As we've talked about for years, investors absolutely lust after the idea of ISPs ditching flat rate pricing here in the States and shifting to a low cap, high overage pricing model. That's not to be confused with real per byte pricing, where people would only pay for what they use, given the majority of their customers would only have to pay $5 a month. No, the dream investor pricing model for the States is much like what they have in Canada, where users overpay for flat rate service, then have expensive per GB overages tacked on top.
This allows ISPs to charge more money for the same product, while simultaneously allowing them to both cash in on -- and/or deter -- the use of Internet video. All of this occurs while the cost of bandwidth and hardware continue to drop, so it's fairly clear why investors are so bullish on the idea. Again, while real per byte billing might be a good idea, the proposals we've seen so far in trials by companies like AT&T and Time Warner Cable are something else entirely, and offer little consumer value.
Sanford Bernstein analyst Craig Moffett really, really wants the cable industry to impose new metered pricing, likely to bolster company and client holdings. Moffett, who recently proclaimed TV cord cutters were lame, old and poor (they're actually usually young and educated), has already proclaimed he thinks that if people cut TV service, cable will have "no choice" but to start heavily metering broadband. In an investor note today, Moffett interprets this morning's ambiguous FCC neutrality announcement as a green light for carriers to begin imposing their dream overage pricing models:
quote:"Broadband rationing is now the order of the day," Bernstein Research senior analyst Craig Moffett says that the FCC's just-circulated order on codifying and expanding network neutrality guidelines "specifically and expressly endorses usage-based pricing for broadband." "The tacit endorsement of UBP is, in our view, the biggest news of the day, and must be viewed as very positive for terrestrial broadband operators," Moffett said. "We would expect the introduction of UBP plans from major cable MSOs to follow in short order, and we would expect that their stocks will respond well to such introductions."
Usually you don't get such frank terminology from investors, Moffett interestingly using the phrase "rationing" to correctly illustrate how carriers dream of constricting and further monetizing connections with pricing models utterly detached from real world costs. Left out of Bernstein's equations and certainty of a metered future is the fact that many consumers aren't stupid. Time Warner Cable already tried to impose overpriced overages on customers, and the result was one of the biggest telecom PR disasters in recent memory.
While it's not out of the realm of possibility a broadband company imposes a usage-based pricing model that has consumer value in mind, offering such a tier would run contrary to the entire point of usage-based billing: to generate more revenue from the exact same service while exerting power on the content and Internet video ecosystem through artificial scarcity.
Update: The FCC tells GigaOM that they'll remain watchful for predatory pricing practices:
quote:It looks like the FCC isn’t ready to give up its consumer advocacy on usage-based pricing plans. An FCC spokeswoman emailed me a statement attributed to a senior FCC official that said, "Usage-based pricing can create more choice and flexibility for consumers. But practices that are arbitrary, anti-consumer, or anti-competitive would cause serious concern. The FCC will be a cop on the beat for consumers."
Of course with an FCC that's frightened of its own shadow and bends over backwards not to upset major carriers, taking any serious stand against carrier last mile pricing is very unrealistic. The only thing standing between investors and executives and these expensive new pricing plans? You.
I think the one thing that will stop telecoms and cable providers from doing this in the US is the amount and quality of competition. While most people say there is limited competition, the majority of Americans actually have multiple choices for internet: Satellite, DSL, Cable, or Wireless. An example is my area. Service Electric has a 100 GB cap. They don't dare reduce that cap because CenturyLink, Verizon Wireless, Sprint, and multiple satellite providers all service my address. The only thing that keeps me using Service Electric is the high speeds. If SE lowered the cap to the point where it interfered with my heavy usage (netflix, xbox, steam, youtube, 80-90 gb/mo) then I'd jump to CenturyLink.
Once clear gets it's network rolled out and the cell providers roll out their 4g network things will really start to get interesting.
That only works if the other companies don't jump on the overage bandwagon, which they probably will. Also, satellite internet is not a real choice, and wireless is iffy. Here we only have the cable company and the phone company that can offer any real speed, and it's like that for almost all of the country.
Satellite? Seriously. Go use Sat Internet for a while and then tell me that you'd *willingly* choose it over anything else. (I wouldn't if I were on the side of a cliff and it was free.)
DSL... most of the country is served by zero or one DSL provider -- and that one being the local grubby phone company. If you are exceedingly lucky, you'll be close enough to a CO that still has some legacy DSL gear in it (99% of that being Covad owned today.)
Cable... where cable is available (yes, there are many places in this great country not served by cable TV) there is one provider. They buy their monopoly via "franchise rights." If you live in an area served by more than one coax cable provider, you've won the lottery.
Wireless... If you mean cellphones, you have to be joking. Cellphone data plans are insanely expensive, metered and capped with excessive overages (repeatedly exceeding the cap can get you booted), and the speeds vary constantly. If you mean Wimax/WISPs such as Clearwire, then it's a gigantic maybe... speeds are unstable, coverage varies wildly, and rumor has it Clear has "unwritten" caps as well.
here we go with the "rumor" mill again against Clear- get a life and stop bringing them into it. They're using fair throtting and NO caps. And it's not a wide throttling. it's only on the BUSY towers.
If anyone is going to talk about broadband competition and alternatives, Clear has to be included. As I said, their "caps" are completely unwritten -- you won't find anything about it in any of the legalese when you sign up, and support generally won't give a straight answer (maybe they haven't been given one.)
Anyway, the point to be made is Clearwire doesn't have any overage fees (yet.) They may throttle your connection for vague and undocumented reasons -- I had a modem for a week and didn't have that problem.
[reception was ok at my house; not so much any of the other dozen places I tried. download speed was all over the map. price was roughly the same as cable and dsl.]
You start with a system where the current revenue stream is maintained by the pricing model. And as users drop TV subscriptions and move to broadband video, the lost TV revenue is replaced by higher broadband usage fees as users eat more and more Internet bytes.
All companies want revenue growth and not mere stand still revenues. But this can be obtained as new products use broadband delivery and not just TV channels converted to Internet video. Things like tele-presence; medical monitoring; more video conferencing; etc.
In any case, a dozen accountants and a few weeks of analysis could easily create a pricing model that will reward light users and make heavy users carry more of the cost burden than they do now. And these models can even be structured such that it can forecast and adjust for the fact that heavy users will find a way to reduce their usage due to it costing them more per month.
Except for a company like Comcast which put themselves in a hole by establishing an incredibly high 250GB cap. For UBP to be effective against heavy users, they really need to drop it down to 80~100GB, something which is now impossible to do without a PR nightmare.
At this point, I'd rather see them just go with modest annual rate increases and benefit on the side from any hardware/bandwidth price drops. And yes, I am a both a Comcast user and shareholder.
250 isn't incredibly high, real bandwidth hogs can use 1 -3 TB a month on a fast cable connection, trust me comcast's 250gb cap is more than low effect to effect bandwidth hogs.
No offence, but is there any public data about what people actually use? I hear people whine and cry about the 250 GB cap but I would like to see some hard numbers of what is actually used in the real world.
From personal experiencing... with two very heavy heavy users at my house... myself downloading games on Steam, running a Minecraft server, torrenting ISOs, streaming Netflix, playing XBOX, watching ESPN-3, and remote connecting to a Slingbox... while my sister does heavy photography, uploads to photobucket, more Steam, Hulu, and gawd knows what on IRC....
.... I actually average 80 GB per month (so says DDWRT). I had a few months where I hit 120 GB and one month in particular where I did 280 GB...
So please, I would really love to see some reference as to what an average user, cord-cutter, and techno-heavy user actually use.
Well I can give you some sort of idea on the cord cutter front. Every hour (42 minutes) of SD is around 350Mb, every hour of HD content is around 1.09Gb. Now there are some options for just downloading/streaming and viewing, but any long term model for this is going to involve something similar to P2P. So assume a 1:1 download/upload ratio, and you end up with 2.18Gb for every hour of pure content, probably closer to 2.5Gb when you add in commercials. (assuming some sort of legit option pops up, it will have commercials)
So a cord cutter on Comcast, using the connection for nothing but replacing TV, would hit the cap around 25 hour long shows per week.
That number drops even further when you factor in connection overhead.
And if you are really doing everything you listed, I'd lay money your DDWRT meter isn't accurate.
I used to use over 200gigs a month back in 2000 before shaw bought up my local ISP and started charging me double for half the speed. I still only get 1/3rd my upload that monarch.net gave me years ago and im on a higher tier that is supposed to give me 1 meg per second but can never break 70k unless it is 2am or later. I would consider myself a cord cutter since i get all my content via the web, tho my household still has cable but not for me. Under fair use i feel free to download any shows that are on any of the channels i also pay for threw cable fees. IE bones house etc the stuff shaw wants me to pay 2-3 bucks per episode on their shaw VOD.
I would have to be mad to pay that over the price of netflix.
I regularly come close to or exceed 250GB/month. Twice I've received a warning call from Comcast securities in regards to my usage. The problem is that its me and one other roommate that lives together. We have the 50/10 tier because we don't have cable. Between IPTV and my IPTV research project I'm working on for gradschool, the PS3 and 360 being played once in a while and me video chatting with my folks back home 250GB is quite minuscule. I'd be ok with flat rate price but when I'm paying for one of your top consumer tiers and you patronize me about my usage its like a slap in the face. Last month I used 372GB's. transferring to/from sites like Souncloud and Mixcloud also increase bandwidth significantly. FYI, those two site mentioned are like Cloud resources for music...legal and free for the most part.
Fair implies an mutually agreed upon price. The ONLY thing that maters to them is to increase Profit.
If they can get you to pay more while providing the same or less service, they will. This gives them the perfect opportunity to screw over their customer base for several years, until laws get introduced to stop them.
The only way usage based billing would be fair would be if they charged lite users (ie: grandma who checks her email once a week) something like $2 a month which is something THAT WILL NEVER EVER HAPPEN
The only way usage based billing would be fair would be if they charged lite users (ie: grandma who checks her email once a week) something like $2 a month which is something THAT WILL NEVER EVER HAPPEN
There is basic cost just for maintaining an open account, billing, customer support, advertising, etc.
My water, electric, natural gas are usage billed. They rise and fall with my usage, but never to $0.
IMO, broadband should be treated like a similar public utility to ensure rates, profit, investments, etc., are appropriate. But, appropriate doesn't mean overhead recovery ceases to exist.
The only way usage based billing would be fair would be if they charged lite users (ie: grandma who checks her email once a week) something like $2 a month which is something THAT WILL NEVER EVER HAPPEN
There is basic cost just for maintaining an open account, billing, customer support, advertising, etc.
My water, electric, natural gas are usage billed. They rise and fall with my usage, but never to $0.
IMO, broadband should be treated like a similar public utility to ensure rates, profit, investments, etc., are appropriate. But, appropriate doesn't mean overhead recovery ceases to exist.
yeah, i get charged a "base meter fee" for my power, gas, and water. the difference? i get the first X amount of each one included in that fee. do you honestly think ISP's will say a base fee of $15 a month that gets you the frist say 5GB's included? hardly, theyl charge the $15 as an "access fee" and then charge for every single byte of data including im willing to bet that includes the DHCP traffic for their own network....
do you honestly think ISP's will say a base fee of $15 a month that gets you the frist say 5GB's included? hardly, theyl charge the $15 as an "access fee" and then charge for every single byte of data including im willing to bet that includes the DHCP traffic for their own network....
Actually yes, because that's exactly what the "light" users are already paying so it won't affect their profits. AT&T, Comcast, Time Warner, etc all have basic/light tiers in the $15-25 range.
In fact, a $15/mo 5 GB initial package just opens up the opportunity for more revenue when that "light" user has friends & family over.... or does something more than "check their email" in the off-chance they try out this new-fangled Netflix Youtube Hulu thing.
That has always been my beef with metered billing. OK, so I regularly see all this ARP and DHCP traffic keeping my TWC modem busy nearly constantly. Soooo....under UBP, will I get charged for all this traffic I never wanted in the first place? One attempt from one user constantly pinging you or SYN flooding you can ruin your day or indeed your whole month because there is all that traffic you most certainly didn't want and probably didn't deserve either. I also think about all the spam that rolls through my mail server, not to mention all the spamming attempts which get cut off right at the MTA (Sendmail) because they're not accepted in the first place.
We consumers only deserve metered billing to the extent upstreams do metered billing. Last I knew, that's not the way it worked; they pretty much all are some flat rate per month.
Well, more to the point, MMH, it's nontrivial to figure out in an automated way which traffic is legit and what isn't. A spam attempt for example looks just like email that I want, except maybe for the 4xx or 5xx response (I use 4xx a lot to slow spammers down). And there's still the possibility of some horked-off user driving up my bill by sending nonsense traffic, if only by accidentally typing my address into his/her attack tool instead of his/her intended target's address.
Agreed. It can be fair and I would actually welcome it if done properly. We do pay for gas, electricity, water, and all our other utilities based on our usage. Plus under a UBP model we wouldn't have to mess with "lite" "basic" "standard" "turbo" "extreme" speed tiers.... everything could just run at full throttle and the ISPs could compete on cost-per-gig.
Sadly these companies haven't given the public much confidence because the "experiments" they've run don't pass the financial smell test (I'm looking at you Time Warner).
But if I paid $10 for a "connection" and something like $0.10 per GB then that would actually put me close to what I already pay for. Even if I decide to take the plunge and become a cord cutter and do nothing but Netflix streaming, I'd still come out ahead in savings and the ISP would still get their fair share for my increased usage.
And heck, if I was buying all my video separately directly from the source (i.e. Netflix/Hulu/ESPN3/etc)... then Comcast or Time Warner would come out smelling like roses by no longer being involved in the nasty carriage-disputes we've been seeing lately.
In any case, a dozen accountants and a few weeks of analysis could easily create a pricing model that will reward light users and make heavy users carry more of the cost burden than they do now.
It's the rewarding light users part that just isn't happening though. Sure, the caps being rolled out force heavy users (and usually even modest users) to pay more, but there has been no drop in pricing for the light users. They are still paying the same monthly fee they were for unlimited. (and usually more, since even those base rates are increasing regularly)
The other problem is the metering itself. My electric company charges me per kilowatt, but at any given time I can look at the meter to see how much I've used. And the billing runs off of that same meter, which is regulated and required by law to be accurate. With internet metering, you are lucky if you can see what you've used as of 3 days ago, and we are just (foolishly) relying on the honesty of the ISP that the meter is accurate.
the problem is the big name ISPs are greedy heartless sacks of poo. they would never charge something reasonable like 5-10 cents per gig it would be more like 50 cents to a 1 dollar per gig. on top of your 42.95 monthly.
I DARE ANY CABLE COMPANY to try this crap & see what happens! Comcast had to tuck tail with a soft cap. This is NOT Canada or other places where consumers are going to stand for whatever corporations want, and like it.
Bernstein Research senior analyst Craig Moffett. This idiot is the senior analyst?? How good is this Bernstein Research company? Companies always have idiots making decisions. They go and look for someone that took certain classes in college and got extremely good grades. Problem is the people that made these classes were rich idiots that don't take consumers into mind. Always college, don't look and see what their real life was like. Usually some kid that had a golden spoon in his mouth all his life. Willing to bet the idiot Craig Moffett had a golden spoon,fork and knife in his mouth all his life.
The Cable & Phone companies to to understand exactly what we all think of them and deal with it.
YOU ARE A DUMB PIPE. ---- Period.
We do not want or need you for TV or Phone. We also will not pay more, just to use the basic Internet needs (e-mail, gaming, video, search).
If they truly start a pay as you use service... Yes, usage will go down a little. But so will their income as it just means customers will use less. If they combine a monthly fee with usage... Customers will revolt.
If they truly start a pay as you use service... Yes, usage will go down a little. But so will their income as it just means customers will use less. If they combine a monthly fee with usage... Customers will revolt.
Pfffffft... yeah right... They will just set the price to give the illusion of lower and then when adding overages the net total will be higher. That while making a big PR campaign about reducing the base price Revolt and do what? Write a nasty email to the CEO?
Is there REALLY any "subsidy" going on with cable internet vs. TV? I have yet to see any facts proving it... Obviously infrastructure costs may have some crossover, but the basics have to have been paid off several times over by now (by and large). ...What about all the wiretapping infrastructure? Who pays for all that?
This is crap. Karl is so right. The "average" user (not 'power' user) would realistically only need a ~$5/mo. plan (screw it, let's even say $20), and they'd still be making money (they ARE still making money, lots of it!).
Hell, in some areas, 1.5Mbps DSL is around $60, PLUS phone service costs. This is already an insane price, and the use of that line ought to be flat out unlimited.
My cable bill has changed very little in years, but speed has increased. Could they not have kept "speed" at 2003 speeds (~3-4Mbps) if this were such a concern????? ...On that note, DSL pretty much HAS stayed the same for a majority of subscribers, if only because they CANNOT get faster service in so many areas...
I'd rather pay for tons of usability of my connection than a few more megabits of speed. It does no good to have extra bandwidth if its available usage shrinks (time, or Gigabytes, whichever).
This whole things smells dirty.
Possible that they're also looking for ways to pay themselves off for investing in all the wiretapping, eavesdropping, etc. that they had to do - but that's just a wild guess since nobody else has brought it up yet...
If that's even remotely the case, it makes this all the worse.
Is there REALLY any "subsidy" going on with cable internet vs. TV?
Not sure what you're referring to. Broadband is subsidized through the use of easements and rights of way (alleviating companies from negotiating with every private-property owner along the way). They also received some hefty taxpayer dough back around 1999 to increase speed, provide greater coverage.
TV is subsidized through the use of finite, public airwaves. Their conversion to digital was coordinated by the federal government, and facilitated by taxpayers giving away converter boxes to broadcaster's customers.
It's hardly a free market of willing buyers and sellers. There's a great deal of "in the public interest" happening. With not a lot of strings attached (IMO).
Metered billing would be 'OK' depending on the caps, but the problem is a lot of bandwidth gets eaten up by stuff one doesn't want, advertising, embedded video and music, etc.
I'm not sure how to react. My gut is telling me that this isn't right. It's getting to the point where I'm seriously considering going to the lowest internet tier, cancelling cable all together, and simply doing without if the billing by the byte comes to my ISP. There are so many things that I download and re-download ( the same updates for several computers) that I would have to think twice about if I were metered. I'd want to go back to using physical disks to get updates, which is stupid considering that requires actually delivering a DVD to me but would likely be less expensive than the superior technical solution... Oye!
... for years caps are going to be a reality. It's just too much money for no extra investment for these IP's not to drool after. They have bribed off a political party who is attempting to pay them back in spades. But there is at least one huge turd in their corn flakes - all of the new internet services that provide movies, games, music, and a ton more that requires a LOT of bandwidth use. Companies like Netflix could be burned badly if low usage caps (some have been as low as 5 GB) are put in place after they invested heavily with the movie companies get gain early access for movie content. Gaming sites will probably go under. Games like Call of Duty and World of Warcraft require a good bit of bandwidth when you add it up toward a cap.
The old canard that most people won't even notice a cap is a fallacy. As our society moves toward an ever-increasing dependency on our computers and the freedom they offer the internet providers are more than willing to chain us with a cap on that freedom. Maybe it's me but when I look at what's going on (like at the airports) freedom is getting in scare supply and losing the internet would probably be the last nail.
Moffett interprets this morning's ambiguous FCC neutrality announcement as a green light for carriers to begin imposing their dream overage pricing models
The green light for UBP was explicit by Genachowski in his speech.
The big shift came when Genachowski said hed be open to business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing. That means broadband providers can start creating variable price plans under which consumers will pay more for using more.
Maybe the powers that are currently in control want to shut down the free flow of ideas and are attempting to render the internet impotent as a venue to disseminate vast amounts of non corporate controlled information. My favorite aspect of using the internet is to view content from sources other than the traditional biased media outlets. These oligarchical overlords can not afford to permit the truth to surface about our pseudo republic and how it actually functions.