Talking Points

One of the grand mysteries of the entire “broadband can no longer be unlimited” argument is the incredible range of usage caps cable operators and telephone companies suggest are required to keep them from going the way of the U.S. auto industry.  Broadband providers doing capping will swear that their cap model is the only one that is “fair” and “protects consumers” and “allows us to make required upgrades.”  Once those arguments are recited in a unified chorus, corporate spokesfolks zig zag their way all over the place explaining why their 5/40/150/250GB cap is fairest of them all, while trying to ignore those providers who are quite happy and profitable with no cap at all.  The customer is the last person they ask, because they know the answer from most will be, “no cap at all.”

This bring several questions to the table:

• Can you provide us with the raw data that illustrates there is a major problem with the current unlimited broadband model and that it cannot sustain profitability except with usage caps?
• Can we obtain independent analysis of that data by a third party and/or put together a conference of business, public, and educational groups to consider new possibilities to deal with what is rapidly becoming a utility-type service?

The answers to those questions have been, by all major industry players, an emphatic “no.”  You are required to take their word there is a problem and their solution is the only one that works.  And, for that matter, take their word they have an infallible way to measure and bill for usage under a consumption based model.  You can independently verify your usage all you want, as long as you pay the bill they send you with their own usage measurement.

It’s not that we’ve been the only ones asking.  Broadband Reports has the same questions we do, and asked for the hard data to prove that flat-rate pricing is simply untenable going forward.  And here was their response:

“We’ve shared our analysis of our data. We’re not going to share raw data…just not going to happen.”

Okay then, I guess that settles that!

That provokes us to first ponder whether there actually -is- a crisis in the flat rate broadband industry at all?  A press release or a claim by a company official isn’t evidence of anything.

Assuming we will never get a satisfactory answer to that question, how about these:

• Why can a company like Time Warner be unable to survive with flat rate pricing in Rochester, Austin, San Antonio, and Beaumont, but can deliver faster speeds with no cap in cities where they face strong competition from uncapped providers?
• If the company was interested in an honest assessment of marketplace reaction to usage caps, why not test in communities with the most robust and challenging competition?
• Why should customers not be deeply offended for being involuntarily turned into guinea pigs and be expected to pay more for a dramatically reduced level of service?
• Why is the nation’s largest cable operator Comcast able to deliver service with a 250GB limit at their current pricing, Verizon FIOS is able to deliver a product line twice as fast as Time Warner with no usage cap at all, and the nation’s second largest cable operator Time Warner needs consumers choosing a meager 20GB tier to not only pay $10/month more than their current unlimited service, but also pay a penalty of $1 for every extra GB?

That old axiom about pricing what the market will bear comes to mind, particularly considering the fact Time Warner is only interested in “gathering facts” from cities where the competition is limited.

The fact the Internet of the last few years is becoming an increasing threat to the video side of the cable industry may also have something to do with it.  That will be the subject of an upcoming Talking Point.

Usage Caps on Selected Broadband Service Providers

Charter Cable – Cap starts at 150GB for “light user” plan, removed entirely for deluxe plan (60Mbps service) – Violators are asked to select higher tier service or face account suspension – No meter yet

Comcast Corporation – Residential accounts limited to 250GB usage per month – Violators face account suspension – Tracking meter provided

Time Warner Cable – Residential accounts limited to 5-40GB currently, Violators face $1 per GB overage fee – Tracking meter to be provided

Verizon FIOS – Residential accounts are unlimited.  No violation, no tracking meter required

The New York Times (hat tip: Shawn808) just exposed the argument from cable companies like Time Warner, who argue for punitive rate hikes and Internet rationing plans, as little more than a naked profit grab in an insufficiently competitive marketplace.

Competition, or the lack of it, goes a long way to explaining why the fees are higher in the United States. There is less competition in the United States than in many other countries. Broadband already has the highest profit margins of any product cable companies offer. Like any profit-maximizing business would do, they set prices in relation to other providers and market demand rather than based on costs.

Pretty much the fastest consumer broadband in the world is the 160-megabit-per-second service offered by J:Com, the largest cable company in Japan. Here’s how much the company had to invest to upgrade its network to provide that speed: $20 per home passed.

The cable modem needed for that speed costs about $60, compared with about $30 for the current generation.

Meanwhile, Time Warner made dubious claims that it required a punitive rationing plan and rate hike to increase profits to “invest in technology to keep up with demand.”  Other cable operators are deploying DOCSIS 3.0, an upgrade to the current cable broadband delivery platform, as a normal cost of doing business.  The upgrade actually benefits cable operators in meeting demand and reducing neighborhood congestion, by “bonding” multiple channels of data together to “fatten the pipeline.”  Time Warner has dragged its feet on doing this upgrade, according to the Times.

Most systems can be upgraded for no more than about $100 per home, including a new modem. Moreover, the monthly cost of bandwidth to connect a home to the Internet is minimal, executives say.

Yet Time Warner’s rationing plan, announced last week, would dramatically increase the price of Road Runner service, in some cases by hundreds of dollars per month, well above the costs the company claims it must pay to upgrade its network.  Even more moderate users will be paying far above the amortized cost of the network upgrade, month after month, indefinitely.  Some other operators are not imposing Time Warner’s ludicrously low usage caps and demanding more money for them.  They just charge considerably more for faster service.

So what’s wrong with this picture in the United States? The cable companies, like Comcast and Cablevision, that are moving quickly to install the fast broadband technology, called Docsis 3, are charging as much as $140 a month for 50 Mbps service.

Let’s compare and contrast what is entirely profitable in Japan vs. what Time Warner whines they need to just eke by:

Liberty Global – 160Mbps unlimited access – $60 per month¹

NTT Communications – 100Mbps unlimited download/930GB upload cap per month + free phone line – $42 per month²

Time Warner – 10Mbps 40GB usage cap – $55 per month ($1 each additional gigabyte)³

¹New York Times April 3, 2009   ²Broadband Reports June 25, 2008  ³Rochester Democrat & Chronicle April 3, 2009

So why does Time Warner really need to ration your Internet service and punitively limit your use of the net? Michael T. Fries, the chief executive of Liberty Global is candid:

Fear. Other cable operators, he said, are concerned that not only will prices fall, but that the super-fast service will encourage customers to watch video on the Web and drop their cable service.

The industry is worried that by offering 100 Mbps, they are opening Pandora’s box, he said. Everyone will be able to get video on the Internet, and then competition will bring the price for the broadband down from $80 to $60 to $40.

Aren’t you worried that the prices will fall too? I asked.

“Maybe,” he said very slowly. “We’ll see how it happens. We want to keep it up there for now. It is a premium service.”

One of the major problems in waging a battle with large corporations is being able to protect yourself from potential legal harassment and bothersome lawyers that want you to go away and stop organizing and fighting the fight.

With some behind the scenes arrangements to better handle potential “difficulties,” we’re now back in business. And at just the right time, as we learn Time-Warner has decided to dump unjustified bandwidth usage caps on four more American cities, including my own hometown of Rochester, N.Y. Nothing gets you more energized that confronting a ridiculous cap on a service you use to bang out these articles on this website.

I appreciate the continued loyalty of readers and commenters who are still coming back to look for new things. It has been too long, but now we’re back in it again.

Comcast Implements 250GB Usage Cap Effective October 1, 2008.

Comcast CEO Brian Roberts likes his new high-tech toys, even if using them on his own cable system is now pointless.   At the January Consumer Electronics Show, Roberts demonstrated the next generation of broadband Comcast is poised to begin rolling out to consumers in the next several months.

Dubbed “wideband,” Roberts downloaded a High Definition copy of Batman Begins in less than four minutes.   Comcast’s DOCSIS 3.0 upgrade, which bonds multiple channels together to deliver broadband speeds up to  160 Megabits per second, will be able to bring Comcast customers the latest high bandwidth applications, particularly including very high quality video, in just a matter of minutes.

Designed to compete with Verizon’s FIOS fiber to the home network, Comcast’s “wideband” service will create a new paradigm for high quality video services entering the home.

Except for one thing.

A 250GB monthly usage cap.

Using Comcast’s wideband service, customers downloading movies could easily exceed the 250GB cap in less than five hours.

Even the cable industry’s trade publications like Multichannel News are now posing questions about how exactly Comcast can promote customers upgrading to wideband service when a cap of 250GB stops the fun in a matter of hours.   What MN didn’t add to the equation is the fact Verizon FIOS does not have a usage cap and has no current plans to implement one.

So exactly why would any consumer choose Comcast wideband, with a usage cap over Verizon FIOS, which leaves you alone and doesn’t threaten to terminate your service if you use more than the cable company deems appropriate?

Another issue MN touched on, but didn’t bother extending to the real issue – stifling competition:

Imagine if all your TV were delivered via the Internet. High-quality  1080i HD video at (conservatively) an average of  5 Mbps would chew up plenty of bandwidth: roughly 286 Gigabytes in a 30-day period, given that Americans watch an average of 127 hours and 15 minutes of TV per month, according to Nielsen.  Cap busted!

Imagine indeed.   Imagine virtual “cable companies” delivering cable networks and broadcast TV over the Internet.   Pay your monthly bill for data from the cable company, but watch your video programming from another provider.   A 250GB cap puts an end to that business plan quite nicely, thank you.

Comcast CEO Demonstrates Wideband At Cable Show In May

By the way, a quick note to Frontier, which still thinks 5GB a month is just plenty. Pay attention to the file sizes in this video and then get back to us about why you think your customers will never come close to using 5GB a month in the coming year or two.

BREAKING NEWS: Frontier Communications has modified their position on the 5GB usage cap yet again.   Your pushback on this unjustified 5GB monthly usage cap has continued to make a real difference in getting company officials to listen to reason.

Frontier’s website has been changed again, now deleting the portions of their DSL sales pitch which used to reference “5GB” of included access per month.   Additional changes have been made to their terms and conditions pages.   Still present in Frontier’s Residential Acceptable Use Policy is the language which defines their usage cap at 5GB per month, although they don’t formally call it that.   Instead, they consider 5GB to be a “reasonable” amount of usage, and reserve the right to terminate accounts that exceed it.   However, some other language has been introduced as Frontier backs off from implementing their cap formally:

The Company has made no decision about potential charges for monthly usage in excess of 5GB.

Company officials have repeatedly said they will not penalize customers who exceed the 5GB “reasonable” level they define in their Acceptable Use Policy, which is to be commended.   But as Frontier Communications has been continually modifying their position on the cap issue in general, both in comments to reporters and on their website, customers have no guarantees what they insist today won’t be much different tomorrow.

StopTheCap! calls on Frontier to do the right thing and remove this entire “5GB” section of their Residential Acceptable Use Policy altogether.   It is this language upon which the entire 5GB usage cap debacle was built, and Frontier can show its good faith by eliminating it from their website  if they truly want to put customers at ease.

We have also learned that Frontier has taken another piece of our advice: to launch a campaign to better educate and inform their customers about how bandwidth is utilized, and ways they can reduce their usage voluntarily.

StopTheCap! strongly believes that consumers are willing to review what they are doing with their Internet connections and will reduce usage voluntarily if they understood how certain applications can consume bandwidth even if they don’t seem to be running.   And it’s a win-win for customers who wonder why their Internet connection seems so slow without realizing someone in the house is running a torrent server 24/7, or has a computer infected with a virus that is churning out millions of spam e-mails without the owner even realizing it.

Treating your customers right means allowing them to  take advantage of the myriad of new applications and features a broadband experience can provide, without a draconian limit on that usage.   And customers have a responsibility to better understand what they are running on their computers.

There are several additional developments about Frontier’s 5GB usage cap, and we’ll be publishing a roundup of the latest news, including your comments and what company representatives have been telling you, shortly.

This remains a developing story.