Look At That: Competition Helps Stop Broadband Caps

from the it's-all-about-the-competition dept

Mon, Apr 6th 2009 10:42pm — Mike Masnick

For years, many people have been pointing out that the real problem with broadband in the US isn't an issue of net neutrality or broadband caps, but the lack of competition. While having only two providers in a region usually isn't enough to ensure reasonable broadband practices, it may actually be working in upstate NY. While Frontier Communications has been talking about really low usage caps, it seems that now that Time Warner Cable has decided to launch capped broadband in one of Frontier's regions, the company may be thinking about going in the other direction, potentially even running a whole ad campaign about why TWC customers should switch to avoid the caps. Of course, given Frontier's previous statements about caps, it's difficult to believe that customers will be all that well protected from an eventual capped broadband anyway. But, still, this demonstrates that competition can sometimes keep these things in check. But, what you really need is more than just two players.

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Filed Under: broadband, broadband caps, competition, upstate new york
Companies: frontier communications, time warner cable

22 Comments

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Anonymous Coward, 6 Apr 2009 @ 11:53pm

Competition is what modern businesses fear the most. This applies to all industries that have managed to get things whittled down to a small enough number of companies that they can form a cartel.
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bushibot@gmail.com, 7 Apr 2009 @ 12:56am

Now if we could just get the dam cel companies to stop colluding and capping all data usage.
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R, 7 Apr 2009 @ 1:21am

Down Here...
Here in Australia, everyone has caps. But the on the plus side, having competition means that there's always someone with a bigger cap - Telstra & Optus are around 20 GB, iiNet is around 60 GB, and I hear TPG is even more (for aproximately the same price.)
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jFiveNYC, 7 Apr 2009 @ 1:22am

There is no reason for TWC to cap their customers. Ever since I signed up, I average about 700kbps and 35% packet loss from 5pm to 3am. If they imposed a cap it would be impossible for their customers to reach the limit. If you think I'm alone, feel free to browse dslreports.com. I'm in Flushing NY.

Just gimme some FiOS son!
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bish, 7 Apr 2009 @ 2:36am

The hometown voted, last year, to have bignasty cable co buy up the cable infrastructure for a song; up to then it was actually owned by the municipality. I mention this because there was actually two cable broadband providers vying for customers over the same infrastructure. Added to the DSL provider, it made for 3 competitors and nice, cheap rates for customers.

I haven't seen such a great and level playing field before or since, and the slackjaws who voted to sell out have no idea what they're in for!
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Weird Harold, 7 Apr 2009 @ 3:55am

It's a good selling point. But it is also the way to end up with the vast majority of the 5-10% of users that eat massive bandwidth. In the end, one company with have higher costs than the other, and they will be less profitable. The capped player can push down a little bit on prices, and suddenly the upcapped player is losing money.

End competition.

Uncapped is nice for users, but perhaps less realistic as a business model.
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Duane (profile), 7 Apr 2009 @ 4:32am

Re:
You have no proof of this and apparently little in the way of business or marketing savvy.

1. If you run a campaign offering uncapped services, you set the price point for that higher. It keeps all but the most serious users from going uncapped which means you get the cake and the delicious sensation of eating it too. You've also got the whales and those type also tend to be influencers in this particular sphere. So there's a little side benefit.

2. Saying you're uncapped is a great way to attract normal users who like to think that they use lots of bandwidth or will use it, or dammit they ought to be able to use it. Plus it's an easy campaign to run. You show people getting giant overage bills from the "other guys" or miserly dads cutting the network cable on teens, etc., etc. I could build a campaign for that in about 35 minutes.

Also, you're forgetting that once one companies offers it, the other(s) usually follows suit, so the field levels out again and the havoc continues to ensue.
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Anonymous Coward, 7 Apr 2009 @ 5:28am

The really interesting thing about Time Warner in Rochester is that Time Warner isn't experimenting with caps in Buffalo just to the west and Syracuse just to the east because in both those areas Verizon is rolling out FiOS. Verizon isn't in the Rochester area due to Frontier.
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Weird Harold, 7 Apr 2009 @ 6:07am

Re: Re:
You actually proved my point even more.

1) If your price point is higher, only people doing massive overages (capped price point plus usage) will see a benefit. So which users come over?

2) Most normal users won't consider themselves great bandwidth users unless they are getting billed, see (1). Without reason, people aren't going to start paying more for what they are not using. The campaign is easy to write, but the target users are only the ones getting an overage bill. SOmeone paying $39.95 a month capped and never going over isn't going to line up to pay $49.95 just for the heck of it.

So what you end up with is a service for people who use a ton of bandwidth, and in cable terms, that can made nodes slower and give poorer response to users inside busy nodes.

In the end, companies need a mix of a few heavy users and mostly light users to make the costs work out well. Actually providing 100% of the bandwidth suggested (but not promised) by the connection speed to each user is beyond to reach of the average consumer still to this day.
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Anonymous Coward, 7 Apr 2009 @ 6:21am

Re: Re: Re:
Plenty of people I know around here (upstate NY - Albany area) pay extra (I think it's $10/month extra over the base internet service) for the "Turbo" TWC internet service...funny how none of them say they notice a difference, but none are willing to give it up "just in case."

I don't know why they pay either...but, they do.
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Anonymous Coward, 7 Apr 2009 @ 6:39am

Re: Re: Re: Re:
I pay extra for the 'turbo' version not for the increased download bandwidth, but for the marginal increase in UPLOAD bandwidth. It does make a difference for my VPN connection into work.
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The infamous Joe, 7 Apr 2009 @ 6:40am

Re: Re: Re:
You really don't think before you send, do you?

Your original complaint is that high usage users are eating up all the bandwidth. To you, this causes an imbalance, because the cost-for-usage for high usage users is much lower than average.

Now you say that the only people who would pay more for uncapped service are the high usage users, but wouldn't this bring their cost-for-usage closer to the average user?

Also, and I could be way off base here, but isn't part of the [way overpriced due to lack of competition] bill I get every month supposed to go to upgrading the system? It's not all pure profit, or just for maintenance. Technology isn't standing still-- it's obvious that the data transferred today dwarfs the data transferred just 5 years ago. So I see no problem with high usage users paying more-- though I believe we pay plenty as it is-- in reality, it should be that low usage users pay *less* than I do. (I just downloaded Jaunty Jackalope i386 and 64b, plus I watch hulu all the time-- so I think you'd consider me high usage)

The real point is that competition can never hurt the economy, though it can hurt specific [outdated] businesses. If uncapped data plans are *really* out of the question for ISPs, then competition won't change that-- but I believe they are in the same mindset as you are-- "Customer-be-damned, let's milk them for all they have."
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Herm, 7 Apr 2009 @ 7:26am

Frontier Communications? Upgrade equipment?
In most of their service areas, you'd do better with two tin cans and a string. Frontier is a 19th century company trying to operate a 21st century business. The only part of the business they've caught on to is outsourcing and that's usually poorly done.

I'm with the guy who posted "Give me some FiOS!" (or LTE)
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DS, 7 Apr 2009 @ 8:06am

Re:
If TW does expand to WNY, I will be looking to switch. The bad part, is FiOS is half-assed where I live at this point. The max speeds I can get are half of what I get now (I get faster internet as part of the IP phone service), and the TV signal is through Direct TV (whom I cannot stand). So unless they bring real FiOS to where I'm at in WNY, I'd be screwed.
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DS, 7 Apr 2009 @ 8:07am

Re: Frontier Communications? Upgrade equipment?
You're not the only one who complains about how bad Frontier Communications is.

If Blue Wave is still around in WNY, that's a competitor, but again, I've yet to hear a good thing about them either.
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Felix Pleșoianu, 7 Apr 2009 @ 9:58am

Aw man... How should I put it. Don't you people see they're not just capping bandwidth, which is arguably a scarce resource, but actual traffic volume? What does that have to do with anything?

Look. Romania here. Friggin' Romania. Not exactly the most prosperous country in the world. I have the cheapest Internet plan at a small-scale neighborhood ISP. That's $10/month. Can you guess how much I get for it? A constant 300KB/s both ways, with NO TRAFFIC CAPS whatsoever. That's more than they're officially guaranteeing. And the speed is, like, 10000x that for local mirrors.

And now for the big question: how come a tiny company from Eastern Europe can offer a better deal to its not-so-many customers than a big North American corporation with thousands of times their resources?
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Weird Harold, 7 Apr 2009 @ 11:40am

Re: Re: Re: Re:
Joe, it isn't a cost for usage problem specifically. For a user who isn't a file trader / big bandwidth user, the question is accessibility. The ISPs run ratios of anywhere from 20 to 1 to 100 to 1 for bandwidth, basically proving 100 users with 5 meg connections with a total of, say, 20 meg of pipe to run off of. So if in your group of 100 users you have 10 people running P2P servers and trading tons of files, there is a shortage of pipe for those users. The number that I saw from the President of Comcast a little while back was something like 5% of the users taking 50% of the bandwidth. So for a company to offer enough pipe to satisfy that demand of 5% of their users, they would have to double or triple their available pipe. That is expense with absolutely no additional income.

Most "big" users don't want to pay more, until there is a cap. Then suddenly they are either willing to pay, or they will take to the virtual streets to protest the greedy ISPs.

You are correct - the lower usage users should pay less. Bandwidth caps accomplish this - anyone under the cap pays one price, everyone over pays over.

Competition never hurts the economy, but often companies looking to gain market share will take on more than they can handle, more difficult customers, or make other cuts in their business plan to try to grow. It's all part of free enterprise, and it's fun to watch.
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Anonymous Coward, 7 Apr 2009 @ 12:20pm

Re:
That is an excellent question. Why not ask the big bells and the cable companies that very question.

I work in the data center industry right in downtown Atlanta. If a client needs more bandwidth, I just make a deal with the providers and get a 10GigE cross connect run to the providers and call it a day. Yes, the client pays for what they use, But at less than $5/meg it is dirt cheap. it is not that bandwidth is hard to get or is expensive, it is just that they are not making as much of a profit off the larger users. well... too bad. you are already paying for it, why not use it?
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hegemon13, 7 Apr 2009 @ 12:44pm

Re:
There are plenty of user's outside that supposed 5-10% that will switch if the marketing is done right, for the same reason people buy unlimited cell phone plans when the 1000-minute plan would cover their usage needs. They do it for peace of mind, knowing that they can use the service how they want without ever have to worry about going over. If Frontier can conjure that image of peace of mind paired with the image of a greedy, draconian competitor just waiting to charge you an overage, they will be quite successful at attracting all walks of users.

Besides, with caps as low as 5GB, it really is not unreasonable for even mid-level users to get paranoid about their usage. A few too many YouTube videos, or one HD stream from Netflix puts you right over the top. I really don't mind caps if they are reasonable, as they are with Comcast right now. But TW's are ridiculously low.
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Anonymous Coward, 7 Apr 2009 @ 11:03pm

Re: Re: Re: Re: Re:
The number that I saw from the President of Comcast a little while back...

I wouldn't believe much that either one of you had to say.
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Blackbagger, 8 Apr 2009 @ 11:48pm

Re:
Just thought I'd toss this little bit of info into the fray. I live in Japan, and was on a 30 Mbps connection which I was paying $50 a month for. Just the other day I switched to a shared line of up to 100 Mbps (usually running around 30) for $10 less and the 1st 2 months free. Then a few weeks ago I get a pamphlet advertising another company's service, and on top of the decent speed for a decent price they were willing to sell new customers a PS3, PSP, Wii, or an eeePC for 100 yen if you also switched your cable and phone to them. Yes, that's like a $1 for a brand new PS3. And they weren't even charging much more for the cable and phone connections.

And it all comes from having 3 major and a bunch of minor companies that all provide broadband to the same area. Better competition gets better deals for the customers, and gets more money for the providers (not less), because their good deals and incentives are enough to get even old people and others who usually wouldn't care about getting broadband to sign up.

I feel sad for my family living back in the States when I hear about the insane prices the 1 company that gives "real" (8 Mbps) broadband in the area charges.
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pionex_80, 15 Apr 2009 @ 4:43am

RE:
I live up in Redwood, NY and there is no provider of broadband here that we have found thus far. Many complain of thier internet costs and caps and more. I only wish I had it as good as folks that have better services available have. Satellite internet has so many issues and they have their infamous FAP program in place (425Mb and your done for 24 hours). And we pay twice what DSL/Cable/FiOS/Others are paying for thier service. All upstate New York wants is for broadband access to just even be available to them. Most do not have internet or are still using dial up earthlink or another provider.
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