Former FCC Boss: Data Caps Not About Network Congestion

An anonymous reader writes "Broadcasting Cable reports on comments from Former FCC chairman Michael Powell (now president of the U.S. cable industry's trade association) confirming what many have long suspected: data caps on internet service aren't just about network congestion, but rather about 'pricing fairness.' 'Asked by MMTC president David Honig to weigh in on data caps, Powell said that while a lot of people had tried to label the cable industry's interest in the issue as about congestion management. "That's wrong," he said. "Our principal purpose is how to fairly monetize a high fixed cost." He said bandwidth management was part of it, though a more serious issue with wireless.' Powell went on to say that ISPs had huge up-front costs which had to be allocated out to consumers, and those consumers were familiar with usage-based fees from paying their power bill or buying food. He was part of a panel with three other former FCC chairs. Dick Wiley agreed with his cost argument, adding that the marketplace was responding better than new legislation could. Michael Copps thought the FCC could question data caps a bit more, but wasn't opposed in principle. Reed Hundt said he wants the FCC to focus on getting better, faster, cheaper internet to 100% of the population."

Comments

So who were these wrong people?

[Anonymous Coward]

"Powell said that while a lot of people had tried to label the cable industry's interest in the issue as about congestion management. "That's wrong," he said."

So who were these wrong people who said it was congestion management?

Oh, that's right, THE CABLE COMPANIES THEMSELVES.

And if they want to talk about "fair", then what about the salaries of these executives?

By this logic

[SquareOfS]

shouldn't we also have usage-based pricing for the TV they sell us? So that we pay "fairly" for for the fixed cost of establishing the network? Why would that model be different, since it's not really about congestion, as admitted in the article?

The electric bill and buffet examples in the article are terrible: when we pay for electric usage, we actually are paying for utlization/generation; use more and something (coal, natural gas, etc.) actually gets consumed more. And most buffets are all-you-can-eat; if you're paying by weight or something, the analogy is the same — you're actually consuming something. But both bandwidth and TV channels are there no matter how much they're "consumed." Bandwidth can be saturated (the congestion problem) but it can't be actually consumed.

If we're going to talk about "fairness", let's talk about:

1. 1. Fair access to the wired networks built out, frequently, under monopoly guarantees
2. 2. Fair levels of monetization of the network: does the telecom industry really want the equivalent of a utilities commission deciding how much they profit?

what infrastructure build-out?

[Anonymous Coward]

the phone company here runs DSL off copper at least a generation old and refuses to build-out to serve customers past 3 miles from a CO.. even though it's possible to bring the per-subscriber cost of extending DSL down to as little as $100.. and even though they charge nearly double the 'in town' rate for a fraction of the speed past about 1.5 miles.

the cable company hasn't upgraded anything outside of its headend since they moved into town in the 80s, except for dropping a neighborhood node on each end of town for data. cable internet rates go up at least once per year even though it's a small town with a big fat, underutilized uplink.

each wireless company has exactly one tower here, and when one is down (happens a few times a year) there's not even an agreement between them to carry calls on the other company's tower. towers are well under capacity but data rates go up and caps go down. what was a reasonable $50 for uncapped unthrottled data no longer exists thanks to verizon's buyout of alltel and the fcc for allowing that to happen.

and oh yea.. all four companies receive federal funds to provide service to this rural area....... it just never makes it here.

Bait and Switch

[Tenebrousedge]

Why are you surprised?

There are a couple fundamental issues with capitalism that are failing to be addressed here: monopolies, and natural monopolies.

Capitalism really is less about competition and more about accumulation of capital. The competitive behavior is the goal, but it comes with the built-in problem of monopolies. You can't allow people to 'win' this particular game. Taken to an extreme, you might end up with one company that simply owned everything.

Capitalism in this sense is kind of a bait-and-switch. We're sold on the idea of an efficient competitive marketplace, but end up with monopolies and rent-seeking.

The problem of natural monopolies is even worse. Your ability to start a competing business is almost entirely a function of how much initial capital it takes to enter said market. It's far easier to start a restaurant or web company than to start a company that lays undersea fiber optic cable. This is why people talk about 'barriers to entry' as a bad thing: they reduce the efficiency of the market. Further, there are some services where competition would have negative utility -- no one really needs multiple companies laying water, power, or sewage lines to their home.

The answer to both of these problems is government. The government's purpose is to prevent or eliminate these market failures.

With natural monopolies, there is no real purpose behind allowing them to make a profit. It's a form of taxation, and can justly be called a theft from the public. These markets are the natural purview of government.

We have a slightly larger toolbox for dealing with large companies. We can break them up entirely, levy progressive business taxes, or subsidize potential competitors.

We need to start divorcing the idea of competition from the idea of capitalism: they're not synonymous. Yes, I am anti-capitalist -- but very pro-competition. Which side are you on?