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Phillip Dampier
In response to one of our pieces today about AT&T, I replied to a reader’s question about why providers are not subject to oversight when it comes to their traffic meters. The answer is, providers want all of the benefits their monopoly/duopoly status deliver, with none of the oversight and regulation that is supposed to come along with the deal.
When I am asked by reporters if our group would support the concept of usage-based billing if prices were lower, I know some education is in order before answering.
Frankly, what providers define as “usage-based billing” isn’t really usage-based at all. It’s simply a double-tiered pricing scheme. Consumers already pay for broadband service based on speed, which informally includes a usage limit of sorts — your maximum amount of consumption is governed by the speed of the connection you purchase. Not satisfied with the enormous profits already earned selling broadband that way, some companies want to monetize Internet use by inserting usage limits or inserting a new tier of service based on usage allowances, which generally increase with higher-priced levels of service.
When broadband providers attempt to use the argument consumers already pay for usage of essential services like water, gas, and electricity, they are trying to conflate broadband traffic much the same way. But apart from the fact broadband carries no generation costs and represents a limitless resource, the “fairness” argument falls apart when you consider the provider is effectively double-charging customers by implementing a use-based pricing scheme on top of a speed-based pricing model.
The equivalent would be charging you today’s prices for gas, electric, or water service, but then adding a surcharge or tax based on how fast or when you are using the service. Here’s the kicker: they are not lowering the price of their speed-based tiers, they are simply layering a use tax on top. In short, it extra-bills customers for what they already paid for.
A true usage-based billing scheme would carry a monthly minimum charge for infrastructure costs (maintenance of the delivery system, meter measurements, etc.) and a traffic cost. In a regulated utility environment, most providers are required to sell service at a price verified by regulators to cover costs and a small profit. No gouging. No provider dares sell service under these terms because it would dramatically slash the cost most consumers pay for the service. Instead, they sell “usage tiers” that include arbitrary “allowances” that provide no rollover or discount for unused traffic.
Imagine what would happen if AT&T or Comcast sold broadband like electricity?
CartelCountry Broadband & TV
From coast to coast, we put the cartel in cable!
- Monthly Minimum Charge: $9.95
- Broadband traffic delivery $0.05/GB
- Amount consumed 20GB = $1.00
- Payment Due: $10.95
Thank you for your prior payment of $9.95. We hope you enjoyed your vacation. No broadband traffic consumed equals no broadband traffic charges.
That is why there is no such thing as true usage-based billing. Providers wouldn’t dare because they would lose the enormous income they earn from those “98 percent” of “light users” they keep suggesting are in the majority.
Even “heavy users” probably would not object to this kind of pricing. A 500GB per month user would pay $34.95 at these prices, and providers would STILL be making a profit.
Oh, wow. That example at the end is amazing. How awesome would that be if we did have the internet provided like utilites? I don’t really know how much bandwidth I use, but at even 500GB, it would STILL be less than what I would be paying now if my complex didn’t have free internet installed recently.
Yea but good luck cause your bandwidth would prob be the equivalent of dial up.
You don’t know that for certain. There may still be different speed tiers. Maybe instead of $.05 per GB, you could pay $.20 to get higher speeds.
Why should someone pay a higher price to move the exact same amount of traffic? That is where you get into providers trying to monetize everything and often charging twice.
If they want to charge today’s speed-based tiers, that’s fine with me and what I actually personally prefer.
If they want to charge a REASONABLE charge for traffic and give everyone the highest speed tier available, that could be workable too.
BUT NOT BOTH.
No, I think you misunderstand what I was saying. In your example, you said that it would be $.05 per GB. If we agree with Mike A. when he says it would likely be “dial up speeds”, I was saying that they could easily institute different speed tiers, so that you would maybe pay $.20/GB for more like a 10MB/sec speed.
That’s what you advocate, isn’t it? Paying more for faster speeds, not paying more for more data allotment?
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