The GAO Studies Data Caps

meter-hiThe General Accountability Office (GAO) issued a report near the end of last year that said that broadband customers don’t want caps on their data. That’s not a surprising finding. The report was generated in response to a request from Rep Ann Eshoo of California. So the GAO issued a survey and held focus groups looking into the issue. They also talked to the large ISPs and the wireless companies about their networks.

They concluded that there is no reason to have caps on landline bandwidth because networks generally do not experience congestion. The large ISPs used the congestion argument a number of years ago when they first experimented with data caps. But the large cable companies and telcos admit that congestion is no longer an issue.

The average customer understands this as well. You don’t have to think back many years to a time when your home Internet would bog down every night after dinner when most homes jumped onto the Internet. But there have been big changes in the industry that have gotten rid of that congestion.

Probably foremost has been the cost to connect to the Internet backbone. Just five years ago I had many small ISP clients who were paying as much as $15 per dedicated megabit for raw bandwidth from the Internet. That has dropped significantly and the price varies from less than a dollar to a few dollars depending upon the size and the remoteness of the ISP.

During this same time there has been an explosion in customers watching video and video is by far the predominant use today of an ISP network. Video customers won’t tolerate congestion without yelling loudly because if the bandwidth drops too much, video won’t work. When Internet browsing consisted mostly of looking at web pages customers were less critical when their bandwidth slowed down.

So ISPs today mostly over-engineer their networks and they generally try to provide a cushion of 20% or more bandwidth than what customers normally need. This has also become easier for ISPs because of the way they now pay for bandwidth. Ten years ago an ISP paid for the peak usage their network hit during the month. They paid for the whole month at the bandwidth demand they experienced during their busiest hour of the month (or perhaps an average of a couple of the busiest hours). Slowing customers down during the busiest times under that pricing structure could save an ISP a lot of money. But now that bandwidth is cheap, ISPs routinely just buy data pipes that are larger than what they need to provide a bandwidth cushion. Because the ISP has already paid for the bandwidth to provide a cushion there is zero incremental cost for a customer to cross over some arbitrary bandwidth threshold. The ISP has paid for the bandwidth whether it’s used or not.

This is not to say that there is never congestion. Some rural networks, particularly those run by the largest companies are still poorly engineered and still have evening congestion. And there are always those extraordinary days when more people use the Internet than average, like when there is some big news event. But for the most part congestion is gone, and the ideas of data caps should have gone away with the end of congestion.

If the data caps aren’t about congestion then they can only be a way for ISPs to charge more money. There is no other explanation. ISPs with data caps are taking advantage of their biggest users to nail them for using the Internet in the way it was intended to be used.

Consider a cord cutter household. Derrel, my VP of Engineering has cut the cord and his family, including five kids, uses OTT services like Netflix as their only form of television viewing. The average streaming video in the US uses between 1 Gb and 2.3 GB per hour, depending upon the quality of the stream. For ease of calculation let’s call that 1.5 GB per hour. If Derrel’s family watches video for three hours per day he would use would use 135 GB in a month, and at six hours per day 270 GB. Plus he would still use bandwidth for other things like web browsing, emails with attachments, backing up data in the cloud, etc. Since Derrel works at home and I send him a lot of huge files, let’s say that he uses 100 GB a month for these functions.

And so Derrel might be using 370 GB a month if his family watches 6 hours of streaming video per day, and more if they watch TV more. How does this compare the data caps in the market?

  • Comcast had a data cap of 300 GB. They removed it after public outcry but are back testing it again in some southern markets. It just came back onto my bill in Florida.
  • AT&T Uverse customers have a monthly cap of 250 GB while AT&T DSL customers have a cap of 150 GB.
  • CenturyLink has a cap of 250 GB on any plan that delivers more than 1.5 Mbps.
  • Cox has caps that range between 50 GB and 400 GB depending upon the plan.
  • Charter has caps between 100 GB and 500 GB.
  • Suddenlink has caps between 150 GB and 350 GB.
  • MediaCOm has caps between 250 GB and 999GB.
  • Cable One has caps between 300 GB and 500 GB.

Derrel’s household, which is probably pretty representative of a cord cutter household would almost certainly  be over the monthly data cap for all of these providers. Note that there are plenty of providers that don’t have data caps. Companies like Verizon and Frontier don’t have them. But I feel certain that if data caps start producing a lot of revenue that you will see those companies look at data caps too.

Data caps on landline data really make me mad because I understand how networks are engineered and also how ISPs buy their underlying data. This is nothing more than trying to find a way to squeeze more money out of the data product. It lets ISPs advertise a low price but charge a lot of their customers more than that.

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