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

Large company trying to be "fair"?

[Anonymous Coward]

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!!

They set the pricing model

[Anonymous Coward]

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?

Then why is overuse 5x as expensive as in-band use

[localroger]

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.

Re:Who has data caps in the USA?

[Sponge Bath]

I have Tim Warner cable...

Do you watch it on your Magnetbox TV?

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?

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[account_deleted]

Comment removed based on user account deletion

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?

Re:By this logic

[Gaygirlie]

One thing that baffles me is that, well, here in Finland we just don't have data caps. Period. Since we don't have data caps whatsoever, even on most mobile broadband - connections, does that mean we're somehow being unfair? Incompetent? Both, even?

I just don't see it. We're a small country with lots and lots of rural land, only about 8 million people in the whole country and all, and yet our ISPs and cell-phone operators are just thriving without any data caps. We have only one ISP/cell-phone operator that does data caps, the rest do "speed limits," ie. the lowest of the lowest mobile broadband - packages one can get from my cell-phone operator is 512kbps up/down for 4.99€/month and on which you can simply upload and download as much as your heart is willing. 512kbps is enough to download about 158 god damn gigabytes of stuff a month and I didn't even factor in the amount of uploaded data at all -- this is also a package that you can just drop off or switch to a higher/lower tier at your own leisure, there are no 12/24 month contracts involved at all. So basically, even our lowest-tier broadband packages grant us consistent speeds, no long contracts and no sudden extra charges no matter how much you transfer. For some reason our method sounds fairer to me.

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.

I don't think it means even that

[Moraelin]

Fair means they'll leave the customer with some money for other corporations to fleece.

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.

Re:I don't think it means even that

[tqk]

I suppose the system just works.

I'd allow that it functions, yes.

I remember the days when corps constantly worked at lowering their prices and increasing efficiency, all in order to compete for customers. Now, NorthAm telecoms is Balkanized into a few monolithic corps who don't need to care about competing; in many markets they have no competition to speak of. In Canada we have Bell, Telus, Shaw, Rogers, and they only tokenly try to appear to compete in each other's market area (territory). USA has AT&T, Verizon, Sprint, T-Mobile, and I've read lots of stories from people saying that in their area they have only one of them to pick from. Whole cities have tried to roll out their own municipal networks to fill the gap, and they end up in lawsuits attempting to prevent them from doing it. The Google GBit rollout has proved how possible it is. That's not the game the telecom monoliths want to play. They want to milk us for every penny they can get, not maximize fair service for a fair price in competition.

Compare Euro telecoms access and rates to NorthAm's, and it's pretty easy to say it's a rigged game. Our regulators have been helping them do it, not forcing them to compete on level playing fields.

Re:Who has data caps in the USA?

[poity]

They changed that last year. It's 300GB/month now, with 3 months overage without charge (you are warned whenever you get near the cap or go over), then on the 4th month that you go over they will automatically bill you +$10 for an additional 50GB

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?

Re:Bait and Switch

[tqk]

I'll tell you up front, your and my viewpoints are polar opposites from each other. Where you see capitalism inevitably trending to larger and larger monolithic and fewer players, I see government meddling as the cause of that. Where government isn't interfering, smaller and more nimble outfits can run rings around the entrenched dinosaurs. Where government is allowed to interfere, those dinosaurs buy favours and protectionism and regulations from government, stifling those little innovators from interfering in the dinosaurs' turf.

I can accept that you likely need a government for things like WWII, the Manhattan Project, & etc. As for regulating food production and distribution & safety, it's idiotic. Informed consumers and competition can do that much better at a fraction of the cost.

It takes fifty miles for a supertanker to turn around. A cigarette boat can transport millions of dollars in illicit cargo far more nimbly and efficiently.