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Local Governments and Internet Access Debate - Community Broadband Bits Episode 185
New Report on Bandwidth Caps From Open Technology Institute
The Open Technology Institute (OTI) at the New America Foundation recently released its report on bandwidth caps. "Artificial Scarcity: How Data Caps Harm Consumers and Innovation" is the latest warning about an issue with grave implications. The PDF is now available to download.
Last November, the Government Accounting Office (GAO) released a report [PDF] with serious comments on how ISPs might abuse their power through bandwidth caps. In that report, the GAO strongly suggested the FCC take action.
This report by Danielle Kehl and Patrick Lucey further examines how this profit grabbing technique from the big ISPs impacts consumer decisions and usage.
From the OTI press release:
In this paper, we examine the growth and impact of usage-based pricing and data caps on wired and mobile broadband services in the United States. We analyze the financial incentive that Internet service providers (ISPs) have to implement these usage limits and discuss research that demonstrates how these policies affect consumer behavior. In particular, we explain how data caps can make it harder for consumers to make informed choices; decrease the adoption and use of existing and new online services; and undermine online security.
It is also increasingly clear that data caps have a disproportionate impact on low-income and minority populations as well as groups like telecommuters and students. In the conclusion, we urge the Federal Communications Commission (FCC), particularly as the new Open Internet Order goes into effect, to open up a serious inquiry into whether data caps are an acceptable business practice.
In addition to their own data and conclusions, Kehl and Lucey provide information to many other resources that tackle the implications of bandwidth caps. As consumers' need for bandwidth increases with their changing Internet habits, this topic will only become more pressing.
GAO Report Warns of Potential for ISPs to Abuse Data Caps
Last month, the U.S. Government Accountability Office (GAO) released a report warning of the possibility and potential consequences of ISPs instituting data caps in their fixed line plans. In effect, this could mean applying something like the tiered service charges based on usage levels that we see in the mobile sector to broadband connections in the home or office. But whereas the vast majority of Americans have a reasonable range of choice between several major and minor carriers for mobile service, the GAO notes that the same is not true in the market for broadband, which could lead to ISPs using data caps (or usage-based pricing (UBP) in their parlance) in various harmful ways:
...providers facing limited competition could use UBP [usage-based pricing] to increase profits, potentially resulting in negative effects, including increased prices, reductions in content accessed, and increased threats to network security.
The GAO has provided the FCC with a copy of its report, and urged that the agency take action on the issue, including systematically tracking information on how many consumers are impacted by fixed providers instituting data caps and developing a voluntary code of conduct for the industry. According to Ars Technica, the FCC has taken a skeptical stance on the issue, despite Chairman Tom Wheeler’s outspoken concerns on the lack of competition in the fixed broadband market. Pointing to the small number of consumer complaints on the issue so far, the FCC asserted that “it is unclear that any action is needed at this time.”
Usage caps do not just affect sophisticated users with bandwidth-intensive jobs or hobbies that require them to transfer large design files or generate and share multimedia content. This has the potential to affect kids and adults doing homework or taking classes online, people who hope to cut the cord from traditional television providers, and telecommuters. From the GAO study:
Paid Prioritization Threat Reinforces Value of Community Networks
Danger of "Sponsored Data" via AT&T, Others
Entrepreneur: I plan to launch a better streaming music service.
Lack of Competition Creates Capped Connections
This post comes to us from Patrick Lucey of the Open Technology Institute at the New America Foundation. The post was originally published there, but we are excited to feature it here as well.
Bandwidth Caps are Unnecessary and Counterproductive
The Open Technology Institute at the New America Foundation has released a report on data caps in the U.S. The report, Capping the Nation's Broadband Future, was authored by Hibah Hussain, Danielle Kehl, Benjamin Lennett, and Patrick Lucey.
The paper looks at the growing prevalence of monthly data caps by massive ISPs like Time Warner Cable, AT&T, and others. Authors conclude that data caps are effectively discouraging Internet usage with restrictions and limits that can be expensive. From the summary:
As this paper documents, data caps, especially on wireline networks, are hardly a necessity. Rather, they are motivated by a desire to further increase revenues from existing subscribers and protect legacy services such as cable television from competing Internet services. Although traffic on U.S. broadband networks is increasing at a steady rate, the costs to provide broadband service are also declining, including the cost of Internet connectivity or IP transit as well as equipment and other operational costs. The result is that broadband is an incredibly profitable business, particularly for cable ISPs. Tiered pricing and data caps have also become a cash cow for the two largest mobile providers, Verizon and AT&T, who already were making impressive margins on their mobile data service before abandoning unlimited plans.
The increasing prevalence of data caps both on the nation’s wireline and mobile networks underscore a critical need for policymakers to implement reforms to promote competition in the broadband marketplace. Data caps may offer an effective means for incumbents to generate more revenue from subscribers and satisfy investors, but making bandwidth an unnecessarily scarce commodity is bad for consumers and innovation. The future is not just about streaming movies or TV shows but also access to online education or telehealth services that are just starting to take off. Capping their future may mean capping the nation’s future as well.
AT&T, Others Overcharge Subscribers Based on Secret Bandwidth Meters
Imagine going to a gas station, putting 10 gallons into your car's 12 gallon tank, and driving off only to find your needle only approaches half a tank? This scenario is quite rare because government inspects gas stations to ensure they are not lying about how much gasoline they dispense.
But when it comes to the Internet, we have found measurements of how much data one uses is unregulated, providing no check on massive companies like AT&T and Time Warner Cable. And we are seeing the results -- AT&T is not open about what its limits are or how to tell when one has exceeded them.
Stop The Cap has noted that AT&T has advertised unlimited bandwidth for its DSL/ U-verse product while chiding and charging customers who exceeded certain amounts of monthly usage. Customers were quietly warned and charged $10 for each additional 50 GB over 150 GB for DSL subscribers or 250 GB for U-verse customers. Clearly, "unlimited" has several definitions, depending on whether one is a customer or an ISP.
Complaints have also come in from SuddenLink customers and others. The ISP charged usage based customers for bandwidth usage when they didn't even have power. Simlarly, AT&T customers began to complain about inaccurate meters from the beginning of the program. This from a 2011 DSL Reports story - one of many comments from AT&T customers:
AT&T's data appears to be wholely corrupted. Some days, AT&T will under-report my data usage by as much as 91%. (They said I used 92 meg, my firewall says I used 1.1 Gigs.) Some days, AT&T will over-report my data usage by as much as 4700%. (They said I used 3.8 Gig, dd-wrt says I used 80 meg. And no, this day wasn't anywhere near the day they under-reported.)
Usage Based Billing - Time Warner Cable Latest Attempt to Increase Prices
Time Warner Cable's announced intention to expand its usage based billing for broadband has recently received a little media attention. The company currently uses tiers for customers in parts of Texas, allowing customers to sign on to a plan which limits the amount of usage per month. If they come in under the plan amount (currently 5 gigabytes), they get a $5 dscount. If they go over, they are charged $1 per gigabyte over the tier limit.
One commentary we find particularly insightful is from Susan Crawford, "The Sledgehammer of usage-based billing." Crawford not only addresses TWC's billing change, but critiques New York Times' "Sweeping Effects as Bradband Moves To Meters" by Brian Stelter.
Crawford points out several statements in Stelter's article that sound rational on paper, but are actually "holes" in the fabric of reality. Based on what we have seen from companies like Time Warner Cable, we concur.
Stelter justifies Time Warner's decision to shift to usage-based billing based on the fact that its competitors are doing it. Crawford points out that:
Time Warner does not have competitors among cable companies – if by competition you mean a cable distributor that could constrain Time Warner’s pricing or ability to manage its pipe for its own purposes. Time Warner’s DOCSIS 3.0 services do compete with Verizon’s FiOS, but FiOS is available in just a tiny part of Time Warner’s footprint. The major cable distributors long ago divided up the country among themselves.
The Stelter article raises the issue of high usage and congestion, their connections to the usage tier billing model, and claims that there is no other way to handle high usage. Crawford calls out this error as it relates to the new billing plan:
Cable distributors have a choice: They could maintain the 90+ % margins they enjoy for data services and the astonishing levels of dividends and buybacks their stock produces, or they could rearchitect their networks to serve obvious consumer demand. But they are in harvesting mode, not expansion mode. And no competitor is pressuring them to expand.
Roundtable Discussion on Bandwidth Caps and Broadband Networks
On Friday, July 13, I was a guest on TWiT Specials on the This Week in Tech Network, discussing bandwidth caps with Dane Jasper, Reid Fishler, and Benoit Felten. Hosted by Tom Merritt. It was a very good discussion over the course of one hour.
The video can be viewed here.