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Battle Over Data Caps Heats Up

18 Feb, 2013 By: Chris Tribbey

In mid-January, Michael Powell, current president and CEO of the National Cable & Telecommunications Association (NCTA), made an admission about Internet usage-based pricing.

Speaking at the Minority Media and Telecommunications Association, Powell, former chair of the Federal Communications Commission (FCC), said that the data caps issue, and Internet service provider (ISP) charges for consumers who go over those caps, is less about Internet congestion and more about service providers recouping infrastructure costs.

“It is a completely rational and acceptable process to figure out how to fairly allocate those costs among your consumers who are choosing the service and will pay you to recover those costs,” he said, according to a Broadcasting & Cable report.

A majority of major ISPs today — including Comcast, AT&T and Charter — apply a cap for broadband usage and charge more for additional usage after so many gigabytes. That’s brought about charges that cable providers are attempting to protect their TV services from over-the-top content offerings such as Netflix.

A recent report by the Open Technology Institute (OTI) flat-out accuses the ISPs of using data caps “to further increase revenues from existing subscribers and protect legacy services such as cable television from competing Internet services.”

“Data caps may be good for the short-term profits of broadband providers and please investors, but they are not benefiting innovation or access to the Internet,” said OTI policy director Benjamin Lennett. “Costs for providing broadband connectivity are continuing to decline, yet Americans continue to face higher prices for a service that is no longer a luxury.” He said the FCC continues to ignore requests to investigate the issue and require ISPs to justify data caps.

The OTI report found that the cost for ISPs to deliver content continues to go down, while cost for consumers continues to go up.

Michael Weinberg, VP of open Internet policy group Public Knowledge, said ISPs should suspend data caps until they can prove independently that they’re accurately measuring consumer data consumption.

“The debate around data caps has been premised on the assumption that ISPs had the capacity to accurately count consumer data usage,” he said. “ISPs should no longer be afforded the benefit of that doubt. Instead, ISPs have an obligation to consumers to suspend their data caps until — or unless — they can accurately meter usage.”

Sen. Ron Wyden (D-Ore.) has introduced legislation — the Data Cap Integrity Act — that would require industry-wide data measurement standards for ISPs, and ensure data caps are designed to offset network congestion. The legislation would require the FCC to establish standards for ISPs that want to use data caps.

“Americans are increasingly tethered to the Internet and connecting more devices to it, but they don’t really have the tools to effectively manage data consumption across their networks,” Wyden said in a press release. “Data caps create challenges for consumers and run the risk of undermining innovation in the digital economy if they are imposed bluntly and not designed to truly manage network congestion.”

The NCTA called the legislation “ill-conceived,” saying it “ignores the substantial pro-consumer benefits of usage-based pricing.” The cable group said it’s only fair that people who only check Facebook and email pay less than those who watch Internet movies all day.

“While congestion management may be one effect of tiered pricing, the primary benefits are consumer choice and fairness,” the NCTA said in a statement. “Usage tiers give consumers more choices to better fit their bandwidth needs, and they rightly distinguish between low-volume users and high-volume users, as is true for many products and services.”

A recent report on usage-based pricing from Michigan State University (MSU) concluded that data caps that charge heavy users more allows ISPs to offer cheaper services for those who use less. Additionally, the MSU report concluded that usage-based pricing ultimately results in more infrastructure investment.

“By enabling ISPs to profitably offer services to different groups of customers based on their differential needs and usage of broadband service, [usage-based pricing] not only makes the benefits of broadband service available to consumers who otherwise would not be willing to pay for service, but also makes the provision of broadband service more profitable,” the report reads. “This, in turn, encourages investments in network improvements and extensions, including investments in unserved and underserved areas.”

As far as infrastructure, the FCC is making noise. In January FCC chairman Julius Genachowski called on ISPs, states and local communities to work together on having at least one ultra-fast, 1 gigabit-per-second community up and running by 2015. One gigabit per second is considered approximately 100 times faster than current, fixed high-speed Internet connections, and can handle multiple streams of high-def content.

“The U.S. needs a critical mass of gigabit communities nationwide so that innovators can develop next-generation applications and services that will drive economic growth and global competitiveness,” Genachowski said.

A Feb. 12 report from the Information Technology and Innovation Foundation (ITIF) finds that America’s broadband infrastructure is already among the best in the world, and that Americans enjoy the second-lowest prices for introductory level broadband in the world.

“Taking into account the high cost of operating and upgrading broadband networks in a largely suburban nation and the wide economic diversity of our population, the U.S. has made significant progress in creating a vibrant and high-quality broadband ecosystem,” said Richard Bennett, senior research fellow at ITIF.

About the Author: Chris Tribbey

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