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Cable Broadband Users, Get Ready For Overage Fees
Clear caps? Great. $1.50/GB Overage fees? Wait a !@$% minute...
by Karl Bode 06:14PM Thursday May 08 2008
What seemed like a vague industry possibility just a few months ago now seems like an inevitable certainty. Multiple carriers in North America are now either employing or considering monthly caps where users pay per gigabyte should they "over eat." But the move begs a number of questions. Not least of which is whether opening the door to overage fees invites a broadband future where ISPs use the nebulous specter of "excessive use" as a new piggy bank -- and as a pre-emptive weapon against competing content.

Once we've agreed to the monetization of "excessive consumption," what stops ISPs from constantly lowering their definition of "excessive," while hiking user penalties?
Earlier this week I broke the news that Comcast is considering implementing a 250GB monthly cap, with a $15 penalty for each 10GB over that cap you travel. I've been reading through the various subsequent coverage (Associated Press, New York Times, CBC) , and came across this Business Week report. In it, Time Warner Cable spokesman Alex Dudley confirms they're still on track to begin testing their own overage system. If you recall, we also broke the news of that system, which could come with caps as low as 5GB per month.

The public backlash apparently didn't scare Time Warner Cable away from the project. While Time Warner Cable and Comcast are still cooking their overage plans, Canadian cable operator Rogers just became the first major North American broadband operator to implement such a system (60GB cap, between $1.25-$5 per additional gigabyte). Some smaller U.S. cable broadband providers like Oregon based BendBroadband have also embraced the idea (10-50GB cap, $1.50 per additional gigabyte).

If the caps are generous (and Comcast's 250GB cap is), being clear about them is certainly a welcome shift. However, many caps won't be so generous. And the sudden decision by the U.S. broadband industry to adopt a system where "excessive use" is punished by per-GB charges raises a lot of new questions.

What's To Keep FiOS From Eating Cable's Lunch?

Verizon has thus-far said they won't cap or restrict their FiOS FTTH service. With the cable industry suddenly imposing overage charges on high-consumption users, it immediately puts them at further marketing disadvantage to a product they're already afraid of. Sure, 250GB is reasonable, but it won't be hard for Verizon or AT&T's ad agency to make cable broadband service seem miserly. Cable won't have to worry about Qwest, who has their own invisible consumption ceiling and hasn't invested in fiber to the home.

What Will Keep Caps And Overage Fees Reasonable?

Honestly, what's to keep investor pressure from constantly forcing caps downward and overage fees upward? Unless you're living in denial, we can generally agree that most broadband markets in the United States consist of a largely uncompetitive duopoly. In order to please investors and create consistent quarter over quarter growth, ISPs have been selling everything that isn't nailed down (your personal browsing data and even your typing mistakes).

Does anyone really believe that once overages become commonplace, the general trend won't be consistently lower caps and consistently higher overage fees? Once we've agreed to the monetization of "excessive consumption," what stops ISPs from constantly lowering their definition of "excessive," while hiking user penalties? The highly lobbied FCC? A bickering Congress? A cap that begins as reasonable can quickly become oppressive.

ISP Usage Meters Suck

Sorry to be blunt. Don't believe me? Spend some quality time in our HughesNet or Wild Blue satellite broadband forums talking to users of these services. Both providers cap monthly use, then throttle customers who exceed consumption limits. The provided meters for these providers have been so unreliable, many customers have been forced to code their own. Australia ISP Telstra created a billing nightmare when they tried to accurately track consumption back in 2002. Hopefully Time Warner Cable and Comcast do a better job.

If we agree that independent video is a direct and serious threat to cable television revenue, and we agree that the bandwidth needed for HD services will only grow, then what stops any cable operator from lowering the definition of "reasonable consumption" to deter use of competing HD services?

Usage Caps and Overages Impact Content Competition

It's a constant meme thrown out by network neutrality supporters, but it's true. The future consists of any number of bandwidth eating services that haven't been invented yet. The present consists of multiple, independent operators trying to force high-definition content down Comcast's pipe. DirecTV is launching an HD-delivery system that uses your bandwidth as a VOD delivery vessel.

Time Warner Cable's overage trials involve caps ranging from 5GB to 40GB per month. If we agree that independent video is a direct and serious threat to Time Warner Cable television revenue, and we agree that the bandwidth needed for HD services will only grow, then what stops any cable operator from lowering the definition of "reasonable consumption" to deter use of competing HD services?

Why Not Just Make Gluttons Pay For a Business-Class Tier?

Time Warner Cable and Comcast agree that "bandwidth hogs" make up a very small portion of their overall subscriber base. Comcast pegs the number of bandwidth hogs as the top 0.1% of their user base (14,000 customers out of Comcast's 14.1 million users). Time Warner Cable argues that 5% of their subscribers utilize over half of the total network bandwidth. So why would TWC want to impose a 5GB cap on lower-tier users?

These ISPs could simply force these high-consumption users to a more expensive business tier. Instead, they're choosing to monetize "excessive consumption." This is happening just at a point when their bread and butter income (TV and its endless rate hikes) is being threatened by alternative video. It's fair to ask whether the move is less about network strain, and more about a pre-emptive strike against competing video delivery systems.

Is This A Prelude To Billing By The Byte?

I've talked at length with multiple ISP executives who say their companies have no plan to currently shift from a flat-rate pricing model (the current U.S. standard) to a bill-by-the-byte model. The truth is that existing profit margins (particularly for VoIP) are very healthy, and many U.S. consumers already feel they pay too much for what they get. It's an uphill battle to convince consumers they should pay more, to get less.

The general consensus among executives seems to be that they'd love to migrate to such a model, but they're afraid of consumer backlash. But what if you could warm the public to per-byte billing via baby steps? What if you could convince Joe consumer that a bandwidth apocalypse is looming thanks to video and P2P, and per-byte billing is a "necessary evil" to save the Internet as we know it?

This Is About More Than 250GB Being Reasonable

To be clear, I do think having reasonable caps on consumption is vastly superior to nebulous caps, vague enforcement, and the throttling of upstream P2P traffic. But while I embrace clear caps, I think a shift toward per-GB overages is a dangerous migration that could have serious repercussions down the line for consumers and content competition. This is a door, once opened, that can't be stepped back through.

214 comments .. click to read

Recommended comments

Karl Bode
News Guy

3 recommendations

reply to FFH5

Re: ANY Overage Charge is excessive W/O Roll-Over Credits

You are such a stern company man! It's almost cute. I'd really like to meet you sometime to pick your brain.


Suffern, NY

2 recommendations

Since they claim I am paying $X/Month for Y GB/Month, then any time I do not use my paid for GBs in a month, I am entitled to a Roll-Over of the unused GBs to the next month which must FIRST be used to credit me for using over my monthly allowance BEFORE I should be asked to pay for any so-called excessive/overage charge. If in one month I only use 75% of my PAID FOR limit, and the next month I use 115%, my 2-month average is still only 95% so I have NOT exceeded my allowance during that 2 month period.

In fact, since they want an Over-Usage Charge, I can be considered to be entitled to an Under-Usage Rebate. The Overage Charge should also be based on a prorated amount of the Limit and the Monthly Charge. IOW: If I go over by 100%, the total Overage Charge should not be more than my Monthly Charge or it is gouging.


San Jose, CA

3 recommendations

250 GB is a lot, mmkay people.

I'm not sure you realize how much this is. Even if you are doing loads of downloading from newsgroups, that is still at least 100 high-quality divx movies per month, plus hundreds of high-quality MP3s per month, and add onto that regular surfing, streaming video (which is typically low-bandwidth), streaming radio, email (even spam). Put it all together and it wont even meet that limit. Hell, throw in a couple ISOs while you're at it ... how about the latest 2 or 3 games? Oh and maybe you want an illegal copy of Nero? go for it. Ubuntu discs? Go for it.

In general we don't want limits, naturally. But I'd be happy to see the hogs pay more or go to another ISP. Trust me.. at over 250 GB, you are a hog.