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Moffett: AT&T Caps Herald 'Next Generation of Communications'
If By Next Generation You Mean Artificial Scarcity
by Karl Bode 08:42AM Monday May 16 2011
An ISP bull rush toward metered billing has long been 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. Moffett is now insisting AT&T's new caps "provide air cover that makes it easier for all of them to follow." Moffett's latest research note also once again cheers the arrival of new restrictions and pricing, insisting it heralds the "next generation of communications":
quote:
The goal of moving to usage based pricing is not to undermine competition from Netflix (or anyone else… although it certainly wouldn’t be good news for Internet video). And it is most decidedly not to simply “raise prices for broadband” as Public Knowledge or New America would have it (although it might well do precisely that, too). Instead, it is nothing less than to re-align the entire business model of today’s infrastructure providers with the next generation of communications… so that broadband providers might stop fighting against the tide and embrace it instead.
Except if you've followed Craig Moffett over the years, the very last thing he's interested in is embracing the "next generation of communications." Moffett has long criticized any serious upgrades by broadband ISPs, be it Verizon FiOS or even the less expensive DOCSIS 3.0 upgrades being undertaken by most cable operators. That's because as an investor, what Moffett's interested in isn't the next generation of connectivity, it's the next generation of milking consumers. In this particular case Moffett -- and the industry he feeds off of -- is interested in creating artificial scarcity.

The broadband industry began pushing this effort with the Exaflood, or the repeatedly-debunked idea that bandwidth demand is growing so quickly that we'd all be facing connectivity blackouts if the carriers weren't allowed to charge by the byte. Except independent data from Cisco and numerous Universities has long shown bandwidth demand is growing at a reasonable rate -- entirely manageable with fairly basic upgrades. In AT&T's case, current flat rate pricing remains very profitable, and AT&T's DSL and U-Verse network has little to no congestion.

So what's really going on here? As voice becomes just data, calls approach free and voice revenues fall. As Internet video grows, TV revenues fall. The solution? Impose steep new limits and per byte overages on bandwidth that are absolutely detached from any real-world economics. Artificially constrict and meter the pipe, and you've not only got a great new way to deliver investor returns and offset TV and voice losses, but you've managed to retain power in an age where the traditional carrier continues to lose relevance (see Google Voice).

Supporters of imposing low caps and high overages can't just admit that this bandwidth rationing is about turf protection and layers of unreasonable new fees that offer no benefit to the consumer. That's why investors and the broadband industry will often try to insist that these price hikes (not to be confused with real pay per use) are somehow about altruism, saving grandmothers, or a love of "next generation communications." This showmanship tends to add insult to injury amidst a public that's generally smarter than the industry gives them credit for.


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FFH5
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Cable has to recoup costs of lost TV subscribers

The inevitable reality is that cable companies have an infrastructure cost that supports cable TV & internet. If TV revenue is dropping and Internet costs are rising as users switch to Internet video, then they WILL switch their business models to get more revenue from the Internet side of the business. And right now that looks like UBB is going to be the mechanism to do that. And people who argue that the businesses involved should just suck it up and accept lower profits don't understand business AT ALL.
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