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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."
Yeah, sure. All the ISP wants to do is be "fair" to its customers.
When a large company says it's trying to be "fair", you should hold on to your wallet tightly!!
I have Tim Warner cable and have unlimited
Fios is unlimited too
And how much data is it to get past the cap? I stream all my TV. Only have Internet. And I use less than 200gb per month. So far I'm at just over 50 for this month
So they can only blame themselves. I remember back when dial-up was the option, and there were packages with time-limits. But then a few ISPs started offering unlimited time, and as we moved to always-on, they continued to not set limits. 15 years later, they decide limits are what they want, and they're shocked people react negatively?
I have to use wireless because there is no reliable wired service to my house but I'm practically underneath a cell tower. I pay USD$60/month for 5 gigabytes and, if I go over, USD$60 per gigabyte for every gigabyte I go over that. The only way to tell how close I am to the usurious cap is to log into a website that's only updated once a day and which itself serves several megabytes of ads before I can get to the summary of my data usage. Oh, I also get 50%, 75%, and 90% emails and similar SMS messages which I can't receive because my access point is a MIFI which isn't really a phone. I have complained, and of course not only is nothing done the only competitor has EXACTLY the same pricing model. The one time I went over by accident it nearly doubled my bill and when I complained they "generously" gave me a one-time waiver, but when I told them I'd rather have the service slow down or stop working I got nothing but shrugs. Because, of course, it's a profitable trap and nothing else.
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"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?
Okay, I don't get it. The companies in question are showing record profits...and what he's saying makes it sound like the capital expenditures necessary to have built out the networks in the first place are on some other set of books that don't come into effect. Isn't it the case that companies usually finance capital expenditures, and then pay off the debt over time? Under those circumstances, if the price of connectivity had to stay high in order to pay off that debt, the level of profitability wouldn't be rising the way it is. His argument sounds like bullshit to me.
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no, they price a few users into paying more
lots of customers like my parents' generation only uses 10GB a month at most on their home internet
this is why i haven't run p2p in years. its cheaper to buy blu rays or pay for netflix and be on the cheapest internet plan or a cheaper tier than pay $100 a month for internet and the high electricity costs to keep your stuff on 24x7
you only need 5mbps for netflix. about the same for itunes streaming media. less for most youtube crap. i pay $50 a month for 20/1 to time warner cable and don't see a reason to pay more
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:
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.
I don't think it means even that. In fact, I don't think "fair" was ever meant to mean "for you".
From my subjective experience just means "we want more money". The idea is that what they're already getting is so incredibly unfair, when they could be getting more with just a little PR, disinformation and maybe a little collusion. Why, the CEO is probably still driving a Mercedes, while his neighbour is driving a Bugatti Veyron. Can you imagine how unfair that is?
Sarcasm aside... Not that it's necessarily a bad thing or evil. They're expected, and indeed the system is such that they have a legal obligation, to make as much money as possible for the investors. Not fleecing you as hard as physically possible, would be a breach of that obligation. Whether you have some money left after that, is more of a side-effect, than intended. Indeed, it would be a breach of trust if they actually intended to take less money for fairness sake.
I suppose the system just works. Might as well enjoy it. But the corollary is that whenever some large company is talking about something being for your own good in any way, better bring your own lube, they want to shaft you. They're supposed to, after all. Some just are more subtle than others.
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The US should have been building the fiber lines based around a munipal/county model much the way most water/sewer systems work where the city/county government installs and maintains the lines and then leases out that line to whatever ISP the customer wants. Then we would have been allowed actual competition. Charter offers you the best package, fine you sign up for Charter for $X per month and they pay the city/county $y per month to lease the line. Want Mom&Pop ISP that charges $Z per month, great, they still pay the city/county $y per month to lease the line.
That is something at the local level I would have voted a bond issue, sales tax increase, or property tax increase for without a problem.
Instead we have the system we have now...
"The problem with socialism is eventually you run out of other people's money" - Thatcher.
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?
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