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.

The paper also looks at the technical challenges of capping data usage. Additionally, the authors delve into the many ways data caps are turned into profit for a few big providers while harming users. This resource brings relevent data into focus along side long term policy implications and offers some advice:

Data Cap Myth

For the Internet to continue to serve as a catalyst for economic growth it is imperative that consumers and entrepreneurs not feel constrained online. In a recent speech, former FCC Executive Director and Chief of Staff Blair Levin highlighted the links between broadband abundance, innovation, and economic growth.

"When it comes to the wireline access network, instead of talking about upgrades, we are talking about caps and tiers. Instead of talking about investment for growth, we are talking about harvesting for dividends,” …  “[policymakers] should recognize that our progress demands an investment environment that creates the conditions that allows us to invent the future, not just harvest from the past."

An uncapped Internet environment gave rise to a host of innovative and popular applications. Broadband and bandwidth must continue to be thought of as an abundant resource, not a rationed commodity, to ensure the vibrant online ecosystem can continue to flourish.

Shortly after this report was published, the lead lobbyists for cable interests in Washington, DC, admitted that the bandwidth caps are not designed to solve any congestion problems, which Karl Bode covered with his usual smart analysis.

Except the argument that usaged pricing is about fairness has been just as repeatedly debunked. If usage caps were about "fairness," carriers would offer the nation's grandmothers a $5-$15 a month tier that accurately reflected her twice weekly, several megabyte browsing of the Weather Channel website. Instead, what we most often see are low caps and high overages layered on top of already high existing flat rate pricing, raising rates for all users.

Any argument that caps for wireline service are necessary is refuted by the fact that the fastest networks in the US, whether publicly owned, Google, or even Verizon's FiOS, see no need to cap monthly transfer amounts.

The big cable monopolists don't care about fairness, they care about boosting profits while investing as little as possible. Unfortunately, their overcharging lack of investment is harming every other industry in our country.