Why Metered Broadband Slows Internet Innovation
from the how-to-slow-internet-innovation dept
It's been a while since there's been much debate over the issue of metered vs. flat-rate internet access plans, but it's flaring up for a variety of reasons these days. First, Adam Thierer posted a long essay over at the Technology Liberation Front arguing that piggybacking on WiFi has real costs and that metered broadband would solve many of the problems by convincing access point owners to secure their broadband. This seemed like an odd argument -- adding a significant cost as a method of signaling that there was, in a few very specific circumstances, a tiny little marginal cost associated with some WiFi piggybacking. The second thing thing that's given new life to the metered broadband argument is the sudden reappearance of stories about Comcast's unpublished usage caps. This is an old, old story that's been talked about for many years, but pops up every now and again. Basically, Comcast (and some other ISPs) will cut off certain customers who are using too much bandwidth. The real problem, honestly, isn't that Comcast is cutting off these users, but that they're not at all transparent about it. The services are promoted as "unlimited" and then the usage caps are kept a secret... until you've been kicked off.Anyway, with the latest barrage of stories about these usage caps, it's common for those supporting ISPs to blame the concept of flat-rate pricing, because it only opens up an opportunity for people to abuse the system. That, inevitably, leads to a discussion about bringing back metered broadband offerings (which are found around the world, but rarely in the US). This is a bad idea for a variety of reasons. First of all, most of these problems would go away if the ISPs in question were more open about their caps. However, much more importantly, if you want to encourage innovation online, it's important to leave flat-rate pricing in place. The second you set up metered broadband, it adds significant transaction costs for both the ISPs and anyone trying to do anything or try anything online. For ISPs, they now have to put in place significantly more tracking equipment and then need to manage the various different levels of service, differential billing and more customer service costs in dealing with customer confusion (or anger if a bill seems too high).
However, the bigger problem is the transaction costs it introduces for users. Suddenly, internet surfers really need to see any particular website or service as being worthwhile. Just the act of making them debate whether or not it's worthwhile to pay up to do something represents a mental transaction cost that will slow down adoption of new services. Furthermore, as bandwidth has increased, many of the newer innovative services have come about to make use of that bandwidth -- which only drives further investment in more bandwidth, driving more innovative uses. It's a virtuous circle. Yet, by metering broadband connections, slowing down adoption of these new services, you slow down the innovation and hold people back from trying out or even creating new, innovative and useful services that would require more bandwidth. It's a recipe for slowing innovation online.
While an executive for the CTIA says that flat-rate pricing only made sense when the internet was first getting off the ground, that represents a false belief that innovation on the internet has slowed down and the internet is now somehow "mature." Instead, internet innovation has been increasing as new apps and services are built on top of older apps and services, leading to greater and greater innovation. If the CTIA exec gets his way and convinces providers to move more to metered bandwidth, then his belief that the internet has plateaued may become a self-fulfilling prophecy, as it'll undoubtedly slow the pace of innovation online. Imagine, for example, that metered bandwidth was common when YouTube first hit the scene? It would absolutely have slowed adoption, because video uses quite a bit of bandwidth and people would have been a lot less likely to test it out. In fact, the same could be said for any kind of non-text multimedia. Podcasts? Why waste that bandwidth? Streaming radio? iTunes would also be more expensive, as every download doesn't just cost $0.99, but your metered bandwidth charge. If you look at history of innovative services, you'll see they tend to move more and more towards flat rate offerings, as it encourages usage and encourages innovation. Phone service and mobile phone service have both trended in exactly this direction -- and in both cases it's because it's opened up a much larger overall market, even if it means less per customer. So, why are we suddenly trying to go the other way with broadband?
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Filed Under: flat rates, metered broadband, piggybacking, usage caps
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metered access
So the majority of customers get a flat rate and the ones that need high amounts of data transfer are not a problem.
It does not cost the ISP significantly more to do this - the routers provide the raw data. I track my usage on my system with one line of PERL code.
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Re: metered access
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and by the way
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way off on metered broadband
If they say "we give you fast internet, but you can only use it for 20GB a month" well, good luck with that. As the internet grows, and speed increases, that 20GB is going to seem paltry. Sure, 5 years ago 5GB in a month would be unimaginable but if files get bigger (even office files and such do get bigger, don't think modifications to programs always decrease the size - even optimization can increase filesize), then your bandwith needs are going to get bigger.
Instead, setting a metered cap is like saying "Well, you might use the internet more and more each year, but we'll pin you to a set value"
I spit on that concept. That concept is a spit in the face of everyone ho uses the internet.
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Re: way off on metered broadband
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RIAA & MPAA read this!!
As to the web apps not taking off or stifling innovation on the net, it only applies to those applications leveraging video and audio.
Flip side of the innovation argument is that it would remove a helluva lot of crud from the web!!
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Hang on a minute
Your underlying premise is that innovation necessarily eats bandwidth. Could you please support that? Why wouldn't metered bandwidth spur new innovation in compression technologies? Why wouldn't a changing marketplace where sites suddenly have to strongly justify the time spent on them result in new ways to reach out to audiences? Can you provide any evidence to show that metered bandwidth has made the countries where it's common less innovative?
Also, the conservation argument: Imagine what it would be like if everyone had, say, unmetered water or electricity. (Yes, it's not a perfect parallel, but you know what I'm trying to get at here.)
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sure, example present!
Is that innovation? yes. Article link? here:
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/28/AR2007082801990_pf.html
Is this something we could have done with less bandwidth? Absolutely not. Try that on a 56K modem and it'll take you quite some time. Try that on 800baud and it'll take you months.
Also yes, do you think HDTV over the internet (which is an innovation, albeit a small one) is not only groundbreaking indicative of high resolution possibilities on the internet, but also eats bandwidth?
Yeah, so logic > stupidity, although we know which has it's limit.
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Re: sure, example present!
I find it amazing that most are willing to pay for the electricity they use, the water they use and the gas they use, which are metered, yet don't want to pay for the bandwidth they use, which costs money to provide in addition to the costs of providing you access to the Internet?
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Re: Re: sure, example present!
If metered broadband became the standard once again, I would demand compensation for the broadband eaten up by Windows updates, software patches, virus protection, etc. (I use Ubuntu, but my wife is still a Windows user.) So many services today depend on a freely usable Internet connection. Going back to metered usage would destroy everything.
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Of course, this is still insane. You could simply publish the 1% figure and provide a way to see your percentile over the course of the month, or least warn people before the end of the month they are in danger. And that's assuming the 1% cutoff is a good idea at all, which is asking a lot. I understand the idea to have some kind of downward pressure on users to help keeps costs down, but their policy as it stands will only piss people off.
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Eventually
I have a friend who is a manager for a large US corporation. Every three months he is required to fire the lowest performing 10% of his subordinates on each team based on competitive evaluations. After a few rounds he has found himself in the position of firing very some competent people just to meet corporate churn goals. Sadly, he knows that someday his boss will probably have to do the same to him as well. That's how these games of attrition go.
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pay for premium
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Of course, it wouldn't bode well for advertisers, with charges on bandwidth, I surely won't click on an ad and I'll be very sure to install the toughest pop-up blocker I can find, to help reduce garbage using up bandwidth.
Oh but wait - my ISP doesn't suck that bad. That's why I continue to use them!!
Sure - go ahead and charge for use - that's what made compuserve so very popular and AOL so un-popular, right?
Such short memory some people have.
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Re:
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OK, this is going to be a fun one
Second, I have 20-24M down and 1.5M up on my comcast and I use it. Between Youtube, Xbox Live, and however many hundreds of other legal things I use, I'm probably downloading a few dozen Gig a month and never got cut off. And that's just the stuff I can count. God only knows how much information is crossing for an online game.
Third, If they started metered usage, most companies will pretend that it saves money where in reality they made sure that the average usage will pay as much if not more than what the current prices are.
Forth, aren't Google and Microsoft coming out with completely online office suits? I can imagine that will take up a lot of bandwidth.
Fifth, Metered Internet was around when the Internet was new. Any one remember dialing in to download your E-Mail, disconnecting, writing the replies, and then reconnecting to send them? Unlimited is just simply the next step. look at home phones and now cell phones.
Sixth, I would bet that the **AA would want a cut of the bill to cover possible illegal downloading. Remember the media tax?
Damn, I could go on forever, and I probably will depending on future comments.
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Re: OK, this is going to be a fun one
When I start downloading something from say Microsoft, Say SP2 for Windows XP, Comcast is just providing the connection. Their servers are doing nothing. The only way they are doing anything is if they're monitoring what I'm doing or how much I'm using. Once that connection to Microsoft's download servers is made, that's it. Microsoft is paying for the servers, I'm paying for the PC, we are the only ones that will see any increased degradation of hardware. Any one who has advanced knowledge of networking would know that. I'd assume comcast douse.
So would someone please explain to me why this is even debated, and why downloading something is costing comcast money. If you use more water, the water company has to work harder to produce more clean water. You use more electricity, the electric company has to work harder to produce the electricity. You download more information... There is no added work that needs to be done, at least on the ISP side.
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Re: Re: OK, this is going to be a fun one
"When I start downloading something from say Microsoft, Say SP2 for Windows XP, Comcast is just providing the connection. Their servers are doing nothing. ... So would someone please explain to me why this is even debated, and why downloading something is costing comcast money."
So, if Comcast just switched off all their equipment right then and there, you'd be able to download your SP2 fine, 'cause all that stuff is doing nothing, right?
"You download more information... There is no added work that needs to be done, at least on the ISP side."
More packets have to be switched, more electrons or photons have to be sent to you, more CPU usage, more cooling needed. Basically, data movement costs energy, and energy is darned expensive these days.
And higher and higher network usage degrades everyone's experience unless your ISP keeps adding or upgrading equipment.
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Re: Re: Re: OK, this is going to be a fun one
Not saying that, I'm saying that if they shut down all their equipment except the gateway I'm using it will still work. The Internet is based off of IP address, not names. Every time you type in www.techdirt.com your computer goes out to your ISP's DNS servers and asks for an IP address. once that IP address is obtained, it is stored on your computer for future use. all transactions to www.techdirt.com no longer pass threw the DNS servers. you are only using the nodes between the servers. Comcast only owns one or two. Working with networks for years, running a hub at 1% of its capability or 100% is only a negligible difference.
"More packets have to be switched, more electrons or photons have to be sent to you, more CPU usage, more cooling needed. Basically, data movement costs energy, and energy is darned expensive these days."
First, Photons, someone has been watching too much star trek
second, the CPU usage and electric usage is also negligible. The major difference is on the sending server that has to read the data off of the hard drive and the receiving computer that has to wright it. Both are probably not being payed for by the ISP. The cost there is also negligible.
"And higher and higher network usage degrades everyone's experience unless your ISP keeps adding or upgrading equipment."
Go tell that to Japan that offers their users 80M down. This would fall under the monopoly thing that techdirt has covered in so many previous articles.
I have a small network at home. Web server, media server, security camera server, gaming PC, mobile PC. I know about CPU usage, heat usage, and power consumption. I also know that all together with my LCD TV, Gaming consoles, Regular light bulbs, I use less electricity than my air conditioner alone. Streaming media or copying (Approx 5-20M/s) or not. And in this argument that's all that matters, the difference between transferring and not.
I got a great example. Vonage, Their servers do much more than an ISP's. They offer unlimited local and long distance for $24.95 a month. So no matter how much you talk you don't pay more. I believe that they would have taken into account the data transferring if that was such a big problem.
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Re: Re: Re: Re: OK, this is going to be a fun one
"First, Photons, someone has been watching too much star trek"
Star Trek, bah! I watch classic Doctor Who, which famously allows neutrons to have polarity.
Seriously, fiber-optic Internet access is an option in my neighborhood. (If I want to pay Verizon a buttload more money and give up my static IP address, anyway.)
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Broadband is a Luxury --- Not a Necessity
How do you come to that conclusion? Clearly innovations will be made to perform services with far less waste. Amazingly people cope. For example they have figured out that they can not afford multiple connections to a physical address so the DHCP router was born just like the PBX takes care of telephony connections.
And don't worry about billing issues. The Telcos have had that down for a long time now.
Also Broadband is not a necessity, but a luxury. I do *not* want to pay for others luxury comrade.
In the end we are just talking out of our a-- as the markets themselves will determine who is successfull at whatever scheme they implement. The power is still with the consumer.
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Re: Broadband is a Luxury --- Not a Necessity
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Slovenia
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Re: Slovenia
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metered broadband
That's bad enough, but to have to get into that mindset for the web would be disastrous on many levels.
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Flat fees as overcharging
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Caps
Hopefully this situation will be alleviated after the local loop is unbundled and competition increases. This is meant to start occuring from December.
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metered broadband
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Massive Confusion
When you are downloading from Microsoft, you are indeed using Microsoft's upstream bandwidth, but your ISP is using its own DOWNSTREAM bandwidth to deliver that content to you.
ISP's most certainly pay for ALL bandwidth, at ALL times, regardless of usage. But because of this, they can also OVERSELL the bandwidth, which is the WHOLE reason you can get 6MB for dirt cheap.
You call your local phone company and ask them to quote you the price for a T1 line (1.5 mbps up and down guaranteed) and then compare that to your "guaranteed" 6 mb connection from comcast. HUGE difference.
I work for a medium sized local ISP, I watch the traffic on an OC3 line all day long....
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We had metered usage 20 years ago ...
... metered usage surely spurs innovative services!
Just look back to 1987, when we used dial up modems.
We called local BBSes at 2400 baud ... paying phone line charges and access subscription fees.
Or we connected to Compuserve and paid $1.95 an hour for 2400 baud service, so we could snag text messages, GIF and binary files.
Let's go back to the golden days of metered usage and see how innovation mushrooms and the economy explodes (or is that implodes?)
Oh, one other measure of progress -- let's watch the balance sheets of the backbone providers and local CLECs to see if their MARGINS grow, while total data (bit) volume and usage drops. The only winner will be the large service providers, at least until network use drops because technology finds an alternate path to the data we want. The negative feedback of higher prices for increasingly more limited and useless access will kill internet usage.
We'll go back to using FAX and snail mail, or direct dial connections to private VPN nodes. Communities will launch wifi mesh networks to provide neighborhood LAN's, local clusters of a few thousand users, joined by edge routed links.
Google will cache data locally, using their own fiber backbone to network local nodes, bypassing AT&T, ComCast and Verizon, forming a "second internet".
See how easy it is to argue the proposition by advocating the opposite? It leads to preposterous results.
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Re: We had metered usage 20 years ago ...
Geeeze.
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Re: Re: We had metered usage 20 years ago ...
but that 2400b/s*3600 s/hr cost $1.95
Once you apply a cost metric to usage, users will either reduce use, force you to lower cost per unit or work around you.
The point is, metered usage at THIS POINT is a step back. It's a ploy to increase price per unit and their will be a market response equal to the relative impact.
Flat billing hides the fact that most users have low total usage and high cost per unit. Metering may be more fair, but the human perception will that they have lost more than they gained.
Greed will kill the business, or the provider.
Life will go on.
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I Want Metered
There also seems to be some assumption by many that metered service would be be more expensive than flat-rate. I see no justification for that assumption. As an example consider another common information service: the cell phone. Have you ever checked out the flat rate for unlimited cell service as compared to metered service? It's available from most carriers. How many people opt for it? Not many. Why? Because it's usually much more expensive than the metered rate plans. And I'm talking about the truly metered plans and not the monthly-block plans which appear artificially low in cost because they plan to either hit you with overage charges or take some of those minutes you paid for back. The same basic economics apply to wired and wireless information/communication services.
Of course, I could give many examples of other markets in which people would probably laugh at the idea of unlimited flat rate plans. How about motor fuel? Charge everyone a monthly flat rate? The big trucks would probably love it, but I doubt the motorcyclists would. Ridiculous, right? Or how about other consumable services like electricity, gas or water? How would metered rates likely compare to unlimited flat rates?
As for the claim that ISP's would have some significant equipment billing cost increase, that's just not true. I've worked in the industry and know that most ISP's already track each account's usage with the equipment that's already in place. And talk about customer confusion and anger, that's exactly what the current "unlimited-but-not-really" plans create. I bet far fewer people are "confused and angered" by their monthly metered water bill.
As for people refusing to visit sites that they otherwise would because of the additional bandwidth used, I don't think that would happen to a significant degree. As an example, most people already pay for metered electricity to operate their televisions. But how many choose what shows to watch based on whether not the show is worth the electricity to do so? I know that there are bound to be some out there but none that I know. For most people, their time and other considerations are so much more important than the electricity used that it just isn't a significant consideration.
There have been a lot of claims of metered internet service somehow being a throwback to some earlier time. Well, I'm not really aware of any past examples of national ISP's offering metered service. A lot used to charge based on the amount of time you were "connected", but not on usage. I always thought that was kind of a raw deal. Like if the electric company charged you for how long the lines connected to your house each month rather than how much electricity you actually used. That's not metered service.
Now, I don't think that there shouldn't be a choice. I would like to see the ISP's offer a choice between metered service and flat rate. What I'm having a hard time believing is that the major broadband ISP's would actually go along with something that I see as being actually good for the consumers. It's just not in their character. The only thing I can figure is that while they talk metered service they're actually intending to implement monthly capped service like the majority of cell phone plans. I think that metered service should be legally required to be truly metered-pay-for-what-you-use. Not the monthly-limit-screw-you-if-you-go-over kind of crap. That's just scammy and not real metered service.
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There's a precedent - look to history
This was because internet dialup was charged by most ISPs as a local rate call. Through some quirk in history, US local calls were free while in Europe and elsewhere, you had to pay. So, US customers only had to pay their ISPs for access, while others had to pay twice - once to the ISP, once to the phone company. This stifled internet usage in other territories.
I was in the UK at the time - the internet was a very expensive luxury. As time went on, ISPs that didn't charge directly for access (e.g. Freeserve) introduced a lot more people online, then flat-rate dial-up and eventually broadband have made the internet a utility - for most, not a luxury. Hell, even my job (sys admin for an internet casino) depends on people having cheap, easy internet access.
The simple fact is this: we can't predict how people will innovate on the internet next. But, if we introduce the possiblities of higher costs for users, people will be less willing to try out new services as well as be wary of using existing technologies to their full potential (as an example, Skype calls suddenly cease to be either cheap or free, so maybe people stop using it in favour of a traditional phone call)
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Speed-based charges
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Great Comments
RE #39 above, you are not correctly evaluating your Comcast connection, I fear. Most web servers, file servers, etc. limit the bandwidth any one visitor can use, thus even with a true 16MB connection, you will often only get content to your browser at ~400Kbps. Have you done a speed test at a site like DSLreports.com? This is a better way to test your throughput, but also not entirely fair to the ISP, because a bottleneck could be from your connection, or from other hops on the Internet.
On content metering. I like it. I favor tiers of service (like our buckets of cell phone minutes) and I think it has the potential to lower prices for grannies, keep them the same for most users, and raise them for the heaviest users. Sounds fair.
My only concern is that metering, tiers, or caps in a market where competition is weak (um...the US), then the meter, tiers, or caps could be used against the customer to squeeze more revenue while offering little benefit. But despite this, the problem isn't the metering...it's the lack of competition.
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Just my take...
What does this "innovative idea" of capping mean for consumers?
Many people work remotely from their own homes on the internet, using at least 1 GB a day just for work alone. Won't these "caps" cause these people to quit their jobs in order to be able to pay for their internet bill?
Downloading one movie online, LEGALLY, uses close to 8 GB. There goes $50. Great! The companies are not simply capping illegal bandwidth usage or spamming. They are hurting online internet companies that sell downloadable movies and music. It is not difficult even for light internet users to go over the allotted GB limit.
Watching tv online, which has become so popular recently, is going to become more expensive than fifteen cable connections. The cable companies are the ones who are capping internet usage. They don't want the internet to override their television, which is basically just continuous advertising that viewers can't control. This helps the businesses who advertise get more viewers as well.
Watching news online is going to be impossible. People will be less informed about current events. I believe that the internet has recently become a great way for people to stay in the know on political and social issues. However, from now on, out of fear of using too much precious bandwidth, people may choose not to watch these news shows.
This capping is just censorship and monopolization, plain and simple.
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