Several users have directed our attention to a post by Todd Spangler at Multichannel News
, who insists that alongside the Washington Post, we're somehow an "enemy" of usage based broadband pricing because of our tendency to call the industry out
for its repeated attempts to portray its desired shift away from flat rate -- to high per gig overages -- as somehow inevitable, necessary or even altruistic. At the core of Spangler's assumptions is his incorrect belief that U.S. flat-rate pricing (already among the most expensive by OECD standards
) isn't profitable enough to sustain even modest network upgrades. Flat rate is perfectly profitable, as clearly evident by ISP earnings. Still, says Spangler:
"BroadbandReports.com’s Karl Bode, an articulate critic of usage-based pricing, claims that metered broadband models "aren't based on real economics, given the continually dropping cost of terrestrial bandwidth and hardware." Really? Where is the evidence that the costs to upgrade Internet networks to handle double-digit yearly increases in bandwidth utilization into the next decade can be covered without raising rates in some way?"
Nobody is arguing that ISPs won't have to raise rates in some fashion over the next decade
, and ISPs certainly have no shortage of other creative methods of milking additional revenue from
subscribers. That's a red herring, and obviously entirely different from the observation that low cap/high overage pricing is, in every trial implementation we've seen, punitive and fails to offer consumers real value. Where's the evidence that flat-rate pricing is sustainable? The entire history of the Internet and every ISP earnings report we've ever seen. Where's the evidence that flat-rate pricing isn't profitable enough to adequately fund network upgrades? It doesn't exist. Spangler continues:
Arguing that ISPs have managed to accommodate increased usage without resorting to consumption-based pricing so far misses the point: The wave of video-driven Internet usage hasn’t fully crashed on the shore yet. Common sense dictates that adding hundreds of Gbps of capacity is a significant cost. (Even if Level 3, with respect to its feud with Comcast over interconnection fees, wishes otherwise.) As I’ve said before, paying based on what you use is the fairest and most reasonable approach for operating broadband networks in the era of Internet TV..
Likening video evolution to a tidal wave drifts into Exaflood territory
, a scare-mongering argument that's been debunked repeatedly by data showing
that Internet traffic growth (video included) is manageable with only modest network infrastructure improvements. While it may require a few sleepless nights for network engineers and intelligent network hardware vendors, it doesn't require an entirely new pricing model, and it's "common sense" for those suggesting otherwise to clearly prove why. Also we'll repeat (and it's not clear how much this needs to be repeated, but it's apparently daily) -- but what's being proposed is not "pay for what you use
" -- it's flat rate with
low caps and ridiculously high per gig overages.
Simply wanting real value in pricing tiers does not make one an "enemy" of usage-based pricing. It would be fantastic to see an ISP come up with an innovative new usage-based pricing model that offers value. But that's likely not going to happen (at least among the sector's incumbents), because: 1.
we lack organic competition in U.S. markets to keep these prices in check; 2.
while ISPs like to talk a lot about the utility pricing model, they don't want to be regulated like utilities; and 3.
real usage-based pricing would mean the vast majority of their users would pay $10-$20 a month (to offset support and other costs) -- instead of $40-$60 a month -- costing the sector billions. True "fairness" in pricing is the last thing driving this push.
If I'm "an enemy" of anything, it's not usage-based pricing or even reasonable caps. I'm "an enemy" of already perfectly-profitable ISPs imposing unreasonable and confusing new pricing models on consumers for turf protection reasons, then dressing the move up as an inevitable tidal wave of generosity. Part of the problem is that every pricing proposal we've seen thus far has involved unreasonable high per gig pricing aimed squarely at uncompetitive markets, and ISPs insulting consumers' intelligence by pretending their current flat-rate pricing isn't profitable. They've also consistently involved the industry telling
consumers what kind of pricing they should want, but never asking