GAO Study: Broadband Usage Caps Can Hinder Innovation, The FCC Might Want To Actually Pay Attention

from the gosh-you-don't-say dept

Thu, Dec 11th 2014 2:39pm — Karl Bode

For years incumbent ISPs have abused limited market competition to impose usage caps on fixed-line connections, then sock customers with per gigabyte overages. These slowly-expanding usage caps are usually imposed under the pretense that the ISPs are just ultra worried about fairness and managing the congestion bogeyman. After years of pretense, even the carriers a few years back finally acknowledged that usage caps aren't really about congestion. They're price hikes in a dress, and they're designed specifically to protect legacy TV revenues from the rise of Internet video.

Meanwhile, while ISPs want to bill and meter like utilities, they repeatedly demand that it's unAmerican to regulate them like utilities (as we've seen repeatedly during the Title II fracas). The result so far has been usage meters that often don't work, in some cases resulting in customers being billed while the modem is off or the power is out. Regulators for a decade have napped on this issue, at most acting as if this is just a wonderful example of creative industry pricing.

We've spent many years talking about how usage caps can easily hinder innovation and often just wind up confusing consumers (quite intentionally). Fast forward to 2014 and a new GAO study this week posits that hey, usage caps (and usage-based pricing, UBP) can hinder innovation and may confuse customers:

"According to the literature, providers facing limited competition could use UBP to increase profits, potentially resulting in negative effects, including increased prices, reductions in content accessed, and increased threats to network security. Several researchers and stakeholders GAO interviewed said that UBP could reduce innovation for applications and content if consumers ration their data. While FCC is collecting data regarding fixed UBP, it is not using this data to track UBP use because it only recently started collecting the data specifically to analyze prices. As a result, although FCC is charged with promoting the public interest, it may not know if UBP is being used in a way that is contrary to the public interest and, if so, take appropriate actions."

In other words, the FCC is behind the game when it comes to tracking usage cap data, and therefore couldn't be bothered to study the negative impact of usage caps. The GAO noted that "better communication is warranted" on the issue and that the fixed-line broadband industry should develop a "voluntary code of conduct" to make sure consumers understand what they're buying. While that's all well and good, it doesn't address the failure of regulators to track meter accuracy, nor does it really address the fact that usage caps are by and large (like neutrality violations) the byproduct of uncompetitive markets.

Historically cable and phone companies have argued that they should be free to engage in pricing experimentation, and that straight usage-based billing plans could potentially benefit consumers. The GAO agrees, noting that plans where users only pay for what they use would certainly be ok:

"The literature also suggests that providers could implement UBP to benefit consumers—for example, by offering low-data, low-cost plans for those who do not want an unlimited data plan. While mobile providers GAO reviewed offer such plans, fixed providers—generally facing less competition—do so to a lesser extent."

Odd, that. Obviously the problem is that while carriers pay lip service to usage-based plans that offer value, with no competition this never actually comes to fruition. What we wind up seeing are plans that simply take existing flat-rate unlimited pricing, with overage fees layered on top. In a few instances users will get a tiny discount in exchange for giving up the freedom of unlimited data. For example, Time Warner Cable (who took an absolute PR beating in 2009 and had to retreat from mandatory caps) now offers users a $5 discount if they replace unlimited consumption with a $5 usage cap. Feeling the value yet?

Caps have been a particular worry as Comcast (who is slowly expanding usage cap trials in its least competitive Southern markets) is poised to soon control 40% of the U.S. broadband market after it acquires Time Warner Cable. With AT&T and Verizon backing out of many unwanted DSL markets, cable's going to enjoy a stronger monopoly in many areas over the next decade than ever before. One guess what kind of "creative" pricing plans will be the end result?

GAO Broadband Caps (PDF)GAO Broadband Caps (Text)

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Filed Under: broadband, fcc, gao, innovation, usage caps

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Anonymous Coward, 11 Dec 2014 @ 3:22pm

i think that just about everyone knows that data caps do more harm than good. the tale about congestion is just that, a tale, which, even if true, is the ISPs' fault because all it sees is maximum customers on minimum equipment, even though the equipment costs very little to install and maintain! the other thing that holds back innovation and just about every start-up that has come along is the failure of congress and governments elsewhere from having some balls and telling the incumbent industries that if they want to continue to be profitable and perhaps in business is to innovate themselves! them stopping all the new digital programs out there now could enhance the business but they are too scared of change and just threaten everyone with the least bit of intelligence by saying the industry will fold if laws to protect the old business aren't put in place! and just like good little boys, congress lines up to do all that they can. now that the MPAA is going to start internet censorship in the USA, having been successful in the UK and other countries that are just as brainless as the politicians in the USA, have done all they can to aid them while filling off-shore bank accounts, ready for when they have to get up and move off!
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Anonymous Coward, 11 Dec 2014 @ 3:36pm

Re:
"equipment costs very little to install and maintain"

You must have not seen the price of some of these devices. The shit you pay for soho or moderate size networking devices is chump change compared to the enterprise level price tags that ISP really need to pay to keep those networks in order.

Sure the ISP's over play this expense, but its not wise to under appreciate it either.
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orbitalinsertion (profile), 11 Dec 2014 @ 5:09pm

Re: Re:
The relative cost for any non-Mom&Pop-type ISP is still chump change. AT&T is never going to shit the bed over another blade installed at an IX or connections at the node or what passes for the local office these days. And in any competitive market, this would already be expanded and installed to increase the number of customers and provide appropriate bandwidth and QoS to keep those customers.

I don't think it's possible to under-appreciate the expense to one of the megacorp ISPs. Probably comparable to an exec meeting-cum-golf-outing. Or cheaper in many cases where all they need to do is plug another router blade (or heaven forbid, a few short lengths of cable). They already purposely under-serve with the equipment already in place.

And I doubt they are worried about overloading their NarusInsight boxen.
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any moose cow word, 11 Dec 2014 @ 9:43pm

If you want to know how usage based pricing effects investments in infrastructure and web services, just look at other countries were that is the norm. It's been awhile since I'd seen any reports on this, but basically it was the same we've seen here, only worse. When the majority ration their data usage, ISPs invest little in infrastructure because few would use it, or could afford to do so. Also, there's a lack of investments in web services because no one would pay for the bandwidth to use them. It's no mystery that internet innovations were almost excursively created in countries with open broadband. Many of those started here because at the time we were leading in speed and capacity. Now, we're trailing far behind. Future innovations will spring up where the ground is most fertile, and that's not here.
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Luke, 11 Dec 2014 @ 11:12pm

The problem with data caps.....
The problem with data caps is that I don't have enough bandwidth in my cap to explain the problem......
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Andrew D. Todd, 12 Dec 2014 @ 10:21am

The Dying Broadcast TV Business.
You are of course correct that the incumbent ISP's are attempting to protect their television business. However, the biggest and most existential threat to the TV broadcasting business is satellite broadcasting, and specifically, broadcasting from foreign satellites which do not have to obey American law.

https://www.techdirt.com/articles/20141126/05310429255/netflix-ceo-puts-expiration-date-traditio nal-broadcast-television-2030.shtml#c385

https://www.techdirt.com/articles/20141001/07100828690/not-j ust-consumers-cutting-tv-cord-small-cable-companies-dropping-tv-also.shtml#c449

Comcast and other land-line providers have no constructive response to this. Attempts to block internet video are a foredoomed enterprise.
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Anonymous Coward, 12 Dec 2014 @ 11:54am

Billing while power is off
The result so far has been usage meters that often don't work, in some cases resulting in customers being billed while the modem is off or the power is out.
What's the problem? Anyone who knows how datagram protocols work could have predicted that. Paying by amount downloaded is like paying the postal service for each letter sent to you. It doesn't matter whether you received or even requested something—the billing is done upstream. How could the situation be improved, other than by eliminating bills based on the actions of other users? If the modem happened to be on while this unwanted data was billed, how would that be any better? (BTW, any "fair" meter could be trivially bypassed with asymmetric routing.)
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