There's two major reasons ISP executives want to shift from flat-rate to a pricing model where customers face low caps, and high per-gigabyte overages. One, it's a power play to cushion the eventual (if still far away) erosion of TV revenues in the face of Internet video, and to retain market power in the face of Internet content evolution
. Two, it's so they can make investors happy by continually jacking up the amount you'll pay per gigabyte -- in polar opposite to the ever-diminishing costs of hardware and bandwidth.
Of course carriers can't possibly admit this to consumers, so they pay PR people and lobbyists to dress up metered billing as altruism, dire necessity, or both. If ISPs aren't allowed to impose this new model, lobbyists argue, the Internet will explode (proven to be nonsense
) or perfectly profitable operators won't be able to afford network investment (also proven to be nonsense
). It is a pure cash grab, and once U.S. carriers impose their vision of metered billing (not to be confused with a true per-byte model that offers consumer value
), you can be certain of one thing: you'll face slowly, consistently higher bills.
In Canada, companies like Rogers cable have already established what's essentially the dream billing model for mega-ISP investors. On top of a monthly rate that more than covers the cost of the connection and
support, Rogers charges customers per gigabyte overages up to $5.00 per gigabye
, a nice markup over the pennies the carrier pays for bandwidth. Rogers also tries to keep customers in house by offering a subscriber to any Rogers service a limited catalog of Internet video. Of course the service counts against the cap, so users are penalized the more they use this "free" service.
While carriers often claim these billing models are about fairness to lighter users, you'll note that Rogers lightest customers are offered a 500 kbps tier with a 2GB monthly cap for $26 (plus fees), and users are billed $5 per additional gigabyte. Should grandma simply choose to download one very large file, she faces a monthly bill that could potentially exceed $70 -- for a 500 kbps connection
! The entire Rogers model isn't designed with fairness in mind, it's designed to drive the customer base toward ever-more expensive product. It's designed to get customers to pay more money for the same (or less) service.
Rogers originally capped the amount in overages consumers could be billed per month at $25. However, according to customer posts in our forums
, the company will be boosting the maximum incurable penalty to $50 a month starting in March. A Rogers spokesperson stops in the thread to confirm the change, adding that Rogers "wants to offer our customers great quality of service for the best value," and that the model is justified by "technology enhancements" and network expansion.
Take a very good look at the "value" provided by the Rogers model, because it's coming to the United States eventually, whether you like it or not. While Time Warner Cable's attempt to impose such a model failed due to consumer backlash
, AT&T's still testing low caps and high overages in two markets
-- and we may see a more unified ISP push toward this model in 2010.