dslreports logo
site
spacer

spacer
 
   
spc
story category
One More Time: Metered Billing Is Not Magically 'Inevitable'
Simply because investors dream of a costly broadband future
by Karl Bode 09:10AM Thursday Dec 02 2010
As we noted yesterday, investors are proudly proclaiming that the FCC's paper thin neutrality rules mean that the kind of low cap, high overage pricing models common in Canada are now somehow inevitable here. While the FCC's rules may specifically approve such pricing models, that doesn't somehow magically mean they're inevitable. As the failed Time Warner Cable effort indicated, consumers do have some power over whether this happens, and they've repeatedly indicated they prefer flat-rate pricing to expensive and confusing overages. Still, Business Insider is one of several outlets to somehow conclude the days of unlimited broadband are over:
quote:
But because the ISPs won't be able to set up express lanes with toll booths anymore they're going to have to find growth somewhere. And it's going to come directly from your pocket now...So the ISPs will have to find their revenue growth by getting rid of all-you-can-eat broadband access, which millions of Americans have enjoyed for more than a decade, and by starting to charge Internet users by how much bandwidth they consume....let's face it, it's inevitable: Your all-you-can-eat Internet plan is likely going to be history.
Except none of that is true. One, ISPs, which now are dabbling in everything from behavioral advertising to home security services, have a universe of revenue expansion possibilities without implementing unpopular billing models. Two, just because investors lust after the idea of charging more money for the same service, doesn't somehow negate the reality that these models are not necessary, that flat-rate pricing is very profitable for ISPs, or that these models aren't based on real economics, given the continually dropping cost of terrestrial bandwidth and hardware.

Since our modern regulators are simply show ponies, the only thing standing between ISPs and these plans are consumers. As such, ISPs are busy trying to convince users these plans offer value. But it's a mistake to confuse real per byte billing (only paying for what you use) with the type of plans investors and executives dream of. Namely, expensive flat rate plans with low caps and high per gigabyte overages. There is no consumer value to these proposals. They are designed to make already expensive U.S. broadband more expensive and protect ISPs from Internet video.

Is it possible ISPs could implement real usage-based billing? Yes, but it's unlikely. Real usage-based billing would result in the majority of an ISPs customers paying considerably less money. What ISPs like AT&T and Time Warner Cable have proposed so far isn't true usage-based billing, it's simply awful pricing for uncompetitive markets. Awful pricing is simply awful pricing. It doesn't come magically endowed with the power of inevitability, simply because executives and investors think it's a neat idea.

view:
topics flat nest 

88615298
Premium
join:2004-07-28
West Tenness

What I don't get is

Don't these "investors" have internet? Do they like paying MORE for something? I'm pretty sure the vast majority of people that invest in oil stock don't really want to see the price of gas be $10 a gallon. If you invest in Coke do you want to see the price of 2 liter be $5? If you invest in McDonald's do you want to see a "value meal" be $12?
MASantangelo
Premium
join:2004-07-19
Pittstown, NJ

Re: What I don't get is

They really don't care in the end. The 'investors' (real investors, not stock traders) don't care that a value meal costs $12, that gas is $10, that coke is $5. That is small beans to them, given the amount of money the company will make.

So in a word, yes, they do want the price to go up. That way only they can afford it.

boogi man

join:2001-11-13
Jacksonville, FL
kudos:1

Re: What I don't get is

said by MASantangelo:

They really don't care in the end. The 'investors' (real investors, not stock traders) don't care that a value meal costs $12, that gas is $10, that coke is $5. That is small beans to them, given the amount of money the company will make.

So in a word, yes, they do want the price to go up. That way only they can afford it.

not so much that they are the only ones that can afford it but they get to profit from the rest of the countries necessities and our gluttonous ways
--
my site

Karl Bode
News Guy
join:2000-03-02
kudos:39
There's several ISPs that Craig Moffett could probably buy with his holiday bonus from Sanford Bernstein. Consumer welfare is absolutely nowhere on these guys' radar.
moonpuppy

join:2000-08-21
Glen Burnie, MD

2 recommendations

Re: What I don't get is

said by Karl Bode:

There's several ISPs that Craig Moffett could probably buy with his holiday bonus from Sanford Bernstein. Consumer welfare is absolutely nowhere on these guys' radar.

And he would be one of the first people in line crying for a government bailout when the industry tanks.
kaila

join:2000-10-11
Lincolnshire, IL

1 recommendation

Clearly investors don't want prices to get uncompetitive, or reduce demand. They do care about margins and overall profitability.
--
Jeff Howe
Jeff's Blog - »www.ostjournal.net

Karl Bode
News Guy
join:2000-03-02
kudos:39

1 recommendation

Re: What I don't get is

But ironically they could care less about overall survivability, since they can just dump holdings. So it's all about the now -- and that sadly includes shunning upgrading networks.

DaDawgs
Premium
join:2010-08-02
Deltaville, VA

Re: What I don't get is

quote:
While the FCC's rules may specifically approve such pricing models, that doesn't somehow magically mean they're inevitable.

ROFLMAO -- You're joking right?
--
I am a legend in my own mind.

cowboyro
Premium
join:2000-10-11
Shelton, CT
said by 88615298:

Don't these "investors" have internet? Do they like paying MORE for something? I'm pretty sure the vast majority of people that invest in oil stock don't really want to see the price of gas be $10 a gallon.

You are assuming that John Doe who has 100 shares really matters in the process... You are wrong.
The real investors are corporations which hold billions of $ in shares. All that matters is the bottom line - and a lousy 1% increase in stock prices means extra millions in assets for a major holder - more than enough to cover the extra few $ spent on cable, which is written off as a business expense anyway...
gorehound

join:2009-06-19
Portland, ME
these investors do not care about any of us.i should know this answer as my brother is a very rich conservative and this is the way they think.they do not care if they have to pay more because they can rape millions more dollars from all of us little folk.
backness

join:2005-07-08
K2P OW2

Try Canada...

Our largest Cable ISP has the money to buy 3 professional sports teams but not enough to roll out DOSIC 3.

Our largest telco has the money to buy 1/2 the news stations in Canada, but can't seem to get users off of 3MB DSl.

Oh.. and they all charge overages on these services starting at around 60GB per month.

The whole system is a scam.

ArrayList
netbus developer
Premium
join:2005-03-19
Brighton, MA

Re: Try Canada...

wow. that sounds like extortion.
Mr Matt

join:2008-01-29
Eustis, FL
kudos:1

Re: Try Canada...

Sounds like Oink, Oink to me!
MaynardKrebs
Heave Steve, for the good of the country
Premium
join:2009-06-17
kudos:4

Try France


I know you Amuuricans don't like the French...what with them helping you out in your Revolutionary War and them giving you the Statue of Liberty (liberty - a now outdated concept in the USA these days anyway), and all that, but you should take a look at www.free.fr and then break out the crying towels

One bundle
28x1 ADSL
Landline telephone - free LD to 103 countries
150 TV channels
30 euros/month, or about $40 greenbacks

That's just one of several packages from them and other competitors prices in the same ballpark.

And no, you didn't win WWII all by yourselves. The war started in 1939....you guys were late to the party.

Simba7
I Void Warranties

join:2003-03-24
Billings, MT

Re: Try France

said by MaynardKrebs:

I know you Amuuricans don't like the French...what with them helping you out in your Revolutionary War and them giving you the Statue of Liberty (liberty - a now outdated concept in the USA these days anyway), and all that, but you should take a look at www.free.fr and then break out the crying towels

And no, you didn't win WWII all by yourselves. The war started in 1939....you guys were late to the party.

Oh, knock it off with the trolling. Talk about freakin' off topic.
--
Bresnan 18M/1M
MyWS[E5200@3.75GHz,4GB RAM,2x1TB HDDs,Win7]
WifeWS[A64@2GHz,2GB RAM,120GB HDD,Win7]
Router[2xP3@1GHz,512MB RAM,18GB HDD,SMC 8432BTA,2xDigital DE504,Compaq NC3131,Intel Pro/1000MT,IBM Gigabit Ethernet-SX,Allied Telesyn AT2560FX,Gentoo Linux]
bn1221

join:2009-04-29
Cortland, NY
Reviews:
·TowerStream
Yes the French slogged along and after the USA got involved the war ended. Both WW1 and WW2.

Where was France in the US Civil War? Oh right - selling arms to both sides.

I hear in parts of France they turn the power off in some areas to handle peak demand in other places. Sounds like great place to be.

MM

@shawcable.net
Nothing more then greed, time to disband them and offer a nation broadband policy like the aussys
Mr Matt

join:2008-01-29
Eustis, FL
kudos:1

Sounds like down on the farm!

Pig Farm that is. Visit a pig farm and you will see that the pigs never get enough. There is no difference between ISP Pigs and real Pigs.

NOCMan
MadMacHatter
Premium
join:2004-09-30
Colorado Springs, CO

The problem in a few words

So the ISPs will have to find their revenue growth

Wall street is the problem, they expect any company to generate more revenue each quarter compared to the time next year. If subscriber growth is not happening such as in a saturated market, then yes there's not going to be revenue growth. A dividend should be enough for these greedy bastards, but we all know none of them can wait for their profits it's all NOW NOW NOW.

Karl Bode
News Guy
join:2000-03-02
kudos:39

Re: The problem in a few words

That's absolutely right. An ISP can't just be VERY PROFITABLE. It has to be consistently more profitable, which in every sector results in crappier service as companies look to cut corners and maximize revenue at every possibility, with less and less regard for consumer welfare. That's where a balanced and reasonable regulatory authority would enter the equation, but in our culture we've decided that letting the inmates run the asylum (see: banking) makes more sense.

WHT

join:2010-03-26
Rosston, TX
kudos:5
said by NOCMan:

it's all NOW NOW NOW.

The mantra of the short-term investors.

richdelb
Go Hawks Go
Premium
join:2003-01-22
Algonquin, IL

Regulated "Utility"

If they want to charge by the byte, that's fine with me. Run them like every other public utility:

Charge EVERYONE the same "access" fee per month. (of course, like the other public utilities, this "Access Fee" would be regulated the state. The ISP would have to petition the state utility commissions each year to justify possible rate increases.

Each Utility charges a REGULATED "assess fee" of some type or other. (they all seem to call it different thing, but it's a basic fee for "plugging into" the network) Then, I pay for what I use. That rate would also be a rate that is subject to annual review by the Public Utility Commission, and also scrutinized by groups like CUB.. (at least here in Illinois)

As far as what that "Access fee" would be... I think there are GREAT models for that in place already. ComEd, NICOR, AT&T, all have LARGE physical infrastructures that they must maintain. (Illinois) Good price examples of those costs are already in place and have been in place for many years. Surly it doesn't cost Comcast more to maintain their infrastructure than it does for the Electric company or Gas companies to do the same, right?

If I run the A/C non stop in the summer, my electric bill is high. If I only use a fan, it's not so high. Same in winter. Blast the heat, high gas bill. Turn it down and put on a sweater, lower bill.

So if Grandma is just sending an e-mail picture now and then of the grand kids, in this model she WOULD pay MUCH less than a heavy BT or Netflix user. Just like I would pay much less than my neighbor if I set my heat at 65 degrees and he sets his at 72.

Speeds tiers would no longer be relevant as the important factor would be the AMOUNT of data you consume each month: It would be to the benefit of the ISP's to offer EVERYONE the very fastest speeds possible, as you can burn though more DATA a month when you have faster speeds. Capping or throttling a customer would work against the business plan of getting you to consume as much data as possible. (they are billing you for all that data. THAT is their source of growth and revenue. Of COURSE they would invest to build faster networks. Investors would DEMAND it.)

Of course, this is NOT what "INVESTORS" dream of when they think of billing by the byte, but isn't this the next logical step if they go that way?

88615298
Premium
join:2004-07-28
West Tenness

Re: Regulated "Utility"

said by richdelb:

If they want to charge by the byte, that's fine with me. Run them like every other public utility:

Exactly. They compare their services to utilities as a way to justify metered billing but they do not want to be regulated like a utility. You can't have it both way guys.

COMMAN
Plug Me In

join:2000-07-17
Mount Juliet, TN

Re: Regulated "Utility"

Sadly, with our current state of "the best government that lobbyists can buy", they CAN have it both ways.......

From downloading music and movies for free, to raising prices and lowering services, everybody wants to TAKE, TAKE, TAKE, without ever giving back.

CAPITALISM is a GOOD thing, GREED is NOT!
--
Broadcasting TO the people, FOR the people, BY the people - INTERNET RADIO!

88615298
Premium
join:2004-07-28
West Tenness

Re: Regulated "Utility"

said by COMMAN:

CAPITALISM is a GOOD thing, GREED is NOT!

You really can't seperate the two. The concept of capitalism is to make more and more money. Eventually that becomes greed. The phrase "enough profit" does not exist under capitalism.
sonicmerlin

join:2009-05-24
Cleveland, OH
kudos:1
Downloading movies and music for free doesn't affect legitimate sales. It happens all over the world, and studies have shown the most prolific downloaders are also the biggest spenders. Ars Technica has run a few articles on studies demonstrating that pirating has virtually no effect on overall game sales. So comparing the corporate gouging of consumers to consumers pirating files is a very illogical route.

Condensed

@ountpromotions.com
This would push me back to disc based media through Netflix and what not. Kind of bizarre in a way.

FFH
Premium
join:2002-03-03
Tavistock NJ
kudos:5

Not MAGICALLY inevitable; but inevitable nevertheless

The cord cutting phenomenon everyone says is coming, where regular Cable TV is going to die off and be replaced by a la carte Internet video, makes charging by bytes consumed inevitable. It isn't magical, but it is the only way that cable providers will be able to fairly allocate infrastructure costs so that the heaviest users pay the most money. And also the only way growing demand for infrastructure upgrades can be financed. Those causing the need for upgraded infrastructure will end up paying for it.
backness

join:2005-07-08
K2P OW2

Re: Not MAGICALLY inevitable; but inevitable nevertheless

I think you should add, In my opinion, to this post.

If cable TV goes away so does all the overhead of that service.

How did poor cable companies survive before high speed internet revenues again?
jkeelsnc

join:2008-08-22
Greensboro, NC

Metered Billing

Yes fine. I do think that if they want metered billing like water or electricity then they must be required to be regulated like an electric or gas utility. And be required to extend their services everywhere. Like some other posts mention. These guys who are the fat cats at the stockholders' meeting don't care what it costs to anyone. They really don't even care about free market economics or the value of competition. Just so long as they get a fat cut thats always growing then they are perfectly happy to find a way to keep it that way. Especially, if they can can get state legislatures, courts, and congress to provide regulations that enforce their ever growing money laundering and racketeering attitudes.

Bill Neilson
Premium
join:2009-07-08
Arlington, VA

What we are headed towards is what AT&T has done

with the iPad with the 2gb cap

A cap number that MANY people (including myself) can hit by not even being a "heavy user"

I restrict myself HEAVILY now with the iPad and sense that more companies will want this type of low cap where many people hit the caps and get the penalties

Simba7
I Void Warranties

join:2003-03-24
Billings, MT

Re: What we are headed towards is what AT&T has done

said by Bill Neilson:

with the iPad with the 2gb cap

A cap number that MANY people (including myself) can hit by not even being a "heavy user"

I restrict myself HEAVILY now with the iPad and sense that more companies will want this type of low cap where many people hit the caps and get the penalties

I love their remedy for the problem: "Use WiFi". You should've seen me stare at my phone with the "WTF?!?" look.

This was when I was asking at&t about the switchover from Alltel. I use alot of data and their remedy was to "use WiFi". My response was "That does me a hell of alot of good."
--
Bresnan 18M/1M
MyWS[E5200@3.75GHz,4GB RAM,2x1TB HDDs,Win7]
WifeWS[A64@2GHz,2GB RAM,120GB HDD,Win7]
Router[2xP3@1GHz,512MB RAM,18GB HDD,SMC 8432BTA,2xDigital DE504,Compaq NC3131,Intel Pro/1000MT,IBM Gigabit Ethernet-SX,Allied Telesyn AT2560FX,Gentoo Linux]
megarock

join:2001-06-28
Catawissa, MO
Reviews:
·Charter

...

It's only inevitable if people don't act quickly and cut their cords. Dump the phone, dump the TV and dump the internet if you can. If you can't dump to the lowest possible package.

Which is worse - a few months of no or slow internet....or years of being capped, overcharged and screwed?

YukonHawk

join:2001-01-07
Patterson, NY
Reviews:
·Comcast

Here's a video from The Street.com

Basically once the merger goes through for ComCrap and NBC The "all you can eat" will go be the way of the dinosaur.

»www.thestreet.com/video/10937283···80165001

Natalya2222

@verizon.net

why isn't it inevitable?

With no competition, they can charge what they want. Most people only have 1 or at best 2 choices. that aint gonna change anytime soon given current anti-competition policy.

Flimblam

@shawcable.net

Only works if....

All the providers in the area have stupid low caps with stupid high overage fees.

These companies have enough money to buy up massive media assets but not have a working network that can deliver netflix etc, ya right ill believe these steps are necessary when their stock plummets more then BP during their disastrous failures. Nothing more then collusion in an attempt to curb internet video and cord cutters.

Does it surprise anyone that the same guy that is pushing for these caps that tries to brush cable cutting off as something for the stupid and lame? Or not even an option.... Sure if you have your greedy way you could make money, however you will lose any and all customer loyalty after the excessive charges hit.

Shaw's choice to support these tactics is disgusting and will cost them my future business as well as many others i assume.

They better hope all the people who have unsecured wifi or just end up having their wifi hacked into and costing them hundreds of dollar will make up for the pissed off customers that will switch their TV VOIP and phone to telus,teksavvy,novus.

Anon6

@comcast.net

Netflix

So all the people who stream netflix every other day should have to pay more, but it won't just be them that pays more, it will be all of us as well even if we don't use netflix.