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Will All ISPs Follow AT&T's Cap & Overage Lead?
Or Will They Paint AT&T As Greedy, Cheap And Lazy?
by Karl Bode 01:49PM Monday Mar 14 2011
Yesterday we were the very first to exclusively report that AT&T will soon be imposing new caps of 150GB and 250GB on legacy DSL and U-Verse customers respectively, charging both sets of users $10 for every 50GB over the cap they travel. The move comes after previous trials by AT&T were shuttered, and on the heels of a failed effort by Time Warner Cable to charge by the byte in 2008. That latter effort failed in part because of a customer backlash, but also because competitors were using the meters as a competitive advantage, painting the company as a cheapskate with inferior network capabilities.

AT&T's move provides air cover that makes it easier for all ISPs to follow
-Sanford Bernstein analyst Craig Moffett
With more than fifteen million subscribers and a more sophisticated public relations apparatus, AT&T is another animal entirely. Their dominance of the market could allow ISPs in AT&T markets to use this opportunity to jump on the overage bandwagon, since users in monopoly or duopoly markets can't vote with their wallets. We've long argued that if the United States was going to shift from flat-rate to metered billing like in Canada, it would require all the largest ISPs to do so uniformly, to prevent any competitors from using their unlimited service for a marketing advantage.

An ISP bull rush toward metered billing is certainly the hope of investors like Sanford Bernstein analyst Craig Moffett, who has relentlessly been pushing for steep broadband overages for as long as we can remember. Moffett takes any opportunity to try and push meters; like when the FCC imposed neutrality rules, when the discussion of cord cutters recently heated up -- or as a huge fan of AT&T's decision to kill off unlimited iPhone data. In a research note Moffett was quick on the gun to argue AT&T's latest decision -- you guessed it -- could mean a stampede of metering:
"AT&T's move provides air cover that makes it easier for all of them to follow. We view the move as good news for all the terrestrial broadband operators."
Maybe, and maybe not. Competitors could use this opportunity to impose a very unpopular and confusing pricing model on consumers, or they could use the opportunity to badger AT&T, arguing that as a supposed next-generation broadband company, AT&T isn't making the grade. Cable is already winning the race against DSL, more than half of the AT&T network remains on legacy DSL (and will for years given AT&T's U-Verse investment cuts), and now many of those customers face new limits and higher costs.

It's a marketing attack that essentially writes itself. Take a look at the users in our AT&T forums threatening to leave AT&T (assuming they have the choice), and you'll see the marketing potential for any ISP that wants to highlight the fact they don't need to charge you by the byte.

With Moffett's help this week (he'll be quoted extensively and often exclusively as this story evolves), AT&T is hoping to convince the public that the new caps and meters are absolutely necessary without a shred of supporting data of any kind and few if any press outlets asking for any. While both Moffett and AT&T would love consumers to believe that such overages are both necessary and inevitable, Time Warner Cable's botched implementation of metered billing still strongly suggests consumers know better, and still have a say in the matter -- if their market sees competition.

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