Cable Industry Finally Admits That Data Caps Have Nothing To Do With Congestion
For years, the key rationale given by broadband providers for implementing data caps was that it was the only way they could deal with "congestion." Of course, for years, independent researchers showed that this was bogus, and there was no data crunch coming. If you actually caught a technologist from a broadband provider, rather than a business person or lobbyist, they'd quietly admit that there was no congestion problem, and that basic upgrades and network maintenance could easily deal with the growth in usage. But, of course, that took away the broadband providers' chief reason for crying about how they "need" data caps. The reality, of course, is that data caps are all about increasing revenue for broadband providers -- in a market that is already quite profitable. But if they can hide behind the claims that they need to do this to deal with congestion, they can justify it to regulators and (they hope) the public.
Of course, enough people have been calling this explanation out as completely bogus that it appears that even the broadband companies' own lobbyists may finally be dropping this line of reasoning. Former FCC boss Michael Powell, who is now the cable industry's chief lobbyist (president of the National Cable and Telecommunications Association -- NCTA), has finally admitted caps aren't about congestion:
Michael Powell told a Minority Media and Telecommunications Association audience that cable's interest in usage-based pricing was not principally about network congestion, but instead 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."
Of course, as Broadband Reports notes, Powell is jumping from one myth (congestion) to another (fairness) that is just as ridiculous.
Arguing for fixed-price unlimited service is a losing debate. We don't get unlimited electricity, unlimited water, unlimited gas or unlimited anything else for a fixed price. Why would you expect telecom be exempt from the laws of economics?
The reason is that there is a direct relationship between the consumption of services or goods and cost. The notion of fairness that Michael Powell referred to is correct because an environment of unlimited use encourages highly distorted usage models that are inefficient and completely separated from underlying costs. Inevitably there will be some number of users that will exploit the fixed-price arrangement to their benefit, while pushing the cost of the shared infrastructure to others. There are countless examples in the wireless and wireline world. This is the fairness issue Michael Powell referred to. Usage pricing brings fairness in cost recovery and it encourages efficiency in usage.
Now for congestion every telecom manager will tell you that the period of peak demand drives cost. Consider Internet usage only about five years ago, before YouTube, before Netflix. There was email, web, a little streaming music and very low resolution video. Today, demand for data has grown exponentially and broadband providers often say streaming video now represents about 40% of the entire traffic on their network and the predictions offered by CISCO show data traffic increasing by orders of magnitude every couple years. If there isn't constant re-investment in the telecom provider's infrastructure there will be serious congestion and outages.
So yes, congestion and fairness are always concerns for telecom operators, regulators and the public and usage-based pricing is here to stay for consumers.
"Arguing for fixed-price unlimited service is a losing debate."
[There is nothing about the economics that requires caps. Nothing. It is simply the lack of adequate competition. I can't imagine why you would argue for caps unless you work for a big cable company or telco...]