Do Data Caps Make Good Business Sense for ISPs? > What PR disaster?

What PR disaster?

People are upset but what alternative to they have then the gov supported duopolies?

If were going to artificially pick the winners and losers in Broadband shouldn't we plebians at least have uncapped connections?

reply to battleop
That was my first thought as well. This editorial, and DSLR, assume caps are a "PR disaster". Ask any average consumer if they have a cap or if they care. Doubt you'll see the same "outrage" you do around here.

reply to battleop

So you prefer getting kicked off as a subscriber than paying a fair overage fee? That makes no sense for anyone.

reply to MRCURAnon

reply to battleop
I've got a friend who didn't know about AT&T's caps until I told him. He wondered why his phone bill had almost doubled. He's switching to Time Warner for internet only as he already has DirecTV and is happy with it for now.
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An appeaser is one who feeds a crocodile, hoping it will eat him last. - Sir Winston Churchill

reply to battleop
DSLR and many users here are ahead of the tech curve, so you can expect to the general population to slowly become aware in time. With smart phones and tablet devices on the rise AND streaming becoming more common, this is a PR disaster brewing.

The solution to this insatiable greed of telco and cableco is have a common pipe and let providers compete with service over the same network. It can be done. See Utopia now, and in the future Google's Fiber project in Kansas city.

reply to JasonOD
Define overage. The entire industry thinks that data is like water, fuel, electricity, etc. It is not. If you want it to be, the entire industry needs to become a utility, which they clearly don't want to be.

It's the ISP's that think it's a good idea to issue caps to gain more revenue. Unfortunately, most don't bother upgrading their network and not giving a damn about their own customers.

Maybe if most of the ISPs were more honest with their customers, they'd be fine with caps.. but when they can't even get the cap meter to work properly.. Ya.
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The electric company doesn't charge a flat fee at a rate that makes a healthy profit for the executives, and then charge for kilowatt usage in pre-set amounts. They don't charge over 10 times the normal rate if this set amount is exceeded, and they don't flip the switch off if you go a little nuts with the Christmas lights in December.

Do you actually know how demand billing works? They measure your electrical consumption every 15 minutes and charge you a set fee for every kilowatt that you use. A business that occasionally runs an energy intensive appliance will pay out the nose with demand billing. Use 40,000 watts for 15 minutes and 200 watts for the rest of the month? That's a 40kW demand charge. On top of the demand charge they continue to charge you for each kWh that you consume.

I would also dispute the flat fee claim. Between my electric and gas I'm paying $30/mo in "service charges" before you consider the actual energy consumption. It does not cost them $30/mo to leave meters at my residence yet that's what I'm charged each month.

Anyway, it's not a perfect analogy, but the underlying point stands. Bandwidth is a commodity and limited resource. Data itself really isn't, except insofar as users with high data consumption will obviously have a higher average bandwidth usage.

reply to JasonOD
I see your point and I agree that it would be better to monetize overages than terminate service.

However, I don't buy the current reasons as to why caps are needed. If it only affects 2%, then it isn't about the original claims centered on protecting the network experience by mitigating the very few heavy users. Sans speculation, the only meaningful purpose caps serve is mitigating court hassles if a service termination is challenged. However, there are other ways to define excess without a hard ceiling. Why not statistically look at those outside of 2 standard deviation units from the mean use? It's simple. It's objective. It's easy to explain to the court. Since alternatives exist, I'm at a loss, without speculation, as to why caps exist.

Now if I speculate, there's only one rational reason for cable caps. They are a hedge against OTT video displacing the current distribution model.

There's nothing wrong with this but if the wired industry follows the wireless industry and OTT video wins, unless a lot more competition develops, the public will become VERY aware of caps and efforts to regulate ISPs as utilities will get a lot of attention.

The bottom line in all of this is most folks don't mind getting screwed a little. While some don't want ANYONE to make money, most are OK with being asked to bend over a little bit. But in the absence of competition, companies don't seem to exercise rational restraint because it's far easier to raise fees than invest capital to lower operational costs. I certainly don't fault companies for this because we're all human. If there's no reason to restrain increases, why would I take the risk of keeping revenue tied to inflation by investing in property, plant and equipment maintenance? That's why honest competition is so fundamental in capitalist economies.

In my opinion ISP thinking is not unlike the medical industry whose costs continue to soar because there's really no reason to restrain costs. The consumer really isn't part of the equation because either the government or their employer pays for most of their medical care. Neither the consumer nor the medical industry needs to obey normal cause and effect economics.

As an example, my dad gets frequent injections in one of his eyes to abate his macular degeneration. Each shot is billed at over $4,000. Medicare reduces that cost to about $1,800, by contract, and by the time they pay and his supplemental insurance pays, it only costs him the price of lunch at a nice restaurant. Where is the incentive for him to challenge the injection's necessity or for the medical industry to acknowledge the fee is excessive?

And where is the incentive for the duopoly that is the wireless industry to acknowledge that charging someone $10 for a gigabyte of wireless data is egregious? In this same breath, will there be a future reason for the wired industry to believe a $150/month package for truly unlimited service is reasonable when their network has been relegated to a dumb pipe and only carries NetFlix OTT video and various cloud services data?

reply to Crookshanks
We use this in our retail grocery stores to actually lower our utility bill. By applying energy management techniques, our coolers run defrost cycles in the early AM hours, per agreement with the utilities. They monitor our usage with smart meters and lower our costs because we work with them.

I just wanted to point out that demand billing can have a useful purpose and isn't necessarily something crafted by the electric company to make more money. In my opinion, they do this to incent heavy users to work with them to flatten the overall system's peak demand curve.

reply to Crookshanks
A better analogy would be to use roads for capacity, trucks for packets, and the truck's cargo for your data, with network management implementation acting as a toll gate.

There is no consumable commodity being used up that can be accurately compared with utility services such as electricity or water usage.

You still don't understand the difference between BANDWIDTH and DATA. Bandwidth is not a "consumable" commodity but it's still a limited resource.

The demand billing analogy is very apt. They aren't charging you for the electric you use they are charging you for the burden you place on the grid. Your analogy that they won't shut you off is also misplaced; you won't get cut off for hanging too many x-mas lights but if your residential connection starts using industrial amounts of electricity you will undoubtedly be forced into a higher tariff.

Heck, where I live the PSC rules allow them to force you into a commercial class of service for a home business that uses >=1.5kW of electricity. 1,500 watts and you are compelled to pay more just by virtue of it being commercial. That's a single space heater or large air conditioner.

reply to rradina
I agree, demand billing can be beneficial if you know how to work the system. This bit is spot on:

reply to rradina
Nice post. I definitely agree about meaningful competition being critical to a successful market. From a consumer standpoint, a multitude of companies competing for customers and just barely getting by (profit wise) should be the goal. Fat, lazy, and poorly regulated corporate monopolies and duopolies only help themselves (and their paid-off regulators) and generally provide lesser value to customers.

We just started Netflix a month ago, and we see great value in this OTT streaming service. You choose the content on your schedule and NO COMMERCIALS for $8/mo. SOLD! The movie selection could be better, but overall we like it. We don't subscribe to cable T.V. because we don't see the value in it when we already have great digital OTA (with commercials) for FREE.

Our 10/1 cable internet provider just coincidentally came to our home recently and checked for bandwidth "leakage." They didn't find any, but I'm sure they have noticed our bandwidth use increasing. We pay the monthly fee and that is supposed to pay their cost plus profit margin. We have two cable internet providers in our area.

If the day comes that they charge overages (highly unlikely with poor meters) or cut-off our bandwidth, then we will look for alternatives offering the same price point and Netflix like experience. We will not, however, subscribe to cable TV.

reply to Crookshanks
I believe that I absolutely do understand the difference, and my analogy should have made it very clear. (roads=capacity, cargo=data)

When you say bandwidth, I am assuming you really mean bandwidth capacity. If not, then I suppose you have completely lost me, which is quite possible.

I understand the reasoning behind demand billing, but the resource is finite that I am consuming in these scenarios. I believe the "bandwidth" you are referring to in your analogy is equivalent to the roads in my analogy. The roads can only hold so much traffic, but they are not being used-up in the traditional sense that electricity or clean water might be.

In other words, we are not running out of water because everyone is thirsty and demand has dwindled the supply to a trickle. We can't get our water because the pipes are too damn small to deliver the water so that everyone can get a drink or take a shower at the same time that I am filling up my swimming pool.

I'm not sure that demand billing is the solution for network congestion and a fair method to charge for the service. If implemented in any form, it most likely would result in little to no improvement to the existing infrastructure.