends who ended up writing many of pieces of the Act for themselves.

      I have no doubt the same would happen again if given the chance. To borrow from my friends at the NRA, we don’t necessarily need new laws, we just need to enforce the ones we already have. The FCC has considerable power to effect real change to match the administration’s soaring rhetoric, if it shows enough backbone.

      Unlike the CEO’s of Verizon, Comcast and AT&T, consumers don’t have the personal home and cell phone numbers of Mr. Genachowski to start some impromptu chats about the realities of today’s telecommunications marketplace. That is the biggest reason we have a giant beltway bubble — when regulators are totally out of touch with ordinary citizens and spend their time munching on AT&T cupcakes while being groomed for their next private sector “revolving door” job by Comcast, ordinary Americans just can’t get a word in edgewise.

      Perhaps one solution Mr. Genachowski might try to solve America’s broadband problems is to stop asking the advice of those companies who created many of them in the first place.

      • txpatriot says:

        I agree that in many cases, new laws aren’t needed, just enforce the ones on the books.

        But the Communications Act, as it is today, doesn’t even give the FCC the authority to mandate universal POTS service, let alone broadband. The FCC can cajole, beg, and incent regulated carriers to deploy POTS universally, but it has no statutory authority to MANDATE such deployment.

        Thus it has even LESS authority to mandate broadband deployment. If the FCC had such authority it would have used it by now (remember the House was controlled by Democrats for the first two years of Obama’s term).

        So even if the FCC reclassifed broadband as a Title II service (which I agree the FCC has the authority to do), the FCC still can’t mandate that carriers deploy broadband universally.

        The authority simply isn’t there. That’s why the FCC treads so lightly on things like Net Neutrality, the National Broadband Plan, and redirecting POTS USF funds to broadband.

        • I don’t see the Obama Administration mandating universal broadband. They are not that bold. I think it is far more likely we will see the transformation of the Universal Service Fund into a broadband deployment fund that, over time, can continue to expand broadband into more places.

          But the new fund needs reform right from the start:

          1) It should be redesigned to allow various providers to more easily qualify for funding. Right now it is biased towards rural telcos. Rural cable and wireless ISPs should be part of the equation, and funding should also be readily available to assist rural community-owned broadband startups.

          2) To protect rural telcos who fear the loss of important support revenue under the old regime, funding that supports the transformation of rural telcos away from traditional plain old telephone service towards broadband that also supports telco service must be readily available.

          3) Incentives to help push for participation from large telcos who continue to ignore rural lines and won’t participate in funding opportunities could be addressed by one proposal I have seen that awards preference credits to early participants. Those willing to make a larger share of investment towards rural broadband and are enthusiastic about participating in the new program are given preferential treatment in future funding opportunities. That cuts the legs out of AT&T and Verizon lobbyists trying to blackmail regulators with a refusal to participate unless they get more money and get to spend it as they wish. Either get in line now or risk funding opportunities later.

          Net Neutrality and USF funding are different issues than mandating universal broadband. Even I won’t call on regulators to force carriers to develop universal broadband at this point in time, not unless and until rational financial support is available to handle the real outliers. That is where WISPs need to be part of this solution and I question if they can survive if the government is handing out money to rural telcos while refusing to assist them.

          There is no one technology that can solve everyone’s broadband needs. We need a mix.

          • txpatriot says:

            Wow Phillip I agree with 100% of what you wrote! Very logical and reasonable suggestions, and I hope the FCC (regardless of the next administration) sees the wisdom in your proposals.







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