A Pointless Toll on Internet Traffic: The Truth about Data Caps

by Matt Klassen on June 13, 2016

data_capWhile data caps have long been part of the mobile scene, broadband providers have slowly and subtly been implementing them across the gamut of Internet connections, particularly for wired, home use. On the face of it providers are hoping the same explanation given for capping wireless use will be accepted by wired customers as well, that capping data is the most effective way to management networks to the benefit of everyone, users and providers alike.

But that couldn’t be further from the truth.

While many of the major telecom providers are subtly introducing usage-based billing to their wired data services, other ISPs are quick to point out that such restrictions are, to put it mildly, absolutely pointless. Or in other words, the implementation of data caps on most Internet access is a business decision, not a network management decision.

In fact, there is very little evidence to support the idea that there is a scarcity of Internet bandwidth, or that capping data will help better manage networks, and it’s even something CEOs of some of these ISPs now readily admit.

Earlier this year AT&T, following the lead of rival Comcast, decided to introducing usage-based billing for broadband services, effectively imposing data caps on its customers and making unlimited data something of a luxury, which most could simply no longer afford. That is, while the company bumped up data allotments at various price points, if you wanted to enjoy the old way of doing things, well you’d have to pay considerably more per month. Of course more data at each price point sounds great… until you realize that there weren’t really caps before, at least not in any meaningful way.

Now the fact that most customers are unlikely to hit the caps currently is beside the point, for the rise of streaming video and other such online content likely means that those caps will be insufficient for the majority of customers in the very near future, allowing AT&T to reap the rewards of overage penalties (something is threatened to lose out on in the wireless market).

It is, to put it simply, nothing more than a way for AT&T to charge people more for the service they were already using, arbitrarily penalizing those who don’t want to shell out the extra money for unlimited data use. Not only that, but as other rival CEOs are quick to admit, those data caps are nothing but a cash grab, completely pointless when it comes to better network management and better broadband service.

Dane Jasper, CEO of Sonic, a California-based internet provider, said recently that “The cost of increasing [broadband] capacity has declined much faster than the increase in data traffic.” Further, he noted that his company’s costs for managing broadband have dropped from 20% of revenue to 1.5% in the past few years.

Other CEOs have said the same, as Frontier Communications boss Dan McCarthy told trade publication Fierce Telecom, “There may be a time when usage-based pricing is the right solution for the market, but I really don’t see that as a path the market is taking at this point in time.”

In fact, the cost of managing networks and providing Internet access has decreased dramatically over the last few years, meaning it doesn’t cost carriers that much to provide the data customers are using.

According to St. Louis broadband company Suddenlink CEO Jerry Kent, companies don’t have to spend a lot to keep up with customers’ data demands. “Those days are basically over,” he said on an investor call last year, “and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”

Simply put, with recent moves by the likes of AT&T to pointlessly toll broadband access and even charge to opt out of the company’s mandatory targeted advertising, one thing is becoming abundantly clear: that the things we used to enjoy, unlimited wired online access and a modicum of privacy, are now suddenly luxuries of the digital world, meaning we’ll have to pay more not to get more, but to keep getting what we’ve always been getting before.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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