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We need to be reasonable about broadband usage caps

By 28 August 2009 22 Comments

After posting this article on American broadband caps in perspective, it seems we’ve attracted a few angry responses.  Advocacy group Stop the Cap’s Phillip Dampier pulled out all the stops to denounce me and our executive director Jon Henke that we’re essentially selling broadband consumers out.  So what’s the reason for Dampier attacks?  It turns out that Dampier’s Stop the Cap campaign wants the bill HR 2902 passed which would outlaw usage caps, and they can’t afford to have someone point out that every broadband provider in the world has to have some kind of usage cap (disclosed or not), and that the US has some of the most generous usage caps in the world.

The low blow on Net Neutrality

Dampier starts out his attack with the typical straw man argument that George Ou hates Net Neutrality and is probably in favor of blocking VoIP services and ISP censorship.  Next he’ll probably say that I like to club baby seals and kittens too.  The problem with these kinds of attacks is that they don’t advance the debate and they’re just ripping a page from the SaveTheInternet/Free Press talking points that Net Neutrality is all about stopping Internet censorship when it has never been an issue of censorship.  Free Press and other Net Neutrality advocates have continued to propagate the myth that AT&T’s network blocked Pearl Jam and Verizon blocked text messages even though they never happened.  AT&T’s website simply didn’t want to carry a political message when it was supposed to be a rock concert, and Verizon simply denied an initial request for a special shortened phone number but later approved it.

The actual Net Neutrality bills e.g., Markey’s Net Neutrality bills essentially banned tiered pricing on higher priority Internet services when the Internet has never worked that way.  Even staunch Net Neutrality advocates like Larry Lessig and Sir Tim Berners-Lee have stated that they oppose bans on differentiated pricing on differentiated services, but we don’t see Free Press and their allies attacking them even though Lessig and Berners-Lee have virtually identical positions on Net Neutrality as I do.  I suppose one difference is that Tim Berners-Lee is willing to lend his reputation to officially endorse Net Neutrality regulations that violate his own principles while I am not.

The hypocrisy over metered Internet access and usage caps

Free Press, the EFF, Tim Wu (chair of Free Press board), Larry Lessig, and even Vuze networks (the peer-to-peer company that filed the FCC complaint against Comcast) were all PROPONENTS of metered pricing as a superior alternative to network management, at least when they were all trying to fight reasonable network management.

Tim Wu said:
“I don’t quite see [metering] as an outrage, and in fact is probably the fairest system going — though of course the psychology of knowing that you’re paying for bandwidth may change behavior”

Free Press testified to the FCC:
“More importantly, if Comcast is concerned that the collective set of users running P2P applications are affecting quality of service for other users on a cable loop… they could also charge by usage.” (p. 29)
[...]
“Indeed, in many nations, network providers do meter, and bill their customers on the basis of amount used. So the transaction costs of doing so must not be prohibitively high. Indeed, a network provider can apparently meter cheaply because, in most networks, users’ traffic to and from the Internet passes through a single gateway, the network access server.” (p. 31)

I fought hard against their efforts to PROMOTE usage caps as the superior way of managing the network.  I exposed the EFF’s efforts to promote usage caps as the better way to manage the network.  I testified that usage caps were the most inferior way of managing a network before the FCC against Larry Lessig who argued that usage caps were the superior solution.  Yet we fast forward a year or two and Free Press’ lobbying arm Free Press Action Fund is now lobbying hard for the Stop the Cap campaign and HR 2902 to make usage caps illegal.

I pointed out that some form of usage cap was necessary SO LONG AS we don’t have intelligent network management solutions in place, but Dampier quoted me out of context by claiming George Ou says “usage caps are necessary”.  So what does Mr. Dampier think about Free Press and all the others who continuously argued and testified that metered pricing and usage caps were the superior solution to intelligent network management?  He thinks that’s just fine because we must have misunderstood them and besides, they’re allowed to change their mind and he’s not going to attack an ally.  Yet Dampier thinks it’s ok to misrepresent my work and attack me even though I am a leading advocate of metering alternatives simply because I don’t support his particular bill.  I don’t believe HR 2902 is necessary in light of the fact that we have some of the most generous usage caps in the world and in light of the fact that the market already rejected Time Warner’s more restrictive caps and forced Time Warner to back off.

Dampier’s tin foil hat theories and lies

The more we read Dampier’s comments, the more it becomes clear that his rage applies to any commercial or business entity.  For example, he was angry that Time Warner’s commercial customers didn’t get a cap and claimed that businesses were the biggest consumers of bandwidth.  But that makes no sense because businesses usually ban P2P file sharing usage in the work place and they consume far less bandwidth than residential customers.  Moreover, commercial customers PAY MORE money to get more capacity provisioned to their network, so why shouldn’t they get more capacity?  The funniest part came when I suggested the obvious solution that consumers simply need to buy the commercial grade broadband connection and they would have the same benefits as the business customers.  Dampier replied with his tin foil hat theory that Time Warner doesn’t allow consumers to buy commercial grade access.  How does he know this?  Because Time Warner never mentioned the option so that must mean they prohibit consumers from buying commercial grade broadband.

Dampier was also dismissed my suggestion that dissatisfied Time Warner customers can exercise their rights as consumers and switch to alternatives like AT&T.  To make his point, Dampier selectively quotes AT&T’s 20 GB usage cap as the only other alternative.  When I challenged him on this point and pointed out that AT&T had a 6 Mbps service with a 150 GB usage cap for $35/month, Dampier resorted to lies and claimed that AT&T makes you pay $45/month for 6 Mbps service while actually delivering 1.  But I know that isn’t true from experience because AT&T is very conservative about offering faster DSL unless they’re sure that it can deliver stable sync rates that match the advertised speeds.  I even had to spend weeks escalating to AT&T support managers to get AT&T to sell me 3 Mbps service because I lived in a borderline area at 13,000+ feet from the CO.  When called on this lie, Dampier tried to clarify that he was just including taxes in the price and he was citing one particular customer who had a problem circuit but was allowed to switch to the lower rates for the lower speeds.  Somehow I have a hard time believing Dampier’s explanation and it seems more like he’s willing to say anything and propagate any theory to advance his agenda.

Are unlimited usage caps for broadband even realistic?

Phillip Dampier and Stop the Cap don’t just want to stop Time Warner from implementing their 40 GB cap.  That much is obvious because Time Warner already backed off from their proposal but they’re still a convenient bogeyman to rally their ultimate cause of zero usage caps.  Comcast’s 250 GB caps is simply not high on their “target list” for the moment because they just want the bill slammed through congress which will make it easy to target all ISPs.

But are zero usage caps even possible in Broadband?  The reality of the Internet or any packet switching network is that it’s impossible to guarantee that users can constantly use the network.  The “secret sauce” of the Internet is the fact that the packet switching network efficiently shares all available bandwidth between the few active users rather than the old circuit switching telephone network that wasted the majority of capacity on the idle circuits.  Packet switching networks allows Internet based networks to dynamically expand in bandwidth allocation, but the flip side of a network that can expand is a network that must eventually contract when more users are active.  Packet switching networks however do have a maximum number of bytes it can transmit a month and that budget has to be shared amongst its users.  It is not an infinite capacity network where everyone can saturate their connection 24×7.

All broadband networks rely heavily on this sharing concept called “statistical multiplexing” where every bit of broadband network capacity is probably shared between 20 to 40 people.  This is often portrayed as some kind of evil and greedy business model, but it’s actually a great for consumers because shared broadband is 20 to 40 times cheaper than dedicated circuits.  Case in point, Comcast’s 15 Mbps DSL service costs less than $3 per Mbps per month while a business class T1 circuit costs $129 per Mbps per month.  Best of all, the fact that the average broadband consumer uses their connection less than 5% of the time means that consumers can get close to 100% the performance of a dedicated circuit for less than 5% of the cost.  But this only works when the average duty cycle is reasonably low, and that duty cycle has to be kept low with implicit or explicit usage caps.

So at best, we can over provision commercial grade networks with sufficient revenue and capacity that caps aren’t needed.  Even the broadband services that don’t advertise caps rely on some kind of implicit usage cap mechanism.  They all have terms of service informing customers that they are not allowed to abuse the network and interfere with their neighbor’s ability to use the network, and they almost always prohibit the operation of “servers”, which belong in the more expensive commercial grade broadband services.  But explicit caps are more transparent, and more transparency is something that all of us at Digital Society heavily supports. So now that ISPs like Comcast and AT&T have come out and clearly disclosed the usage caps that they’ve had all along implicitly, we’re going to punish them?

Intelligently managed networks mitigate the need for usage caps

Intelligently managed networks like Comcast which employs “fair share” which deprioritize customers who use the most bandwidth behind customers who use the least bandwidth can offer the most generous usage caps.  That’s because intelligent networks deal with the problem of peak consumption directly without having to knock down average consumption with more restrictive usage caps.  But even with a good network management solution in place, residential broadband networks need some kind of usage cap that serves the needs of the vast majority of consumers.  Those consumers with more demanding needs can choose commercial grade broadband services.

Broadband providers who don’t employ these intelligent network management schemes have to resort to far more restrictive usage caps to indirectly deal with peak bandwidth consumption by knocking down the average consumption.  This is why I have consistently stated that usage caps are the inferior solution and I strongly criticized Free Press and others for promoting the myth that usage caps are the superior alternative to network management.  Now Free Press want to swing 180 degrees and get us to believe that ALL usage caps should be illegal, but Free Press’ hypocrisy and unreasonable stance on network management have shown us that they have no credibility.

The current global broadband market has almost universally implemented some form usage caps and the vast majority of countries have more restrictive caps than the United States.  Even Time Warner’s more restrictive usage cap is generous by global standards but the American market has rejected it and Time Warner has listened to the outcry.  That is the free market in action and it has worked.  What we don’t need is legislative action that swings too far to the other extreme where even sensible usage caps are outlawed.

22 Comments »

  • Jeorge Houenke said:

    As an unprincipled industry lobbyist puppet once said…”every broadband provider in the world has to have some kind of usage cap…”
    HAH!…NOT!!! Caps ARE NOT required…best effort and true competition in the high margin ISP market are the ONLY answers….. unless of course you prefer the rape and pillage money party tactics of Time Warner and other companies attempting to take usurious advantage of their monopolies to reduce service and bleed their customers who have no other alternative for service.

  • George Ou (author) said:

    Jeorge,

    Time Warner has already backed down. Are you suggesting that everyone in the whole world has it wrong? Are you suggesting that ISPs should sell unlimited broadband service when they can’t actually deliver unlimited usage? That doesn’t make any sense to me.

  • A rational discussion on the state of American broadband | Technology for Mortals said:

    [...] response to some of the feedback, I’ve posted this updated discussion “We need to be reasonable about broadband usage caps“ Categories: Broadband, Policy Tags: Comments (32) Trackbacks (0) Leave a comment [...]

  • VoIP Solutions: the New Age Telephony | Intro to SIP Systems said:

    [...] Digital Society » Blog Archive » We need to be reasonable about … [...]

  • Ross said:

    But, cable is not a free market. They are regional monopolies. If cable were a true free market all state and local franchise agreements would have to be abandoned. Yes there is satellite yet satellite does not have a comparable internet service by any means, satellite internet is more comparable to dial-up. We have already seen in Canada where there has been an informal backroom agreement between almost every major duopoly cable and telecom company to cap users. Canada has an even higher urbanization rate than the US, metropolitan areas like toronto and Vancouver do not need bandwidth caps, companies like Teksavvy are profitable and also their US neighbours a few miles south enjoy unlimited internet (the US providers are also profitable). Considering that the US is one of the most urbanized countries in the world, there is no excuse as to why major cities by hubs like NYC (mostly powered by Timewarner) and SF (powered by comcast) need bandwidth caps. No one is expecting remote northern Alaska to receive 100/100 unlimited internet overnight. In Canada for example even as bandwidth prices have fallen caps have increased. If ISPs are to institute bandwidth caps it can’t cover almost every major metropolitan area. The US has the most bandwidth in the world, the whole internet infrastructure is centered around the US, this is not Fiji we are talking about.

  • George Ou (author) said:

    Ross,

    It is a fact that nearly 9 out of 10 homes have a choice between DSL/FTTN/FTTH or Cable broadband service, so your assertion that cable is a monopoly on either the TV, phone, or broadband market is simply false. Moreover, 100% overlap isn’t needed for competition to work because ISPs use regional pricing. So if most of the homes have a choice of one or the other in a particular region, which is usually the case, then the two companies have to compete with each other and everyone in the region benefits.

    Canada if you haven’t noticed has much more restrictive usage caps than the US on average. I don’t like bandwidth caps just like I don’t like caps minute caps on my phone service, but there’s is a finite amount of capacity and it isn’t fair to most people who use very little to subsidize people who use a lot. While I’m not suggesting that we go to a completely metered system like most of the world as that would have too much of a negative impact on Internet usage, I don’t think it’s unreasonable to expect 10% of the heaviest consumption users to pay a little more for a commercial grade Internet connection. That means the vast majority of consumers can pay a little less money.

    So I believe the right solution is to use intelligent network management to solve the peak congestion issues and to minimize the need for metering. Then we would use generous usage caps that meet the needs of the vast majority of consumers.

    As for urbanized areas, that’s all the more reason to have some kind of usage cap because of the high congestion due to a high population.

  • Ross said:

    Except Cable and dsl in many cases aren’t comparable. They are different technologies. In some areas you may be able to obtain the advertised rate of 5mbps or so, but in other areas even in the same city you may only have access to 450kbps.

    If cable were a free market there would not be limitations based on regional franchise agreements.

    As we have seen in Canada, two competitors do not necessarily feel the need to “compete”, when they can gouge customers for the same amount of money. Price fixing Duopolies are not necessarily competitors. It iss not part of a “utopic” free market.

    New York city has access to one of the largest if not the largest hubs in the world, yet still happen to be “congested”, while at the same time TimeWarner which has healthy financials all of sudden has felt the need to cap. Meanwhile in other parts of the city and Long Island where Cablevision services, they are also profiting well and have no bandwidth caps.

    As for commercial service, well Timewarner business class is nearly triple the cost for the same service that it would give to residential users. Whose to say that small business users won’t be capped later? Not everyone can afford a t1 connection, let alone any service level above it.

    Japanese caps nowhere near compare to US caps, Japan is a much more dense country and they have a more updated broadband infrastructure, yet urban areas able to receive faster Real-world speeds with much higher caps at a LOWER cost.

    Judging by the cash flow statements of TWC, ATT, etc. They seem to be doing fine financially coupled with the fact that bandwidth costs have been decreasing. If anything the various cable and telecom companies are the real bandwidth hogs for price gouging. Upgrading the network should make bandwidth cheaper and ease congestion over tme, yet Comcast still has the same cap whether you have a 50mbps or a 1.5mbps connection (even in the same metropolitan areas). That is far from “fair”.

  • George Ou (author) said:

    Ross, I don’t care if they’re “different technologies”, they’re all used to deliver bits and they all compete with each other.

    Bandwidth price is decreasing exponentially, but per user usage is also increasing exponentially at the same time so these things cancel each other out. Furthermore, you do realize that the only reason bandwidth prices go down is because network providers spend billions on upgrading the infrastructure to be able to carry more bits right?

  • Ross said:

    Broadband Duopolies are far from being highly-competitive environments. Look at Canada.

    Yet even after such investments and without caps (or unenforced caps depending upon the area) companies in the US have proven to be profitable time and time again.

  • George Ou (author) said:

    Ross,

    First of all, thank you for admitting that your initial assertion of monopoly was wrong.

    Second, are you suggesting that broadband isn’t priced correctly until all the broadband profits are driven to zero or negative values? That doesn’t seem to make any sense to me. We pay so much more for energy (which is all metered by the way) and so much more money for food. Just going out once to the restaurant costs more than a month of broadband service. Why aren’t you campaigning to make those zero profit centers?

  • Ross said:

    Well cable as the cable service is a monopoly in most parts of the country, as there is only one franchised cable provider. DSL is a different technology, that often has lower speeds for the most part in the US. Most parts of the country (including metropolitan areas) cannot get fiber-optics.

    Cable service is not like a gas or electricity, if a person disconnects their cable modem they would still get billed the full rate.

    If a person uses Charter,TWC label etc Video on Demand or VOIP they are not charged for the bandwidth of those services. Yet if a person uses Directv or Dishnetwork on Demand they are charged for all of that bandwidth. That is anti-competitive and that is why cable and satellite are fundamentally different technologies.

  • Ron Dafoe said:

    What about those of us that do not have AT&T or Verizon to use as a service? You seem to continually think that both of these providers have access to the entire country when it is not true. There is no other cable provider in Rochester NY. There is no other regular phone service company in Rochester, NY besides Frontier. Frontier states in their terms of service that they think 5Gb per month is sufficient, but they have not decided what to do about it yet.

    Can you explain to me, that if it is network congestion that is the problem, why if I use 6Gbs per day in 3 hours, and my neighbor uses 1Gbs per day but has a continuous stream of data 24 hours a day/7 days a week that it is a good way to bill us for network use?

    What about those of us that do not use P2P that use data? Why are all these things so focused on P2P? Why don’t they limit only the P2P traffic and explicitly state that they limit it and that it is limited to if that is the argument?

    Why don’t we have data limits on cable TV? They have had to build out their networks as well as upgrade their technology to get HD on their backbone.

    What is wrong with offering various levels of service based upon speed? Why can’t there by a 1Mb connection at $15 a month to save people money, a 10Mb service at $40 and a 20Mb service at $60 per month for those that want to spend the money?

    If you are going to take consumer intrests in consideration, are you not concerned about deals that these ISPs can make where by their own services will not count against the data caps that they have and theirby taking competition essentially out of the picture? Such as netflix? Or having netflix pay some amoutn of money to the ISP to be exempt from the data caps and then Netflix having a serious advantage over Amazon and others? This leads to no competition in the long run if this happens.

    Are you not concerned about ISPs coming up with stuff like “The Netflix data package” that you pay directly to your ISP at some amount of money to allow unlimited Gbs of data to the netflix site (or any other company)?

    These are companies. Their concerns are how to give value to their shareholders while keeping customers.

    If they need more money, why are they shy about raising their prices on Internet Access? I think a $10 price increase across the board with a promise that more services where forthcoming such as DOCSIS 3 would have been recieved far better.

    Why are other ISPs saying that they do not need data caps? Are they crazy?

  • Voip | Intro to Voip Systems said:

    [...] We need to be reasonable about broadband usage caps [...]

  • George Ou (author) said:

    Ron,

    There are some places that don’t have great service, and there are a few places in rural America that have no access to anything other than Satellite service. Internet access is not going to be the same everywhere unfortunately, and that holds true for any country. It’s a harsh reality, and it’s a totally different problem altogether than what we are talking about here. The rural and underserved problem deserves a different discussion.

    I don’t get your question on congestion. As for Cable TV, it has no resemblance to Internet access. It is a broadcast technology that where the same data of every channel is broadcast to every home whether they have their TV on or not. It’s an efficient way of sending content to a large group of people without having to replicate the bandwidth.

    As for raising prices $10 across the board, that would actually allow for a much more generous cap for everyone. The problem is that people are very price sensitive, and the broadband business is very competitive between cable and Telco in nearly 9 out of 10 homes in America, and they’re competing on price. More importantly, if the current 150 GB and 250 GB caps suit more than 95% of the population, why should 95% of the population pay $10 more per month just so that the remaining 5% of the population don’t need to pay more for their own requirements? That might be a good deal for the 5%, but it sucks for 95% of the population.

    Some ISPs say they don’t need data caps, but they all have terms and restrictions in their terms of service. So while they don’t disclose their cap, you better believe they will give you a call if you start going over 150 GB or 250 GB per month. But as I said in the article, I prefer transparency and I would rather have the ISP disclose what their limit is if they have a limit.

  • Daniel Brenner said:

    I think George’s critics aren’t paying attention to what he is saying. Rather than an advocate for bit caps, he’s saying that the right set of intelligent net management practices could avoid using caps in many instances. Since the Comcast decision, ISPs and the net management policy community, including Free Press, are trying to figure out what those are. (See Free Press’s FCC-filed reactions to Comcast’s revised practices) ISPs have different policies and they’re evolving, as they should, based on feedback from users and critics. The challenge will be perfecting those policies, as humanly possible, so that the multiple goals of access, fairness, robustness, and infrastructure improvement can occur and costs that make broadband an affordable service.

    There may be other reasons for bit rate pricing — the idea that low bit users should pay less, so long as the basic service is not too limited (and the companion piece by Ou shows that the US isn’t a laggard in this respect).

  • Ron Dafoe said:

    George,

    I agree on service, but the fact is, this is what the way it is now. Rochester NY, where I live, is the 3rd most populous city in NY and the second largest economy in NY. But we have none of the large players except for TWC. Batavia has Verizon FIOS. They are a small town about 20 mins or so away. Alot of the areas that either have data caps or they were trying to be introduced are the in the same boat.

    I have paid $50 a month (I don’t have TWC cable) since RR was available in my area. That is about 10 years ago. The only time my bill went up is when they offered a higher speed tier, now it is $60. I know people are sensitive to price, but how can you argue with a price that hasn’t change in 10 years?

    That is why you have speed tiered packages. People can save money with the slower service and spend more money with the higher services.

    I just don’t get why they have to change the model. If it really is a small percentage of people that use alot of bandwidth, why can’t they manage that bandwidth that they are using just like they do today? If it is P2P, make all P2P traffic slower.

    Even though the caps may be big today (at least some of them, alot of them a dubious), we have seen the price get raised, caps get lowered and caps enforced on almost everyone in Canada. ‘

    The congestion is pretty straight forward. How much data you download or upload is not a way to bill customers. Someone can be using the network 24 houts a day, 7 days a week and use more network resources over the course of the month then someone doing burst of 5 or even 10Gb per day for a few hours, especially at night when the network is less utilized.

    I know you think network management is a better answer than caps. The problem I have that we should be pushing them to network management, and better equipment verses saying OK, caps are OK if that is all your going to implement.

    Taking the second best thing is not a good way to go about it. Once data caps are in place on ISPs, do you really think that they will ever look at any other solution to manage their network? Especially when they have to spend money to get those data caps in place?

    Especially, with TWCs own data, in a small town – Beamont, TX, 12% of their customers spent an avergage of $20 more a month on their internet bill. While a majority of people may have stayed under their caps, there is still 12% of the people that had their bills raised by an average of 50% if their cable internet bill was $40.

  • Digital Society » Blog Archive » Putting American bandwidth caps into context said:

    [...] Update: We need to be reasonable about broadband usage caps [...]

  • George said:

    All the intellectual talk here is giving me a headache :). The only fact I believe is relevant is that (for example Time Warner) are only offering increases in price. If I use 1 meg a month I will still pay the same base package price as the 100g user. Yes they claim to have less expensive packages but only if you are willing to lower the download speeds to roadrunner light or some other inferior package. It’s designed so the comsumer takes the hit.If I have to be capped then the companies should offer me a way to save if I stay well below the cap. It’s all about them and nothing for the customer. We have a problem in this country in case you have not noticed with a large number or people being unemployed, lower wages and increased energy costs. I don’t know but maybe you believe all the poor people should stay home in their shacks and go without while the upper crust live the good life. I am very well off myself but, I have many friends who give up more and more every month to make ends meet. We need to move beyond greed based thinking and do what is right for a change. I am not suggesting I think every CEO in the country is going to get religion or see the light but there is coming a point which people will just have to go without and then what.
    I don’t want to ramble so I will exit by saying caps may be the answer and thats fine but if that so then make it there are rewards with discounts or monthly reduced rates for those who stay well under the caps. This cannot be one sided and expect the public to embrase it.

    Thanks for the venue
    George

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