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Why ISPs Want to Charge Bandwidth Hogs More Now: Web Video Traffic to Explode

Posted Jun 17, 2008 11:50am EDT by Dan Frommer in Computers, Internet, Telecom

From Silicon Alley Insider, June 17, 2008:

Why are the biggest U.S. Internet service providers, like Time Warner Cable (TWC), AT&T (T), and Comcast (CMCSA) trying to change the way they sell high-speed Internet service from all-you-can-eat to pay-per-use? In part, because Web video is only starting to take off, and the amount of bandwidth used on the Internet could jump sixfold in the next five years, according to a Cisco (CSCO) projection summarized in today's Wall Street Journal.

Cisco, the network gear maker, projects Internet traffic will soar from 7 exabytes per month -- the equivalent of two billion DVDs -- last year, to 44 exabytes per month in 2012, says the WSJ. A big part of that growth: Web video, which Cisco expects to increase from 30% of today's traffic to half of it by 2012. (This is good news for Cisco, of course, which wants to sell as much network gear as it can. So we won't pretend that this is an unbiased report. But we still think it could be directionally accurate.)

Much of the growth Cisco expects will come from greater Internet penetration in emerging markets like Latin America. But as Web video quality -- which means bigger file/stream sizes -- increases, U.S. broadband subscribers will probably be using a lot more bandwidth every month, too. Which is why it makes sense for ISPs to try to change their pricing models as soon as they can -- like they're working on now.

Note: We're not suggesting these changes are good for consumers, or that we like them. But from an ISP's perspective, it makes sense to try. It's not like we have many other options if our cable and phone companies both raise their rates.

46 Comments

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 17, 2008 12:19PM EDT

Where's the credibility of these guys? Did they pull them off the street?

CraigK
CraigK - Tuesday June 17, 2008 12:23PM EDT

A question which comes immediatly to mind is do I get billed for advertiser's crappy flash ads which pop up when I go to a web page, or does the advertiser have to pay for the bytes he dumps down to my PC (which I would rather not have)?

Landsknekt
Landsknekt - Tuesday June 17, 2008 12:25PM EDT

Why should I pay more for bandwidth? I currently pay for a 15M up and 1M down. If I use that all day who cares, its what I'm paying for. If the cable company wants to increase my prices, I will go else ware to get the best price. Bottom line is the cable companies/Telco's are making money (except sprint maybe) and they want to make more... I say screw them!

Andrew
Andrew - Tuesday June 17, 2008 12:29PM EDT

The answer as to why is really simple. With more and more video services becoming available online, there are less and less reason for people to pay an overpriced cable tv subscription. The cable companies are the ones with the control over your internet connection. So they're going to limit how much you can use to stomp out the competition.

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 17, 2008 12:31PM EDT

They have no credibility.

Ralph
Ralph - Tuesday June 17, 2008 12:34PM EDT

When a business buys from an ISP they get things like an SLA (Service Level Agreement)and CIR (Committed information Rate). In other words if the ISP doesn't perform according to the contract the customer gets rebates. Every single ISP oversubscribes their network. This equates to me selling 200,300,400% of a company to the public. Not very kosher and there are penalties. At the very least the ISPs have been guilty of false advertising. If they say its,for example, 512 up and 1.5 down then they should be held accountable. But no, they have the powers that be in their pockets. Whatever happened to the deregulation of '97, to the breakup of AT&T - (now owned by SBC who bought AT&T and Bell South) When the incumbents were mandated to un-bundle their local loops to independents they would do everything to stall the installation. This resulted in delays which peeved the consumer. Just like many other examples, mom and pops build a business then companies like SBC wait until the market is ripe then step in and sell services at deep discounts (so deep that they are less than the mandated unbundled price0 that it forces the competition into folding. So- no competition. Whatever happened to cable companies being forced to open their networks to independent ISPs? They want to charge by the drink? Fine, force them to make restitution every time their networks go down or don't perform according to the contract. Today, ISPs have the benefit of electronics (DWDM)that take the same single lightwave they used in the beginning and splitting it into hundreds of others. This means more capacity over the same infrastructure. This is just another example of gouging. The amount of fiber laid in this country (by L3,global Crossing,and every energy company-Enron included)is unfathomable. This coupled with DWDM has brought backbone costs down to nada. It is public right-of-ways that are being used to deliver local loop. If the Feds won't do anything then local government needs to do something. Start with suing Comcast for false advertising.

Ralph
Ralph - Tuesday June 17, 2008 12:35PM EDT

When a business buys from an ISP they get things like an SLA (Service Level Agreement)and CIR (Committed information Rate). In other words if the ISP doesn't perform according to the contract the customer gets rebates. Every single ISP oversubscribes their network. This equates to me selling 200,300,400% of a company to the public. Not very kosher and there are penalties. At the very least the ISPs have been guilty of false advertising. If they say its,for example, 512 up and 1.5 down then they should be held accountable. But no, they have the powers that be in their pockets. Whatever happened to the deregulation of '97, to the breakup of AT&T - (now owned by SBC who bought AT&T and Bell South) When the incumbents were mandated to un-bundle their local loops to independents they would do everything to stall the installation. This resulted in delays which peeved the consumer. Just like many other examples, mom and pops build a business then companies like SBC wait until the market is ripe then step in and sell services at deep discounts (so deep that they are less than the mandated unbundled price0 that it forces the competition into folding. So- no competition. Whatever happened to cable companies being forced to open their networks to independent ISPs? They want to charge by the drink? Fine, force them to make restitution every time their networks go down or don't perform according to the contract. Today, ISPs have the benefit of electronics (DWDM)that take the same single lightwave they used in the beginning and splitting it into hundreds of others. This means more capacity over the same infrastructure. This is just another example of gouging. The amount of fiber laid in this country (by L3,global Crossing,and every energy company-Enron included)is unfathomable. This coupled with DWDM has brought backbone costs down to nada. It is public right-of-ways that are being used to deliver local loop. If the Feds won't do anything then local government needs to do something. Start with suing Comcast for false advertising.

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 17, 2008 12:35PM EDT

Fire Henry, he is taking up too much bandwidth

Allan
Allan - Tuesday June 17, 2008 12:36PM EDT

How about some real people with real analysis, rather than a pair of corporate mouthpieces.

JM
JM - Tuesday June 17, 2008 12:38PM EDT

this is fine - but these telecom companies MUST stop restricting bandwidth, which is what they do right now. if the prices go from $59 a month (now in nyc) to $300 a month i damn well expect $300 a month worth of service which means excellent streaming capability and no more watching the browser spin waiting for a download. something tells me the price will go up and connectivity will stay the same - that is the typical capitalistic approach in the new usa.

Tim Evans
Tim Evans - Tuesday June 17, 2008 12:40PM EDT

You will go else ware[sic]?!??! What a joke. There will be nowhere else to go. If cable does it, telephone will follow, and satellite will be close behind. Maybe they will give unlimited plans (just like text/pic messaging on cell phones), but they will cost extraordinary amounts of money, and you will choose to go with the pay per play plans. Most of the whiners on here are the few nerds who use inordinate amounts of bandwidth on P2P or movie downloads, and are afraid they'll get penalized. waaah. I love pay per play, pay per bandwidth! :)

Allan
Allan - Tuesday June 17, 2008 12:41PM EDT

How about some real people with real analysis, rather than a pair of corporate mouthpieces.

Robert
Robert - Tuesday June 17, 2008 12:53PM EDT

We need National FREE Internet Service for the poor, middle class and wealthy alike...ISP's are pricing the Internet out of reach for many people...Al Gore where are you??

CaseyG
CaseyG - Tuesday June 17, 2008 12:54PM EDT

If you want guaranteed performance with an SLA, you can get it. Just like a business can. But you won't get it for $45 a month. It will be a few hundred, if not thousand dollars a month.

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 17, 2008 12:59PM EDT

As soon as they gobbled up market share, they're going to start trying to 'one off' charge us and change the business model. It's our fault, for allowing them to manipulate our government(s) into getting sole access and limiting our choices. Now we have to wait for a breakthrough in technology.

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 17, 2008 12:59PM EDT

All cable system providers are offering Internet, telephone and digital TV. I think they can see the writing on the wall. Content providers (DVD, streaming TV , PPV, Vonage, Skype) are going to make significant inroads into cable operators telephone and TV business. This will leave them with only the ISP to make their money. Time Warner claims that 5% of the users are the problem. BULL! The problem is their business model has been gutted. And of course the 'G' word enters into the equation also. They'll do it if they can get any with it. I've already told my TM ISP thet I'll kiss them goodbye if they try this scheme. If 5% of the users are the problem, set a limilthem. Leave the rest of us alone.

Bill
Bill - Tuesday June 17, 2008 01:06PM EDT

Business does get an SLA from their ISP (Cable, DSL, whatever), but business service is 25-100% per month more for the same bandwidth. It's called business grade service.... And OMG, lets force all restaurants to go to an all you can eat model, I can't believe they want to charge extra for seconds... And have you seen how much money the telcom equipment makers are making, selling equipment to the ISPs. These ISP must be stupid buying all that equipment, everyone knows all the investment necessary to run the internet is already completed and bandwidth is basically free. Let's get real, everyone can pay more or the big users can pay more. It really is that simple. If you dig through their books, you'll see that Telcos aren't making any money on Internet services, they are considered investments in the future. Telcos make all their money on switched voice services, and as that continues to go away they will be forced to make money on Internet services. That means the bill is going up, it's just a matter of how much and if you'll save on voice services to balance it out.

J
J - Tuesday June 17, 2008 01:10PM EDT

I think it will be a good idea. I am not a PSP downloader and I like buying stuff on DVD and CD. It gives me a hassle-free backup of the media that I bought. I also have no restrictions on the stuff that I buy. I think the pay-for-use service will take off and provide a new stream of revenue for the telecom companies. Everyone complained when the cell phone companies had outrageously large charges for service that didn't work, but yet everyone had to get a cell phone. This is the same thing. Everyone will complain at first and then see the benefits. Besides, you should be at work instead of sitting in front of your computer downloading all day. Another example was the complaint that people had over VOIP telephony. Who would want a telephone that is routed through your internet connection? Look at it now. The telephone service received in a bundle pack from the Cable companies is just that, an unreliable VOIP telephone that you pay $35 per month for. Ironically, the same as a regular landline telephone. Another thought is the pay-per-use option would keep people from overpaying for the bandwidth that they do use. I don't do a lot of downloading, but I do perform research and check email from time to time. Therefore, I don't think it would be fair for me to have to pay for bandwidth that I don't use. The concept here that should not be restricted it speed, however, the amount of packets of information that are received or sent should be the basis for the charge. Get ready for the tech revolution again y'all.

RanHarley
RanHarley - Tuesday June 17, 2008 01:13PM EDT

I hope they do raise their rates and charge by usage! Why? This will drive competition and new companies will be funded to bring fiber to the home. Right now, it's not feasible at the rates charged; however, break the $100 mark and you will see new companies emerge with better technology and more bandwidth available for the same or less price. They should break up AT&T and Comcast. They control 70% of the market.

Yahoo! Finance User
Yahoo! Finance User - Tuesday June 17, 2008 01:13PM EDT

The bottom line is that cable companies don't want VOD companies competing with their own pay per view services.

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