ISP Data Caps Just a 'Cash Cow'

An anonymous reader writes "Ars summarizes a new report into the common practice of ISPs implementing data caps, ostensibly to keep their network traffic under control. The report found a much simpler reason: money. Quoting: 'The truly curious thing about the entire debate has been the way in which caps have mostly remained steady for years, even as the price of delivering data has plunged. For example, paying for transit capacity at a New York Internet exchange costs 50 percent less now than it did just one year ago, and many major ISPs aren't paying at all to exchange data thanks to peering. So why don't prices seem to fall? ... The authors of the new paper contend that all explanations are more or less hand-waving designed to disguise the fact that Internet providers are now raking in huge—in some cases, record—profit margins, without even the expense of building new networks. ...While Internet users have to endure a ceaseless litany of complaints about a "spectrum crunch" and an "exaflood" of data from which ISPs are suffering, most wireline ISPs are actually investing less money in their network as a percentage of revenue, and wireless operators like AT&T and Verizon are seeing huge growth in their average revenue per user numbers after phasing out unlimited data plans—which means money out of your pocket. In the view of the New America authors, this revenue growth is precisely the point of data caps.'"

Comments

This is Market failure in action...

[Anonymous Coward]

... it must be faced for the US to whom the free market is as much a religion as anything.

Re:This is Market failure in action...

[colin_faber]

I disagree, the reasons the ISP's can continue to charge outrageous rates is because they have a government sanctioned monopoly on last mile delivery. Even if I wanted to setup a cable ISP I couldn't as I have no access. I could setup a telco based one using DSL, but I would be limited to the transit charges the owner (Centurylink in my case) wants to charge my customers.

Re:This is Market failure in action...

[Concern]

The free market fairy simply cannot wave her magic wand over everything. The government cannot avoid playing a role in i.e. wireless communications if you want them at all. Someone has to decide who can use what spectrum. Someone has to enforce the rules. There is a finite supply - meaningful competition is not possible even when this is done efficiently. These are not like newspapers, where anyone can buy a printing press for relatively cheap. This is a multi-billion dollar cost of entry to put up thousands of towers on whatever spectrum you can license.

No amount of ideology can give you a laissez faire market in wireless broadband. Arguing otherwise just makes you sound like one of those old-line Soviet Communists trying to explain how the shortage of bread must be a Capitalist Conspiracy. You can deny reality as much as you want, but it won't fill your stomach, or give you a "free market" cellular internet connection.

Since we inevitably have to have a quasi-governmental broadband industry, I'm all for regulating it better. Fixing this is not rocket science. We did it for generations after our great grandparents got sick of enduring these scams. Set up a commission, give them unlimited fact-finding authority over the ISPs. They examine network load, operating costs, and approve new budgets and prices. Charter them to permit a steady, single-digit profit margin, while ensuring adequate ongoing investment and modernization. You know, how we used to run electric utilities for generations, before we privatized those and the rates jumped and the lights started going out all the time.

Doing anything else is bad for business. Letting ISPs price gouge is the same as letting congress pass a (largely regressive) tax increase. It's just one where the tax money doesn't even have the courtesy to visit the US Treasury on its way to some insider's pocket.

well, of course

[Trepidity]

Just about anything a mobile phone company does is aimed at maximizing revenue. The reason they would even pretend otherwise is that it can be easier to convince people to pay more for things, and avoid being as angry about it, if you can feed them some kind of cover story to mollify them.

Re:well, of course

[Impy the Impiuos Imp]

This, along with credit card companies raising your rate after you borrow a lot because you're "riskier", coincidentally trapping you and making it hard to pay off, and banks charging you overdraft fees, $35/incident, over and over to "protect you", are a nice trio of fine print fraud.

In all cases, the surface argument has the lie put to it because their business model hopes you get into trouble, and the business doesn't fear it. It is the desired state.

It is thus fraud and should be treated as such.

Nothing new here

[xtal]

This is the exact behaviour you'd expect from a largely-monopoly or entrenched oligopoly market.

Governments or municipalities should own the infrastructure. Everything should be fiber. Most of the costs in those rollouts are administrative, not technical in nature.

There is a huge economic cost in not having gigabit FTTH infrastructure; it's big enough that companies like Google are stepping in.

Capitalism

[girlintraining]

This is precisely why capitalism doesn't belong in some markets. Cue rabid "the free market is always right" retorts in 5...4...3... but the truth is when you have any infrastructure service; sewer, electricity, communications, roads, etc., that everyone needs access to (or at least a majority of people in the community use often), without regulation this kind of thing will happen. It creates a natural monopoly; And no, the government doesn't create the monopoly. It would happen whether the government even existed or not. This is the quintessential example of where and when government regulation is needed to rebalance things so that the service provided retains its usefulness to society without becoming parasitic. The government is the only thing besides an even larger monopoly power that can influence this kind of market dynamic.

And yet here we are, getting put over a barrel and raped because of our idealized notion of how the market will "correct itself", and how government regulation "hurts businesses". You know what, fine: Let one company's profits suffer a little for the greater good, rather than letting everyone suffer a little so the company can be massively profitable at our expense. We need to put a stop to the nickle and dime death march that is killing our middle class off. We need regulation.

Duh

[Hatta]

Bandwith is not a commodity like water. We don't save anything when we under utilize it. The cheapest per bit cost is when the network is maximally utilized. Incentives that encourage people to use less bandwith are economically unsound.

OK, so how is that monopoly removed?

[Anonymous Coward]

You can't let someone dig up the roads because a person on the street has decided to change ISP.

You can't let someone use the radio bands willy nilly because there's a new customer for wireless internet.

It's rather the intent of every single Randian faithiest to INSIST that any failure in the Free Market is due to government interference.

Given that you INSIST they should do some things such as enforce contracts and prosecute theft, murder, et al, that there is ALWAYS going to be government interference.

One thing that always shows up the idiot libertarian is that they blame government interference without ever considering evidence for the stance. Just "Government exists? Well, they did it".

If government got out of it and stopped enforcing contracts, then the ISP customers would be able to not pay for the connection and that would fix the failure, wouldn't it? But that's not allowed, government MUST interfere then!

Re:OK, so how is that monopoly removed?

[jythie]

Well, for phone companies (and in the past, DSL) there was a rule saying they have to make their lines available to other companies.. which is why, say, in the days of dial up you could buy your phone service from one company and then dial in to any ISP you liked. DSL used to work the same way, you bought your line and then could use any ISP you wanted. Cable modems never had this, and when DSL providers complained it was unfair, rather then extending the policy to cable they dropped it for DSL, resulting in pretty much the eradication of competition over night.

Putting that bit of regulation back in place would probably spawn all sorts of consumer choice without having to deal with the barrier to entry that is laying physical lines.

Re:Average consumer intelligence level declining.

[mcgrew]

No, you're the clueless one. When cable first came out in the early eighties (it was around in a very limited form in very few places in the seventies) there was no advertising whatever. None. Not on the cable channels; the only time you saw a commercial was when you were tuned to an over the air channel. Uncut, uninterrupted, commercial-free TV. Then when everybody got hooked on cable, THAT is when they started introducing ads... between shows. Then they started breaking the shows for commercials like OTA TV. Then they got even greedier and started showing commercials at the bottom of the screen while the actual content is playing.

No, son, YOU are the one unfamiliar with early cable, simply because you never saw early cable and assumed it was always fucked up like that.

Guess what else? Empty-V used to play music videos instead of stupid "reality" shows. Discovery used to have science instead of "trick my truck." History used to have the history of the Roman Empire and the History of Beer instead of "ice road truckers."

Guess what else? I shut my cable off. It's no longer worth the money. OTA, DVD, and web for me. Comcast can go fuck themselves, the greedy, shiftless bastards.