When Will We See Landline Data Caps?

Numismatics_and_Notaphily_iconThe National Journal asked the FCC how it was going after one month of net neutrality and also asked how many complaints they had gotten from consumers during this time. The FCC estimated they had gotten about 2,000 complaints, and further said that most of them were not about net neutrality issues, but were more generally about service issues with ISPs. One of the more common complaints was about data caps.

The FCC has already ruled that customers with unlimited plans can’t be throttled. Just recently the FCC fined AT&T $100 million for throttling its unlimited wireless data customers for actually trying to use the data they paid for. But it’s a harder case to say that data caps are somehow prohibited by net neutrality. Perhaps an argument might be made that data caps can unreasonably interfere with a consumer’s internet access, something that is prohibited by net neutrality.

But for the most part, data caps are just a way of getting more money out of customers. The US has high broadband rates compared to the rest of the developed world and the rates charged on our cellular traffic have to be among the most expensive Internet access in the world.

Net neutrality does define a few things that carriers can’t do. For example, in the past the FCC has ruled that carriers can’t have a data cap and then provide some of their own programming for free, not to be counted against the caps. The FCC has also frowned on sponsored data where a content provider or somebody else will pay the fee for data so that it won’t count against a cap. If you recall, Netflix had worked out a deal to pay AT&T so that their customers would get the ‘fast lane’ and so that Netflix usage wouldn’t count against data caps.

But there is probably not much of an argument to be made against data caps as long as the customer is fully informed that they are part of the product. The FCC is likely to enforce hidden data caps or plans that were not openly obvious to consumers.

Data caps are also a big issue with satellite data. Customers with that service get very small monthly data caps, and unlike cellular that lets you keep using data and charging you more money, some of the satellite companies cut off your service once you reach the cap. That has to be painful and perhaps that starts crossing the network neutrality line.

Cable companies and telcos have fewer hard data caps, but they do exist. Many cable companies with caps today don’t strictly enforce them. Interestingly, they often use the argument that data caps are necessary to avoid network congestion. They argue that big users tie up networks and make it hard for others to get good service. But two years ago, Michael Powell, ex-FCC Chief and head of the NCTA admitted that data caps are not about congestion but are about ‘pricing fairness’ – which means they are not about fairness at all, but about charging large users more.

I believe we are going to see data caps become a much bigger issue. I wrote recently about how cable companies will be struggling to find ways to grow revenues in the future. They are losing cable customers and they are no longer seeing double digit growth of new data customers as that market gets saturated. They are likely to start routinely raising data monthly rates, but they are also likely to introduce and then fully implement data caps as a way to extract more revenue from their biggest data users. Unfortunately, the large cable companies are publicly traded firms and they will be punished with lower stock prices if they can’t find a way to keep revenues growing quarter over quarter.

I know that Comcast has been ‘experimenting’ with data caps for a number of years in the southeast. They put them in on a trial basis and then get so many complaints that they withdraw the test. But I feel certain that when the extra revenues are needed to meet earnings goals that Comcast and others will then ignore complaints. And sadly, if Comcast or any one other large ISP introduces and enforces data caps and shows a lot of revenue from the process, the other large ISPs are going to follow suit.

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