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So-Called “Expert Network” Guy Suggests “Do-Gooders” Made Bandwidth Providers Throw Caps On Customers

Samuel Greenholtz, a retired manager from Verizon, offered this absolutely impenetrable thinking on why broadband providers needed to impose caps on customers and were forced to charge way too much for them:

While a tiered pricing structure may have been inevitable in the long run, if the corporate bashing horde stayed out of the way, the vast majority of users would have avoided paying more for additional capacity.  Time Warner Cable does give the politicians what they are looking for – more bandwidth availability for all of its subscribers.  Still, the lowest speed package is not going to be enough for most of the consumers – and so they will have to take the higher tier offerings — along with the new overage charges.  Had the MSOs been allowed to just cap excessive users, most of the subs would have continued to receive a reasonable amount of bandwidth at the same flat price.

Ironically, all of the illogic obsession with net neutrality will result in even more of a usage-based pricing scheme.  There will now be several layers of capping.  The anti-ISP crowd has actually created a more beneficial pricing system for these companies.  And there is certainly nothing unfair about this development.  But the clamoring for so-called equality resulted in an acceleration of the removal of the all-you-can-eat advantage for consumers.

What in the world is this man talking about, and why is he part of some so-called “expert network,” Gerson Lehrman Group?

Broadband Providers: How Low Can They Go?

Broadband Providers: How Low Can They Go?

The history of usage capping actually goes back into the earliest days of Internet service providers, providing both dial-up and broadband service in areas where network capacity simply didn’t allow customers to utilize unlimited bandwidth.  Some Time Warner customers in the midwest and central part of the country lived under “limits” for years, mostly due to lack of any viable competition.  The imposition of caps on customers has always been driven by the capacity argument, never by a more honest claim that lack of competition discourages significant upgrades, and allows a provider to limit usage to ensure a higher rate of return. Where competition exists offering similar types of service, caps and limits are much rarer, speeds are higher, and pricing is lower.  A provider that doesn’t regularly invest in upgrades to his network in a competitive marketplace will soon no longer be a part of that marketplace.

Today, a handful of major broadband providers are now colluding in a version of telecommunications limbo, with several watching each of the others “experiment,” to see how low a cap they can set before subscribers and public officials rebel.  Multichannel News columnist Todd Spangler literally wrote that “Time Warner is taking one for the team.”

The “corporate bashing horde” argument, which Greenholtz casually tosses out without any examples or proof, doesn’t hold water.  No group I am aware of has ever bashed the widespread deployment of broadband service from multiple providers.  Oh wait, there is one.  Those providers themselves when they attempt to squelch community cooperative broadband services or municipally-run wi-fi networks, run for the benefit of residents.

Greenholtz completely ignores the fact broadband service is almost entirely unregulated, and providers have always been free to set terms and prices.  Someone draw me a map where corporate critics have developed the leverage to force operators to impose usage caps and tiered pricing.

The net neutrality issue that comes into his argument stems from the Comcast controversy a few years ago, when the nation’s largest cable operator attempted to manage traffic on its network by “throttling,” or limiting the speed of customers using certain bandwidth intensive applications.  Comcast claimed they were primarily targeting peer-to-peer software, which allows users to exchange files with one another, during peak usage of their network.

But this came about at the same time several large corporate broadband providers were advocating for a new distribution system for the Internet, one that would potentially no longer provide an equal level of priority for data traveling across the Internet.  Opponents feared that broadband providers could discriminate or even throttle traffic that didn’t pay their asking price.  And then Comcast provided the net neutrality opponents with a real-world example of bandwidth throttling in action.

Comcast abandoned, at least for now, the bandwidth management approach that included throttling, and instead imposed a simple 250GB “limit” on residential accounts.  Those exceeding that amount of usage risked having service suspended.

Mr. Greenholtz fails to connect this event with any cogent argument or evidence that suggests multiple capped tiers were borne as a result of this controversy.  Indeed, until Time Warner “took one for the team,” other domestic broadband providers simply upgraded their networks to handle capacity issues and imposed no caps, or have simply asked residential users to limit their usage, mostly between 150-250GB per month.  Customers seeking more than that can purchase another account, move to a business plan, or switch to another provider, where available.  Curiously, the imposition and testing of lower limits has often been in areas where competitors either do not exist or cannot offer an equivalent level of service at the same price across an entire community.

But Greenholtz does say one thing that has been obvious to all of us: the Internet service provider is using this as an excuse to create a “more beneficial pricing system.”  Of course, it’s only beneficial to them, not to consumers.  The latter routinely object in overwhelming majorities to the concept of usage caps and the elimination of the existing flat rate pricing which has always been profitable for the broadband industry.  Any other connection, particularly with the absence of any evidence, is tenuous at best.

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Michael
15 years ago

I’m amazed at how such an “expert” seems to not understand the fundamental concept of bandwidth. Bandwith is the speed of the connection, not the total number of bits allowed through a connection. He uses the two so interchangeably. TWC has always had tiered bandwith “caps”. These are the RR Lite, Standard RR, and RR Turbo. This hasn’t created any problems…..we’ve been fine with that. But Mr. Greenholtz offers no explaination of why these evidently rare internet bits need to be conserved. Maybe he should try to get them on the endangered species list 🙂 The internet is not some… Read more »

Michael C
15 years ago
Reply to  Michael

Oh wait…..at least TWC and the FCC understand the difference between bandwith (speed) and bandwith over time (consumption)! It’s an interesting read….for a legal document that is 🙂 This is referring to TWC “suggestion” about how the FCC should dole out stimulus money earmarked for broadband. “Companies were required to submit broadband availability information using the revised Form 477 speed categories on March 16, 2009, and the Commission currently is reviewing that data. Based on the actual data collected with respect to each of the Commission’s specified broadband tiers, TWC submits that the Commission has before it empirical data demonstrating… Read more »

Earl Cooley III
Earl Cooley III
15 years ago

That expert’s argument is like saying that due to the complaints of human rights organizations against the practice, the Taliban is requiring that husbands beat their wives with bricks of gold after the fortieth beating in any one month rather than use the traditionally approved cudgels.

Joe
Joe
15 years ago

Something is really starting to stink here – not that the stench wasn’t bad enough already. When is the last time you knew of a large company that didn’t come out swinging within days when their business was threatened? It’s been something like two weeks now since TWC announced the expansion and not a word from any of the companies I would think would be very concerned about this cap. I.e. Google, Hulu, Netflix, etc. There was a recent thread concerning the TWC caps in Hulu’s forums and here is what a Hulu rep had to say: “While we can’t… Read more »

T.M.
T.M.
15 years ago
Reply to  Joe

Hulu, nor any other business, will comment on TWC’s business decisions. I’m sure they feel it’s not their place to pass judgment. Clearly they should be concerned. No doubt. Companies that should immediately be concerned about anti-trust issues, like Vonage for example, should be in a place to make statements about this plan. Hopefully they will soon. I wonder if Vonage customers have contacted their customer service people to express their concerns about this?

Michael C
15 years ago
Reply to  Joe

Another thing to keep in mind is that, other than a few limited trails in Beaumont and Reno, there hasn’t been a large enough expansion yet to really eat into their bottom lines. Most of this outpouring of outrage has been over something that hasn’t actually happened yet. These companies will only be able to take legal action once TWC, et. al. have made a definitive move into substantial markets with this pricing model. They have to show more than an “experimental” intent

Joe
Joe
15 years ago

Good point Michael!

Matthew
Matthew
15 years ago

Ok if you want to compare high speed to a utility then they should make it like a utility. Give me a 1Gbps connection, and meter my usage from there. See with the electric company we can turn on every light in the house. We can turn on every facet with water companies. So if you want to compare yourself with a utility then you better provide the same kind of service as a utility. They already have caps in place. The speed of the connection is a cap. This is just adding one cap to another cap.

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