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Comcast's Primary Justification For Broadband Caps is Nonsense

Comcast CEO Brian Roberts recently justified the company's slowly-expanding usage cap "trials" by insisting that broadband should be treated just like gasoline and electricity. According to the CEO, broadband is just like both, in that users should be forced to pay more money for more usage, because it costs Comcast significantly more money when individual consumption soars.

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"We don’t want anybody to ever not want to stay connected on our network, but just as with every other thing in your life, if you drive 100,000 miles or 1,000 miles, you buy more gasoline," stated the CEO. "If you turn on the air conditioning to 60 vs. 72, you consume more electricity. The same is true for usage, so I think the same for a wireless device. The more bits you use, the more you pay."

The problem with Roberts implying Comcast faces higher costs with higher usage? Broadband is absolutely nothing like electricity, water, gasoline, or any other utility. Over at its POTS and PANS blog, CCG Consulting is the latest to make the important point that bandwidth isn't a spigot. They note that Comcast faces two major costs for bandwidth: transit and and raw bandwidth.

On the transit front, the blog quite correctly points out that at Comcast's size, the company's cost for transport on a per-megabit basis is likely lower than anybody else in the country other than perhaps AT&T. And, unlike Comcast's narrative, these costs are fixed and don't change if a customer eats 350 GB versus 300 GB in a given month:

quote:
Transport can be a major cost for an ISP that operates a long distance from a major POP. I have small ISP clients that spend between $10,000 and $20,000 per month on transport, which is a lot if you only have a few thousand customers. But for Comcast this cost has to be miniscule on a per customer basis. And the cost is fixed. Once you buy transport to a market it doesn’t matter how much bandwidth you shove through the pipe. So this cost doesn’t increase due to customer usage.
Yes, as Comcast has shifted into selling transit and getting paid by companies like Netflix for interconnection the analysis can get more complicated, but the fundamental point remains that these costs are largely fixed, and Comcast's already enjoying fat margins under the flat-rate pricing model. The other cost Comcast faces is of course raw bandwidth, which is also a fixed cost that won't fluctuate an iota if Bob and Mary Smith decide to watch a few extra Netflix videos in a month:
quote:
An ISP’s total cost for an Internet port is based upon the average of the busiest times of the month. For instance, a small ISP might use 500 raw megabits of aggregate usage on most evenings, but if their customers have a few nights per month where they use 700 megabits, then the ISP pays for that larger amount for the whole month.

The interesting thing about this pricing structure is that the ISP pays the same every day of the month whether the customers are using the data or not. The cost to Comcast wouldn’t change if any one customer, or even all of the customers in a city, were to use more data, as long as that usage doesn’t create a new fastest day of the month. From a cost accounting basis, this means that the cost of Internet bandwidth can also be considered as a fixed cost.


You'll note that usually, Comcast is careful to avoid claiming their caps are necessary to pay for heavier usage because there's simply no technical justification for that claim. Comcast leaked documents, its primary engineer and the industry's top lobbyists have even admitted caps have nothing to do with congestion, and aren't an effective tool to manage network load anyway. Roberts just got lazy, and trotted out the electricity metaphor because it's an easy way to trick a public that can't tell the difference between a gigabyte and gelatin.

Another major flaw in Roberts' logic is that while Comcast wants to bill like a utility, it has vehemently opposed being regulated as such. As a result millions of people face steep broadband price hikes for usage via meters that aren't being confirmed accurate by a reliable third party. Imagine an electricity and gasoline industry where pumps and meters weren't regulated, then imagine the resulting inevitable fraud complaints being policed by Comcast's not-so-award winning customer service department.

At the end of the day Comcast's usage caps are about one thing: socking uncompetitive markets with higher prices, and protecting legacy TV revenues from Internet video. Every other excuse that's been proffered by ISPs (at least here in the States where bandwidth and transit costs are low) is total and utter nonsense.

Most recommended from 111 comments


pandora
Premium Member
join:2001-06-01
Outland

31 recommendations

pandora

Premium Member

Dear Karl,

Karl, I admire your diligence daily reporting the various minor and major atrocities of corporations against consumers.

However it's been clear for a long time that Comcast is full of shit. It used to be a broken clock was right twice a day, this isn't true in the digital age. I don't believe the lovely folks managing Comcast are able to utter any truth to consumers, they can't get into Comcast management if they don't control their behavior.

I would like to request that you start appending an atrocity count for the new year for each ISP, and cellular provider who has been caught in a lie. Put the count next to the title on each news article.

My curiosity is not so much will Comcast tell a lie or do something to damage consumers, but how many times a day / week / year will it be caught doing something new. The same for every other company. I recommend the shit emoji with a number after it if you don't mind, for 2016. It would be fun to watch the shit pile up every day. So many companies pass so many steamers a week, it's amazing.

YukonHawk
join:2001-01-07
Patterson, NY

23 recommendations

YukonHawk

Member

Same old story.....

If you are the worlds most hated company why not just do away with the usage caps and make mostly everyone happy and change your image in the eyes of the public? It's so damn simple!!
Chuck_IV
join:2003-11-18
Connecticut

21 recommendations

Chuck_IV

Member

And of course,they conveniently ignore the other side of things...

if they want to charge like this, then if a user use LESS per month, then they should get a REDUCED rate. Comcast conveniently ignores this side of their justification.

davidc502
join:2002-03-06
Mount Juliet, TN

17 recommendations

davidc502

Member

It's not enough that Comcast PROFITS Billions a year -- They want more!

It's not enough that Comcast PROFITS Billions a year -- They want more!

Comcast continually pushes the boundaries of bad service as well as fees. It's not likely things are going to change unless there is more competition. Case in point -- Nashville TN; as GF rolls in, it has been stated those hated Comcast data caps will be removed in conjunction with and when GF rolls out. It's going to be a very small win for Nashville residents if they realize it or not. The second case in point; also in Nashville -- ATT has pledged to lower its 1Gigabit pricing to Nashville residents as GF rolls out. So, here we have two long time standing evil empires kneeling to 1 single ISP that is expanding into Nashville. It's amazing what a little competition will do.

Clearly GF isn't the answer to all of our countries broadband issues, but we need more competition if we want to see better deals and more fair fees.

TechyDad
Premium Member
join:2001-07-13
USA

1 edit

12 recommendations

TechyDad

Premium Member

Benefit of the Doubt

Let's give Mr. Roberts the benefit of the doubt and say that broadband should be treated like gasoline or electricity. If I sign up for electric service or want to fill up my car, I'm not charged for "access" to this service. I'm charged for what I use and that's it. If I use 0 gallons or 0 kilowatts, I'm charged $0. Meanwhile, for broadband, I'm charged a base fee just for access. Imagine if your local gas station billed you $50 a month just for the privilege of being able to drive into the gas station - and then billed you more as you filled up your tank. As many people pointed out, this is wrong. I'm crossing this out, but leaving it here as I don't want it to seem like I'm pretending I never said this. To modify my argument: You do pay for "access" to your electric company, but it's a small base charge with usage added on. For broadband, you pay a large base charge which includes all of your service up to a certain amount.

The second difference are the meters. The electric company meters and gas station meters are strictly supervised by government officials. If you fill up your tank with 5 gallons of gas, you can be sure that you got 5 gallons. Not 4.7 gallons. Not 3 gallons. Meanwhile, Comcast's meters are notoriously fickle. They can say you've gone above your 250GB cap when you really only used 50GB.

Finally, there are price controls on electricity and gas. If you own the only gas station in town, you can't charge $50 a gallon because there's no competition. The electric company needs to ask permission before implementing a rate hike.

So Comcast wants their Internet treated like electricity and gas, I say that sounds great. It'll now cost $0 a small base rate (see correction above) for people to sign up with Comcast, their meters will be subject to strict regulations to ensure complete accuracy, and their rates will be strictly controlled. Of course, something tells me this isn't what Comcast means by "treat us like gasoline/electricity companies."

dereknSC
@bgainc.com

10 recommendations

dereknSC

Anon

Load of hooey

Comcast doesnt want to run their business like a gas station or an elec. company. They want their huge monthly fees for little to no usage (ppl like my grandma and mother) and then they want to make even more money off the 1% who use over 300GB per month. They want their cake and eat it too.

If they want to go to metered, then it should be purely metered. Like a $5 flat fee for connection and then a price per GB for all data. At their rates it would be like 0.25 per GB or even less. Then people like my grandma who checks email twice a week would be billed fairly, as it is now she's paying 64.99 for "standard" internet and uses less than 1GB/month. People like my mom who uses 10-20GB per month still pays 64.99. I think Comcast would find that their revenue would go down steeply if they went to a purely metered format. They need to just shut up and give everybody either a flat rate and unlimted usage, or go to a purely metered billing. One or the other, not their hybrid greedy model.

camper
just visiting this planet
Premium Member
join:2010-03-21
Bethel, CT

10 recommendations

camper

Premium Member

If the caps really were about network congestion, off-peak usage is exempt

 
If the caps really were about network congestion, then there would be some manner of "off-peak" exemptions, so that data traffic that occurs during low-usage hours is exempt from the caps, or subject to a much higher cap.

This would have the effect of moving things like games downloads and back up services to the times when the network has lower traffic levels and where peak evening streaming services wouldn't be affected.

But the caps are, plain and simple, a money grab by Comcast, so I doubt if there would be anything done to implement the caps in an intelligent manner.

The caps will be optimized to generate maximum revenue.

FureverFurry
RIP Daphne: 3/12/05 - 6/19/12
Premium Member
join:2012-02-20
49xxx
Zoom 5341J
ARRIS WBM760
Vonage VDV-21

9 recommendations

FureverFurry

Premium Member

Power-cycle

Comcast's solution to virtually ANY tech problem is "...powercycle". So -- maybe Comcast can just POWERCYCLE those caps.

Okay, sarcasm aside - has anyone on the executive board explained to Brian Roberts that his so-called rationale for caps is pure horse pucky? AND that his examples (turning down the a/c from 72 to 60) are nothing short of ludicrous? Seriously ... turn the a/c to SIXTY DEGREES ???

Next up: new fee called "H.W. Caps" (for Hog Wash Cap justification) - $5/month.

DaveDude
No Fear
join:1999-09-01
New Jersey

8 recommendations

DaveDude

Member

How is televison different ?

Why isnt he talking about rationing TV. Its the same cable, with the same data traveling thru it. Can he answer that question ?

buzz_4_20
join:2003-09-20
Dover, NH
(Software) Sophos UTM Home Edition
Ruckus R310

8 recommendations

buzz_4_20

Member

Also...

Using the Electricity Model has other problems for Comcast.

If heavier users were causing troubles for others, the electric company would come out and FIX that type of problem REALLY quickly.
They wouldn't try to curtail a heavy users usage, they would adjust the infrastructure to keep all users happy, and the grid functioning as it should.

Just bring Voltage and Amperage out of Phase and see how fast trucks roll.
decifal7
join:2007-03-10
Bon Aqua, TN

8 recommendations

decifal7

Member

cept

Except, to have my car parked in the driveway, i'm not having to put $50 a month into it just to keep it available to me.

Also, the internet isn't a F ing car, stop trying to ruin good things in life with bullshit college grad pie charts...

Eagles1221
join:2009-04-29
Vincentown, NJ

6 recommendations

Eagles1221

Member

costs?

well, 10 Gbit lasers use more electricity than 1 gibt ports eh?

camper
just visiting this planet
Premium Member
join:2010-03-21
Bethel, CT

6 recommendations

camper

Premium Member

Netflix pays Comcast to carry the Netflix data

How is that like gasoline?

In order to make it like gasoline, shouldn't Comcast pay Netflix for the data?
existenz
join:2014-02-12

3 edits

6 recommendations

existenz

Member

Data is not a finite resource like gas/electric, see voice service history

Look at traditional voice service. It used to be unlimited locally then later long distance. Text messages used to be fixed per bulk messages and is now unlimited. This is the appropriate model for all data service as capital costs for delivering every bit go down every year.
Ostracus
join:2011-09-05
Henderson, KY

5 recommendations

Ostracus

Member

Intelligent conversation.

One of these days I'd like to see an actual cost breakdown of what it involves to start and run an actual ISP? Right now there's too much misinformation, and lack of, for their to be an intelligent discussion on the matter, both sides wanting to make their side the preferred narrative.

battleop
join:2005-09-28
00000

4 recommendations

battleop

Member

Gasoline is a utility?

When did gasoline become a utility?

howsthis999
@charter.com

4 recommendations

howsthis999

Anon

Utilities have overage fees?

Sorry but if I use over 1000 kW yes I get charged a higher rate, but what my electric company does not do is charge me $10 per 50 kW over. They charge per kW. They also don't charge 5X more than what the sub 1000 kW is. So even if Comcast was justify they should be charging per GB not per 50 GB. Also the per GB charge should be no more than 5 cents per GB than the current 20 cents. You can also make the case if they insist on a cap it should be at least 500 GB not 300 since it was 250 in 2009.
Paul in WA
join:2010-09-11
Centralia, WA

3 recommendations

Paul in WA

Member

Using Comcast's reasoning

Using Comcast's reasoning, planes, busses and taxis (or Uber, for you kids) should charge by the weight of the passenger. It's just not fair that someone who weighs only 135 lbs should have to pay the same as someone who weighs 265.
Slyster
join:2015-01-08
Sugar Grove, VA

2 recommendations

Slyster

Member

If they want to..

Compare themselves to utilities then lets classify them as a utility.. Just not Appalachian Power. Not sure how they are for others that have them but they have always been awful for us.. We were gone 3 out of 4 weeks one year and our bill was $140. So we called in and were told it was because of christmas lights and we said we dont have any lights up. After awhile longer getting the run around they finally admitted that no one actually checked our meter and our bill was ASSUMED based off of past usage ( I dont believe we use that much either way but we always get a high bill ).

No imagine that in Comcasts hands..... No one will ever actually check your meter they will just assume you used X data and bill you.. Use 1TB during a busy month? Be prepared to be paying 1TB prices monthly even though you dont use that much.
RustyDonut
join:2013-05-28
Boston, MA

2 recommendations

RustyDonut

Member

Comcast is Enron

Comcast is creating artificial scarcity out of the Internet in order to raise rates and charge overages. Not unlike Enron.
travelguy
join:1999-09-03
Bismarck, ND
Asus RT-AC68
Ubiquiti NSM5

2 recommendations

travelguy

Member

It's not about cost...

Sounding a bit like a broken record, but caps and below the line fees have zero to do with costs. Comcast (and the others) are not in a cost based business. The holy grail for them is value based pricing. Since they can't price by what the bits are being used for, they are using consumption as a proxy for value - the more you use, the more important it must be to you. From their perspective, there's a nice side effect that growth in use automatically generates a price increase.

Economists will say that value based pricing is a good thing for the consumer. It forces the businesses to invest in things the consumer wants. An great example of this is broadband over copper telephone, i.e. DSL. DSL can't deliver the speeds most consumers want, so no deployment investment is happening. Fiber could, but can't financially compete with existing coax networks.

amarryat
Verizon FiOS
join:2005-05-02
Marshfield, MA

2 recommendations

amarryat

Member

bad analogy

If data were energy and had to be mined/refined/produced, he'd have a point. But it's not. It's not a finite resource.