One question broadband carriers of all sizes are struggling with is should they cap broadband bandwidth or even meter its usage? After all broadband is the new utility of choice, like electricity and water before it, both of which follow an accepted metered model. It is a difficult question to answer with cost and competitive implications, among other issues, driving the answer.

But, if you believe some industry analysis, the question might already be answered, considering over half of broadband subscribers in the U.S. already are subject to broadband caps. Major broadband carriers, including the two largest, AT&T and Comcast, have already implemented broadband caps. Others who have followed include Charter, and Cox. Verizon is a notable holdout for now.

For smaller tier 3 broadband carriers, the issue is more acute, considering backhaul costs are considerably higher for bandwidth. When a few customers choke off that bandwidth for a Netflix movie or two, there are real consequences, not to mention real costs.

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What’s really at stake here is the true business model for broadband and it’s not an ‘apples to apples comparison’ for all providers. It’s a very different issue for a tier one provider with their own nationwide fiber backhaul network than for a tier 3 provider with a 50 to 100 mile backhaul link to the nearest tier one Internet POP.

 

Of course customer expectations and competition play important roles in defining an overall broadband cap strategy. Along these lines, the marketplace is helping to answer these questions. From a competitive standpoint, it appears the broadband cap is swaying towards instituting it versus not, since more and more providers are already down the cap path. That path may be removing competitive implications for instituting caps.

The harder part is customer expectation, especially considering many of them expect ‘all you can eat type’ plans. Or do they? Perhaps customers just want a plan that works for them with clear terms of service. Most customers are not bandwidth hogs. Some definitely are. The trick is to deal with the hogs in a way that doesn’t alienate everyone else. Broadband caps may be the way to do so and early indications suggest we’ll soon find out if it’s the right strategy.

 

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11 thoughts on “Has the Broadband Cap Question Already Been Answered?

  1. Comparing broadband to electricity and water is a bad analogy. A better one is the interstate highway system, where the heaviest users pay more, either through tolls or gas tax. A Netflix movie is analogous to a tractor trailer traveling the highway. That tractor trailer pays more to use the highway than the cars it passes. Similarly, Netflix should pay into the system to use the broadband network.

  2. You can't have it both ways: a monthly subscription or metered. When are the broadband providers going to stop being so greedy? This is an age-old argument. The cable and DSL companies are making a fortune on broadband subscriptions. Few have even offered services beyond 3Mbps, using equipment depreciated over and over again. True profit machines. If carriers keep thinking they can squeeze more out of consumers, than forget it. Make it work or give up your duopolies to someone else to operate.

  3. The interstate analogy is excellent. As a service provider the likes of Netflix are getting a free ride on the highway.

  4. Metering has very little to do with so-called "hogs." Metering is about maximizing profit for a sector that has too little competition and little pressure to invest in a better product.

    Wall Street knows this: "This isn't about protecting against the data network being swamped with excess usage," Sanford Bernstein senior analyst Craig Moffett said. "This is about putting the business model on a stable, long-term economic model." from: http://www.multichannel.com/article/467475-Usage_

    The use of bandwidth caps will only make the difference between next-generation networks (FiOS, community fiber networks, etc) and last-generation networks more stark.

    1. So are electric and other utilities who meter usage for a service that they have to buy or produce wholesale these same scandalous companies just out to make a buck? You strike me as someone who has never run an Internet company and doesn't have a clue that bandwidth costs money. It's not a fixed cost. The more you use, the more you pay. What is so scandalous about that?

  5. Note none of the operators applying bandwidth caps use a Fiber-to-the-Premises architecture. Just saying….

  6. I think an important point is being missed in this discussion. The caps apply only to Internet access, not to bandwidth devoted to the provider's own services or those of an affiliate. You can watch HD IP-TV all day, gobbling up huge swaths of bandwidth, without fear of exceeding your cap if you are taking your provider's product (e.g., AT&T's U-verse video); try the same with an unaffiliated content provider, say Netflix, and the cap applies. The pipe's the same in both instances. Only content from unaffiiated providers suffers from discrimination under the caps as they are now being applied. Were this common carriage for "telecommunications services" under FCC rules, such discrmination would not be allowed. If bandwidth is to be capped, all content using bandwidth from whatever souce should be included in the metering, not just content from unaffiliated content providers.

    1. Bill Johnston is right. This is a branch of the net neut discussion tree. IPTV movies are still "data" whether the "provider" is HBO and AT&T or Netflix.

      The interstate highway analaogy is almost right…the consumer always pays so the big ol' truck truckin on down the road, haulin TVs and payin tolls (as I drop the g's, I sound like Sara Palen!!) and fuel tax has to charge someone and that someone has to charge someone else but the consumer always ends up paying for what the consumer consumes.

    2. Service providers who offer IPTV channels don't get their video content over the internet. Content providers won't let them. They typically own their own satellite headend and bring the content into their closed network. It has nothing to do with the internet it's just IP (internet protocol) based video. Because the content is on the provider's closed network it is much easier to manage bandwidth demand by beefing up capacity.

      Internet content comes from the internet backbone http://en.wikipedia.org/wiki/Internet_backbone#Mo… which can't be beefed up easily by anyone. If you are a regional provider you have to buy feeds which connect your internet gateway router(s) into the backbone network. Rural telecom companies have as little as 100Mbps of connectivity into the backbone network because it isn't cheap and they don't have the customer base to support it.

      For service providers the only real way to manage internet bandwidth demand is to cache content at the gateway routers. It isn't cheap but it's better than having to meter content in my opinion.

  7. The interstate highway analogy is a bad one because it's publicly funded, and the tolls and taxes are used to pay for its construction and maintenance. The Internet is a series of private investments, where private capital is looking for a return on investment. The marketplace determines the best way to gain this return and thus differing business models. You can't apply a publicly funded model to a series of private investments.

  8. The interstate analogy is a good one. The transmission media used to create the backbone and last mile has been in large part been done with federal and state public subsidies, as well as USF and RUS funds. And what is worse is the obama admin has given private companies even more money to build a monopoly in rural areas. For the most part these private companies like GCI in Alaska are not regulated, hence prices are going up, even though the public is building the network

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