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AT&T Advisor: Overcharging People For Bandwidth Aids Minorities!
It will also apparently cure your goiter and that lingering rash...
by Karl Bode 10:35AM Friday Jun 25 2010
Driven by AT&T's recent decision to impose caps from 200 MB to 2 GB and monthly overages up to $15, CNET's running an article that claims that those upset by this new shift toward high overages shouldn't be. Why? It will apparently not only magically cure the digital divide -- it will also somehow bring broadband to every man, woman and child -- of every race -- everywhere. Robert J. Shapiro, former Clinton staffer turned AT&T "advisor" informs readers of his CNET piece that AT&T's billing model is some kind of magical panacea that users should embrace:
With this flat-rate pricing approach, for example, almost one in five African Americans would still lack home broadband connectivity in 2020. A nearly comparable share of Hispanics and lower-income white Americans also would remain offline. In the face of rising bandwidth demand and the rising cost to accommodate it, the flat-fee pricing approach will perpetuate digital divides based on income, race, and ethnicity.

There is an alternative which, our analysis found, can achieve virtually universal broadband adoption by 2018. This alternative is a flexible-pricing approach that would enable ISPs to recover the bulk of their additional infrastructure investments from the providers of bandwidth-intensive content and the small share of consumers--online gamers, for example, and those who watch high-definition TV, movies, and videos online for hours every day--who claim a disproportionate amount of broadband capacity.
Like most of these articles written by "analysts" employed by major carriers, Shapiro bases his argument on several falsehoods. One, any suggestion that AT&T isn't incredibly profitable and needs this new model to sustain profitability or fund network expansion is simply false. Users already pay plenty for bandwidth and AT&T has been very profitable under flat-rate pricing. If AT&T chose to constrain network investment, it was to please investors at the cost of network performance.

Two, Shapiro pretends that the model AT&T is employing (low caps and high overages) is the same thing as per-byte billing, which would actually help very light users. That's a common mistake, but the two things are not the same.

Under real per-byte billing, billions of AT&T customers who use virtually no bandwidth would pay virtually nothing, costing AT&T billions. Under AT&T's (soon to be Verizon's as well) dream model, everyone ultimately winds up paying more money sooner or later. Imposing such a low cap drives the majority of customers to AT&T's more expensive tier. On either tier, users face huge overages that are far out of line with the cost of bandwidth delivery (which is consistently dropping). Charging absurd overages on top of flat rate is the real goal, dreamed of by investors for years.

In what reality does paying $15 a gigabyte help minorities or anyone other than AT&T?

One more time: AT&T's new billing model is not a decision driven by altruism. It's not about fairness to the nation's grandmothers. It has nothing to do with universal adoption or helping minorities (which for the record is one of the more obnoxious and disingenuous arguments we've seen AT&T's army of policy flacks throw out there). Contrary to popular belief, it doesn't even have anything to do with congestion (AT&T, especially after the upgrade to LTE, has plenty of leg room if they design their network correctly). AT&T imposed this model because it allows them to charge more money for the same product.

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