Powell’s Usage Cap Explanations Prompt New Criticism by Net Neutrality Backers

The cable industry “recently changed [its] tune on data caps” after operators said they were “necessary for managing network capacity and preventing congestion,” said the paper by NAF Open Technology Institute (OTI) members Hibah Hussain, Danielle Kehl, Benjamin Lennett and Patrick Lucey. “Now they argue that caps promote fair pricing and more affordable broadband.” That’s belied by the fact that adding bandwidth capacity has a “negligible” cost once the $185 billion in cable capital spending from 1996 and 2011 is paid for, the paper said. The industry had almost $1 trillion in revenue during that period, it said, citing NCTA figures.

Time Warner Cable is the only U.S. cable operator to discount what it charges broadband subscribers who buy its capped plan, the paper said. The reduction in the Essentials Internet package is $5, so it costs $40 monthly with usage capped at 5 GB monthly, OTI said. That’s far less than the average monthly usage the FCC found in its wireline broadband speed tests, OTI Policy Director Lennett told us. The most recent report, released Friday (CD Feb 19 p1), didn’t list such a usage figure (http://fcc.us/XNh7k2), but the previous one pegged the average at 28 GB monthly, he said.

"Meager discounts” in “low-capped plans” from cable ISPs “are dwarfed by the incredibly low costs for cable companies to provide abundant Internet service,” the OTI report said. It said Powell’s comments at the MMTC conference that unlimited-usage plans don’t mean app and service developers must account for how much bandwidth their products use on ISPs’ networks “runs completely counter to encouraging the development of next generation, high-bandwidth Internet applications and services.” That “disciplining argument” is “promoting the cable industry’s self interest because it directly targets online video services” that use a lot of bandwidth, OTI said. “Data caps and usage-based pricing on cable broadband will impact not just entertainment services like Netflix -- they also threaten to impede other innovation, including the growing world of online education.” Netflix has told the FCC that AT&T, Comcast and Time Warner Cable’s exclusion of some of their content sent on their own networks from data caps is a net neutrality issue (CD May 11 p4). A Netflix spokesman had no comment.

NCTA finds it “regrettable that New America’s latest salvo merely repeats misleading statistics and shop-worn arguments,” said a spokesman for the association. “Their entire analysis is based on a flawed understanding of the broadband business, and the historic and ongoing investments necessary to build and operate world class networks. As the FCC and numerous economists, scholars and commenters have pointed out, tiered pricing models promote fairness by more equitably apportioning burdens between high volume and low volume users.” The American Cable Association declined to comment. In addition to Powell’s comments, NCTA’s December forum on usage-based pricing where academics spoke shows the cable industry is trying to increase support for the practice, Lennett said: There’s a “push by the cable industry to get policymakers and the public more comfortable with usage-based pricing."

OTI’s report singled out cable because “they're the ones that have been sort of aggressively pushing this,” Lennett said. “Caps really make no sense on cable at this point, given just how much capacity they have available, the margins on the service they are already making providing un-capped service.” An analyst cited in OTI’s report said the profit margins are as much as 97 percent. “These caps have nothing to do with congestion management,” Lennett said. Such caps don’t address peak times or places of usage, said Vice President of Government Relations Cathy Sloan of the Computer and Communications Industry Association. Other experts have said such demand-based billing would make more economic sense than outright caps, but that consumers might be reluctant to pay different amounts based on when they download content (CD June 21 p5).

That ISP-affiliated online content is exempted from some cable and telco ISPs’ usage caps while all public Internet content isn’t means those companies give consumers a reason to favor downloading the providers’ own content over others’, said Sloan. Those ISPs “haven’t broken bad on it yet, but there’s nothing to stop them other than public opinion,” she said of adding exclusions or reducing bandwidth caps. “Public education is important on this” issue of caps being unfair because of what’s excluded, said Sloan of CCIA, with members including Dish Network, eBay, Facebook, Google, Microsoft and Sprint Nextel (http://bit.ly/YbdeYc). “The more users who are aware of what’s going on, the more they are going to be in a position to complain to their congressman or the FCC when they really feel they are being squeezed.” Big telcos and other ILECs also may be capping bandwidth for residential broadband subscribers, but there’s no central repository for which companies do so, said Lennett and Sloan. “They're not going to shout from the rooftops about what’s subject to the cap,” Sloan said. Lennett said NAF thinks “this is something the FCC should be collecting.”