Tag Archives: Data Caps

Nuances of the NTIA BEAD Notice

NTIA’s recent BEAD Notice changed the BEAD grant process to focus almost entirely on awarding the grant funds to the ISP that asks for the least amount of funding for a given location. But there are some other interesting changes in the Notice for ISPs to consider.

Grant Areas. Eligible Entities must also allow applicants to propose to exclude select broadband serviceable locations (BSLs) that the applicant determines are excessively high-cost locations from the project area (or would otherwise make the project economically unviable for the technology being used).

This means ISPs don’t have to stick to the grant serving areas that many States tried to dictate. A few States want grant applicants to apply for entire counties. Others forced ISPs to file for areas that combined highly rural areas with more dense areas. This is an opening for fiber ISPs to pursue smaller areas that make financial sense.

Prevailing Wages. States must still ensure that subgrantees have a demonstrated record of, and plans to continue compliance with, Federal labor and employment laws. A subgrantee will satisfy this requirement through self-certification of compliance with Federal labor and employment laws.

Some States were demanding prevailing wages. This new rule says that States should make sure that a grant applicant is complying with federal labor and employment laws but can’t layer on extra requirements after that.

Data Caps. NTIA eliminates the “Consumer Protections” section of the NOFO16 that required Eligible Entities to “ensure that each prospective subgrantee does not impose data usage caps.

With this restriction lifted, we’re bound to see grant winners implementing data caps.

Wholesale Access. NTIA further eliminates the “Interconnection Requirements and Wholesale Access” section of the NOFO.

This is an interesting change because every federal grant program I can think of requires grant winners to sell wholesale access to the network to other carriers. The primary intention of the wholesale access requirement was to allow rural networks to gain middle-mile transport through grant funded networks – something that is vital in rural America. I have a hard time imagining who lobbied for this.

Low-Cost Option. NTIA will only approve Final Proposals that include LCSOs (Low-cost Service Option) proposed by the subgrantees themselves.

ISPs still have to have one low-cost broadband option – but the States can’t dictate the rate. This is a big deal for ISPs because some States were requiring extremely low broadband rates for low-income households. States can no longer dictate any broadband rates.

Environmental Reviews. To support NTIA’s goal of issuing National Environmental Policy Act (NEPA) approvals within two weeks for an estimated 90 percent of BEAD projects . . . Eligible Entities are hereby required to use the Environmental Screening and Permitting Tracking Tool (ESAPTT) within the NTIA Grants Portal.

This is a big deal in that traditional environmental reviews are expensive, and there was likely going to be a big backlog and delays in getting the studies done. This forces a new role on State Broadband Offices.

FCC Investigating Data Caps

In June 2023, FCC Chairperson Jessica Rosenworcel announced that the FCC was going to investigate the impact of data caps imposed by ISPs on broadband usage. For those who don’t know what a data cap is, it is an arbitrary cap on the amount of home broadband usage in a given month. Most ISPs with data caps charge extra for exceeding a data cap – and customers who won’t pay more typically get throttled to very slow speeds.

Most ISPs don’t use data caps, and most home broadband usage is unlimited. But there are still ISPs that enforce data caps. Here are a few of the larger ISPs that use the practice – there are numerous smaller ones:

  • Comcast imposes data caps in some, but not all markets. The data cap is 1.2 terabytes per month, and extra usage is billed at $10 for an extra 50 gigabytes.
  • Cox has a data cap of 1.28 terabytes per month, and extra usage is billed at $10 for an extra 50 gigabytes.
  • Mediacom has data caps that differ by product. Their smallest data cap is 350 gigabytes per month and largest is 1 terabyte. Extra usage is $20 for 50 gigabytes.
  • Sparklight has a data cap on some products. On their slowest products the data cap is 700 gigabytes. Other products have a cap of 1 terabyte. All plans get throttled to very slow speeds if monthly usage hits 5 terabytes.
  • Viasat and HugesNet have severely small data caps.
  • Cellular hotspots also have small data caps, but FWA cellular doesn’t seem to have a cap.
  • Practically all cellphone plans have a data cap, with a separate cap for overall usage and tethering.

The FCC opened a Notice of Inquiry on October 15 to examine data caps. This is an interesting document that talks about the ever-increasing amount of home broadband usage. I’ve written a number of blogs about this issue over the years. OpenVault reported at the end of 2023 that the average broadband customer in the country uses 561 gigabytes per month of broadband – which is download and upload usage combined.

In the NOI, the FCC wants to understand more about the impact that data caps have on customers. This might be from seeing increased costs for exceeding the data cap limit or having speeds reduced. There are different practices that fall under the FCC investigation, including hard data caps, like the ones listed above, soft data caps that ISPs sometimes selectively invoke, de-prioritization where customers that reach a cap may be knocked out of service in times of heavy demand, and throttling where speeds are severely decreased when the data cap is reached.

When the FCC decided to investigate data caps in 2023, the agency opened a portal and asked consumers to tell them stories of the impact of data caps. Consumers can still provide their experiences with data caps at this link.

Consumers almost universally hate data caps. A household that uses more data than the cap can pay as much as $50 more per month for broadband. This is a severe penalty if you consider that every network engineer I know scoffs at the idea that there is an incremental cost from using reasonable amount of extra broadband in a month. If there is a cost, it is pennies, not the large fees charged for exceeding data caps. It’s clear that data caps are a way to increase revenues, not to protect networks.

It’s even more painful for customers who hit a data cap and can’t afford to buy more data. Speeds can be curtailed to dial-up speeds, which in today’s online world means it’s nearly impossible to connect to websites.

The investigation is interesting, because the FCC doesn’t currently have the authority to do anything about data caps. They would have gained that authority from their decision to implement Title II authority over broadband. But that order is sitting in a court and the FCC is only going to be able to do anything about broadband and data caps if and when they win that court dispute.

The FCC to Look at Data Caps

FCC Chairwoman Jessica Rosenworcel asked the other Commissioners to join her in opening an investigation into broadband data caps. According to FCC rules, a majority of Commissioners must agree to open any official proceeding. For those not familiar with the data cap concept, it’s where an ISP bills extra for using more than a defined amount of broadband in a month.

Not all ISPs use data caps. The ISP that gets the worst press about data caps is Comcast, but it doesn’t bill data caps in all markets – seemingly only where it doesn’t have a lot of competition. Charter would love to bill data caps, but it has been prohibited from doing so because of an arrangement reached with the FCC when it got approval to buy Time Warner. That agreement just lapsed on May 18 of this year. We’ll have to wait to see if Charter will impose data caps – but it seems likely it will do so since the company asked permission from the FCC to impose data caps in 2021.

AT&T imposes Data caps on DSL and on some fiber connections. Astound broadband charges data caps in Washington, Oregon, and California. Cox has data caps that kick in after a user exceeds 1.25 terabytes per month. Mediacom imposes data caps on many of its plans. All of the products of the high-orbit satellite companies, HughesNet and Viasat, have severe data caps. So do cellular hot spot data plans.

It’s an interesting request by the Chairwoman. Under current FCC rules, the FCC has no authority to do anything about data caps. This authority went away when the previous FCC under Chairman Ajit Pai eliminated the regulation of broadband by killing Title II authority. Chairman Pai went even further and pushed remaining vestiges of any broadband regulation to the Federal Trade Commission.

This makes me wonder why Chairwoman Rosenworcel would try to open this docket. I can see several possibilities. First, this could just be done to show that the FCC cares about an unpopular ISP practice. It’s clear that the public hates data caps. I saw that the press that covers the FCC immediately flooded the news after this was announced. I would hope the Chairwoman would not be so callous as to investigate something for which the FCC is powerless to make any changes.

That leads to the second possibility that Chairwoman Rosenworcel believes that adding a fifth Commissioner will provide the votes needed to reinstate Title II authority or some updated version of it. Starting the investigation into data caps now might sync up well with renewed FCC regulatory authority and let the FCC make a popular change in the future to ban or modify data caps.

I’ve written several blogs over the years that make the argument that data caps are nothing more than a way for ISPs to extract extra payments from customers. There is zero justification from a cost perspective that residential customers that use more data than average cause any significant incremental cost for an ISP. ISPs buy wholesale broadband based on the busiest times of the usage in a month. Within the pile of broadband purchased to meet that peak need, it doesn’t matter how much broadband customers use as long as it doesn’t push up the busy hour for the month.

Additionally, the big ISPs that use data caps also engage in peering arrangements where they directly hand off broadband traffic to the largest web services like Google, Netflix, Facebook, and Microsoft. While there is a cost to create the peering points, once established, the amount of data sent through peering arrangements saves a huge amount of money compared to shipping this same traffic through the Internet.

It’s harder each year for affected homes to avoid data caps. Data caps accumulate both download and upload usage, and homes are increasingly using upload bandwidth that most folks don’t even realize. According to OpenVault, the average home in the U.S. now uses over 560 megabytes of data per month, an amount that keeps climbing. The household average as recently as 2017 was only 273 megabytes per month.

This will be an interesting process to watch. Chairwoman Rosenworcel has created a form for folks to describe their data caps stories. I’m sure that everybody who does so will be hoping that the FCC can help them – but that remains to be seen. It means getting a fifth Commissioner who is willing to reintroduce broadband regulation – something that is going to have a lot of opposition.

A Study of ISP Billing Practices

Consumer Reports undertook a large study where it solicited broadband bills from customers across the country. The beauty of examining bills is the ability to see what ISPs really charge instead of what they say they charge.

The study is not a statistically valid sample since folks voluntarily submitted bills – but Consumer Reports was able to gather over 22,000 bills and found some interesting things.

Some of the things the analysis found are already widely understood. For example, ISPs that bundle multiple services together don’t disclose the actual price paid for each of the services. This means consumers are at the mercy of the ISP to tell them the revised bill that will come after dropping just one of the services. Companies like Comcast have been using the bundling discount as a cudgel to try to persuade folks not to break a bundle by claiming that all discounts were assigned to whatever service is being dropped.

ISPs offer other kinds of discounts. There are discounts for first-time subscribers who buy a service from the web. There are discounts for agreeing to go paperless or agreeing to auto-pay with a bank debt or credit card. There are discounts that are negotiated with customers who threaten to drop service. As might be imagined, these discounts are all over the board, even within the same ISP. Discounts are the Wild West of the broadband world, with some customers getting much deeper discounts than their neighbors.

The study also documents hidden fees that are not usually disclosed in the advertised rate for broadband. Fees like modem rental can sometimes be avoided by a customer willing to buy a modem, but in some cases, that is not an option. The biggest such fee is the median cost of $16 per month charged by Wave Broadband for a modem. Some ISPs have mysterious fees for broadband which are not explained. The biggest headscratcher is the $7.77 Deregulated Administrative Fee charged by Windstream.

The study was particularly critical of data caps. It highlighted Cox, which charges $49.99 to customers who want a guarantee of unlimited data. Consumer Reports saw one bill where Cox charged a customer $100 in a month for going over the data cap.

One of the most interesting findings is that consumers in zip codes where there is only one fast ISP pay an average of $75, while consumers in places with broadband competition average $65. This is reminiscent of a decade ago when the conventional wisdom was that competition lowers rates by around 15%. This still seems to be the case.

The report highlights Altice (Optimum and Suddenlink) as having the highest rates before any discounts. It lists Sonic, a fiber overbuilder from San Francisco, as having the lowest rates.

The report also highlighted some cases where it found prices to be puzzling. For example, the median prices charged by AT&T for various speeds were 12 Mbps for $63, 45 Mbps for $80, 100 Mbps for $60, and gigabit for $80. The report wonders why AT&T would charge more for 12 Mbps than for 100 Mbps. I have my own theory that the big telcos are milking DSL before it dies while trying to drive people off of copper networks.

There was nothing in this report that is a surprise to consumers who are regularly annoyed and angered by the billing practices of the big ISPs. I’m guessing that the reaction of most folks reading this report is, “At least my ISP isn’t the worse one.”

The Busy Hour and Data Caps

As states are getting ready to create their broadband plans for the NTIA’s $42.5 billion BEAD grants, we’re starting to see some interesting arguments being made by incumbents to influence state broadband plans. One of the aspects of the BEAD plan that hasn’t been discussed much yet is that the NTIA is stressing affordability. For example, the NOFO states several times that states must develop a middle-class rate plan. Everybody I know is scratching their head on that what that means, but to the big ISPs, this must sound like rate caps – something they have vigorously fought everywhere.

One of my readers from Maine says that one aspect of high rates – data caps – is a big topic of discussion in the state. ISPs are making the claim that they’ve made many times that data caps are needed to manage the network. The rest of the ISP argument is that heavy broadband users are creating extra costs and should pay for the extra usage.

I’ve written about this before, and the big ISP argument is pure bosh. Broadband costs are not related to the overall volume of broadband being delivered on a network. The cost is determined almost entirely by what network engineers call the busy hour. The business hour each day is when a network sees the busiest broadband usage. For networks with a lot of residential customers, the busy hour is usually during the evening when the most families are streaming video. However, I’ve seen a few networks where the busy hour was at some different time of the day. One example I know of is a network serving college students that has more usage after 10:00 PM and into the early hours of the morning, which the ISP accredits to gaming. Networks that serve business customers might have the busy hour at almost any time of the day, depending upon the mix of businesses using the network.

The busy hour is important because it determines how much bandwidth is needed for the various components of the network. For example, the data connection between the ISP core and a neighborhood must be large enough to handle the busy hour – otherwise, bandwidth and speeds get slower. Another important network segment that depends upon the busy hour is the connection to and from the ISP and the Internet – there must be enough bandwidth available to accommodate the expected busiest time each month. Most ISPs buy enough bandwidth to the Internet to have at least a 20% cushion of capacity greater than the expected busiest hour.

As long as an ISP is buying enough broadband to the Internet to satisfy the busy hour, it doesn’t matter how busy the network is the rest of the time – because all other times are less busy than the peak time. The ISP is paying for the peak bandwidth and doesn’t get any savings in bandwidth cost for times when customers don’t use the bandwidth.

The data cap for most ISPs is set at or close to 1 terabyte per month (1,000 gigabytes) of total combined upload and download usage for a customer. According to the most recent statistics from OpenVault, 15% of all homes are now using more than a terabyte of bandwidth per month. I see network performance statistics from my clients, and none of them believe that the busy hour is caused by a few big users – it happens at the time of the day when the highest number of homes use broadband at the same time. There is a limit on how much bandwidth a given home can realistically use if they are doing the same things that many homes do – like watching video or gaming. A house that uses a terabyte of data per month is likely no busier than a home that uses half that. The house with the higher monthly usage normally just uses the broadband for more hours per day to accumulate the terabyte of usage.

The only time that data usage costs more money for an ISP is when it has to increase the size of the data connection to the Internet. But interestingly, even that doesn’t always cost an ISP more money because as network usage has grown, the cost per gigabit of traffic to reach the Internet has dropped year after year. I have ISPs that are carrying four times the traffic of only a few years ago but are still paying no more for the connection – which is another argument about heavy users creating more costs for an ISP.

Data caps do not make any significant change to lower the busy hour, and any ISP that says they do is being untruthful. Data caps serve only one purpose – to make additional money for ISPs. There is no other explanation, and any ISP that argues that data caps are a network control issue is counting on the technology naivety of regulators and policy people. When Comcast first introduced data caps, only a fraction of one percent of homes used more than a terabyte per month. Comcast made the same argument then that the data caps were to rein in the usage of the few heavy users. The argument was no more valid then than it is now. ISPs have to be thrilled to see so many homes now exceeding the data caps – the overage fees for exceeding the data caps can be as much as $50 per household. Seeing 15% of households exceeding the data caps is like Christmas to big ISPs, like a big secret rate increase.

Charter Asks the FCC to Allow Data Caps

In a move that was probably inevitable, Charter has petitioned the FCC to allow the company to begin implementing broadband data caps. Charter has been prohibited from charging data caps as part of an agreement with the FCC when the agency approved the merger with Time Warner Cable in 2016. Charter is also asking the FCC to lift another provision of the merger agreement that prohibits the company from imposing interconnection fees on Netflix and other companies that generate large amounts of web data.

There was one other requirement of the original merger agreement that the FCC already modified in 2017. Charter had voluntarily agreed to pass 2 million new homes within five years of the merger agreement. The original agreement with the FCC required Charter to compete against other cable companies, but in 2017 that was changed to require Charter to instead pass 2 million new homes.

The merger agreement between the FCC and Charter is in effect until May 2023, but the original deal allowed Charter to ask to be relieved of the obligations after four years, which is the genesis of this request. If granted, the two changes would occur in May 2021.

Charter is asking to lift these restrictions now because the original order allowed them to do so this year. There seems a decent likelihood that the FCC will grant the requests since both Chairman Ajit Pai and Commissioner Michael O’Rielly voted against these merger conditions in 2016 and said the restrictions were too harsh.

What I find interesting is that Charter has been bragging to customers for the last four years about how they are the large ISP that doesn’t impose burdensome data caps on customers. This has likely given them a marketing edge in markets where the company competes against AT&T, which aggressively bills data caps.

Charter has to be jealous of the huge dollars that Comcast and AT&T are receiving from data caps. Back in 2016, there were not many homes that used more data than the 1 terabyte cap that AT&T and Comcast place on customers. However, home broadband usage has exploded, even before the COVID-19 pandemic.

OpenVault reported in early 2018 that the average home used 215 gigabytes of data per month. By the end of 2019, the average home usage had grown to 344 GB monthly. During the pandemic, by the end of March 2020, the average home used 402 GB.

What’s more telling is the percentage of homes that now use a terabyte of data per month. According to OpenVault, that’s now more than 10% of homes – including nearly 2% of homes that use more than 2 terabytes. Just a few years ago only a tiny percentage of homes used a terabyte per month of data. Charter has undoubtedly been measuring customer usage and knows the revenue potential from imposing data caps similar to Comcast or AT&T. If Charter can charge $25 for exceeding the data caps, with their 27 million customers the data caps would increase revenues by over $800 million annually – for usage they are already carrying on their network. Charter, like all of the big ISPs, crowed loudly that their networks were able to easily handle the increase in traffic due to the pandemic. But that’s not going to stop them from milking more money out of their biggest data users.

The US already has some of the most expensive broadband in the world. The US landline broadband rates are twice the rates in Europe and the Far East. The US cellular data rates rival the rates in the most expensive remote countries in the world. Data caps imposed by landline and cellular ISPs add huge amounts of margin straight to the bottom lines of the big ISPs and wireless carriers.

What saddest about all of this is that there is no regulation of ISPs and they free to charge whatever they want for broadband. Even in markets where we see a cable company facing competition with fiber from one of the telcos, there is seemingly no competition on price. Verizon, AT&T, and CenturyLink fiber cost roughly the same in most markets as broadband from cable companies, and the duopoly players in such markets gladly split the customers and the profits for the benefit of both companies.

I’ve written several blogs arguing against data caps and I won’t repeat the whole argument. The bottom line is that it doesn’t cost a big ISP more than a few pennies extra to provide service to a customer that uses a terabyte per month at home compared to a home that uses half that. Data cap revenue goes straight to the bottom line of the big ISPs. For anybody that doesn’t believe that, watch the profits at Charter before and after the day when they introduce data caps.

Say No to Data Caps

Last week I had a blog that asked why the FCC is seemingly supporting data caps by allowing caps on broadband built with federal grant money. The FCC has established grants that place premium value on fast broadband speeds and low latency but that ignores one of the most important aspects of broadband today – usability.

A broadband connection that doesn’t let homes partake in the same online world as the rest of America is inferior broadband – and there is no better example of an unusable data plan than one a low data cap. The FCC’s RDOF rules support monthly data caps of 250 gigabytes for plans offering 25/3 or 50/5 Mbps. The FCC is clearly saying to rural America – we’ll give grant money to ISPs to bring you better broadband, but we’re going to let the ISPs cripple that broadband so that they can bill you an extra $50 or $100 per month if you want to use that broadband like everybody else in the country.

Recall that ISPs that win the RDOF grants have six years to build the new networks. How will a 250 GB data caps look by the time these networks are built? OpenVault says that the average home used 274 GB per month in 2018 – already higher than the FCC’s proposed data cap. By the end of 2019 average usage had grown to 344 GB for the average home and exploded to 402 GB by March due to people and students working from home during the pandemic. Trending household usage forward until 2026 would suggest that the average home will be using more than a terabyte of data each month by then. That’s not a big stretch since more than 10% of homes are already using a terabyte or more of data today.

The FCC is not the only one to point a finger at. There are plenty of state broadband programs that have awarded grants to ISPs that have data caps. This has happened because policymakers have not viewed data caps as providing inferior broadband. This is easy to understand since just a few years the vast majority of homes used a lot less broadband than the data caps. You might recall in 2015 when there was big public pushback when Comcast tried to introduce a 300 GB data cap. At that time, Comcast said that only a tiny number of customers used more data than 300 GB per month – but in five short years, the national average data usage is significantly higher than the cap Comcast wanted to impose in 2019.

We need a new policy at the state and federal level that says that ISPs with data caps are not welcome to broadband grant funding. Not only should they not be able to impose data caps on grant-funded networks – an ISP that has routine data caps for others should be prohibited from participating in any grant funding anywhere.

There are still ISPs that say that data caps help to protect the integrity of their network. This argument went out the door when most ISPs stopped billing for data caps during the pandemic – the one time when protecting the network would have been important.

What hasn’t been said enough is that a broadband connection with a data cap is an inferior broadband connection. A home with data caps faces the monthly choice of either curtailing broadband usage or else spending a lot more for broadband. Are we going to fix the rural broadband gap by transitioning rural homes with slow broadband connections to ones with tiny data caps that cost a lot more than everybody else in the country?

It’s always been clear that data caps are mostly about greed. There is no better example of this than the AT&T rural hotspot that has a data cap that allows for as much as an extra $200 in monthly fees to a subscriber. It’s outrageous that the FCC gave grant money last year to Viasat which has tiny monthly data caps. The whole proposed 5G Fund is outrageous if billions of federal money will allow the cellular carriers to sell more rural hotspots with tiny data caps and huge monthly fees.

It’s time for broadband policymakers at all levels to categorically say no to data caps. Shame on the FCC for allowing data caps into the discussion of the RDOF grant. But also shame on Congress for not issuing a new telecom bill to stop all of this nonsense. And shame on any state policymaker or regulator who has allowed state resources to be used to support broadband with data caps. It’s time to say no.

Why Does the FCC Support Data Caps?

Most people may not have noticed that the upcoming RDOF grants allow, and even encourage ISPs to enforce data caps on customers. I have a hard time thinking of even one reason why the FCC would suggest that ISPs use data caps.

The RDOF grants have four performance tiers for ISPs, with the auction rules weighted to give preference to faster data speeds. Each of these performance tiers comes with a suggested monthly usage allotment – which means a data cap. ISPs that will deliver speeds of either 25/3 Mbps or 50/5 Mbps can introduce a data cap of 250 gigabytes or the U.S. average, whichever is higher. ISPs offering speeds of 100/20 Mbps or 1 Gbps/500 Mbps can set a data cap at 2 terabytes.

The natural question is to ask why the FCC is setting any data cap at all? Remember, this is an FCC that no longer regulates broadband, and yet they are suggesting rules that encourage ISPs that win the grant funding to introduce data caps. Past experience says that if the rules allow for data caps, the ISPs that win the money are likely to implement them.

I find the data caps for the 25/3 Mbps and 50/5 Mbps to be intriguing since ISPs can’t set the data caps at less than the US average. Who is going to measure that? The FCC doesn’t gather the kind of data needed to measure data caps around the country. Further, there are companies like CenturyLink that have data caps but that often don’t enforce them. I haven’t the foggiest idea how anybody would measure the national average data cap.

It’s important to put these data caps into perspective. The data caps on the slower products are incredibly stingy at 250 gigabytes per month.  OpenVault reported earlier this year that the average US home used 344 gigabytes of data per month in December 2019, up from 274 gigabytes a year earlier. Due to the impact of COVID-19, that number exploded to 402.5 gigabytes by the end of March. Homes being limited to using 250 gigabytes of data are being told not to use their broadband like everybody else. It’s nearly impossible for a home that has people working from home or students doing schoolwork at home to limit themselves to only 250 gigabytes of data per month.

Even the 2 terabyte data caps for faster broadband will become problematic is a few years. OpenVault says that over 10% of homes were already using more than 1 terabyte of data as of the end of the first quarter of 2020 and 1.2% were using over 2 terabytes. By the time these networks are built with RDOF money it wouldn’t be surprising for 10% of homes to be using more than the 2-terabyte cap.

With these grant rules the FCC is actively supporting ISP to introducing data caps that are smaller than the national average broadband usage at the end of 2018 and that will easily be less than half of the national average usage by the time the networks funded by the RDOF grants are constructed.

It seems like the FCC never learns any lessons. Every grant program they have administered has some major flaws. The FCC is handing out billions of dollars to provide broadband to home that don’t have it today. This program is a major boon for the rural communities that get broadband because of the grants. But with these rules, the RDOF money will be used to bring broadband to homes for the first time and immediately cripple homes from using that broadband due to data caps. For the federal government to support a 250-gigabyte data cap is an incredibly bad policy. They are saying to folks – here, we funded broadband, but don’t use it. I can’t conceive of any reason why data caps are even mentioned in the grant rules unless this is another case of bowing to the lobbyists from the big ISPs or the satellite broadband providers.

Looking at the bigger picture, it’s somewhat surprising that the FCC would take any position on things like data caps since they have given away their authority to regulate broadband. What these grant rules tells us is that this FCC would heartily support data caps if they still had that authority. This provision in this grant program provides tacit support to Comcast and AT&T to bill customers huge amounts of extra money for exceeding arbitrary and stingy data caps.

Home Broadband Usage Explodes

ISPs have all been reporting increased bandwidth usage due to employees and students being asked to work from home during the COVID-19 pandemic. Perhaps the best proof we’ve seen yet of the huge increase in home broadband usage comes from OpenVault, which has been tracking home broadband usage for several years.

The company reported that as of the end of March that the average US home used 402.5 gigabytes of usage, up 17% from the 344.0 gigabytes reported just 3 months earlier at the end of 2019, and up 47% from the 273.5 gigabytes measured a year earlier. OpenVault says that most of the growth was realized in the last two weeks of March as employees and students started working from home in earnest.

The OpenVault numbers represent total bandwidth used by a home, meaning the numbers are a combination of download and upload usage. OpenVault validated the widely reported phenomenon that the demand for upload bandwidth is increasing far more than the need for downloading.

Another interesting way to look at broadband usage is by considering the median usage – which is the speed at which half of homes use more and half less broadband. The median broadband usage is the US has always been lower than average usage because of the large number of rural homes that are stuck using slow broadband connections. A home with a 1 Mbps download speed cannot easily use the same amount of bandwidth as a home with a 100 Mbps connection. Median usage for the first quarter was at 233.6 gigabytes, up 60% from 146.0 gigabytes from a year earlier, and up 22% from the 190.7 gigabytes used at the end of 2019. The big news in the growth of median speeds is that even homes with slower broadband connections are burning through more broadband.

One of the most startling numbers to come from OpenVault is what they call power users – homes that are using more than 1 terabyte of data per month. At the end of March, 10% of all US homes were using a terabyte of data, an increase of 138% over the 4.2% of homes that used a terabyte of data just three months earlier at the end of 2019. Even more interesting, 1.2% of homes used 2 terabytes of data at the end up march, up 215% from the end of December. The big ISPs like Comcast are supposedly not billing for data caps during the pandemic – but they must be licking their chops at the flood of new revenues this is going to create if broadband usage doesn’t return to pre-COVID levels.

We saw the demand for faster broadband products also leap upward. At the end of March the percentage of homes subscribing to gigabit data products jumped to 3.75% of homes, up from 2.8% at the end of 2019 and up from 1.9% a year earlier. Amazingly, more than 1% of all homes in the US upgraded to a gigabit data plan in just the last three months – that’s something that’s been predicted for years. Those homes are not likely going to downgrade to slower speeds – so gigabit broadband is now becoming a significant segment of the market. OpenVault says that 12% of US homes now subscribe to speeds of 200 Mbps or faster.

The OpenVault data also validates what’s been reported widely by ISPs – that the patten of broadband usage is changing by time of day. In the recent past the peak period for broadband usage – the busy hour – was always in the evenings. In the first quarter the amount of usage in the evenings was flat and all of the increased usage came during the daytime as employees and students used broadband and video conferences to function.

OpenVault says that usage peaked in the third week of March. It will be interesting going forward to see the how home usage changes. OpenVault doesn’t have any better crystal ball than the rest of us, but they are predicting that broadband usage will never return to the historic patters. They predict that a lot of people will continue to work from home, meaning increased broadband demand during the day. They believe there will be continued pressure on the upload data paths. People who have learned to videoconference during the recent months are likely to continue that practice in the future. Companies and employees that realize they can be productive at home are likely to work more from home, even if only on a part-time basis.

It’s Hard to Like AT&T

Over the last year, I’ve said some nice things about AT&T. It was nice to see AT&T wholeheartedly embrace their commitment to build fiber past 12 million homes as they had promised as part of the conditions of buying DirecTV. In the past, they might have shrugged that obligation off and faked it, but they’ve brought fiber to pockets of residential neighborhoods all over the country. It seemed that they were unenthusiastic about this requirement at first, but eventually embraced when somebody at the company realized that new fiber could be profitable.

I also thought that AT&T was by far the most responsible wireless carrier in terms of not ridiculously exaggerating the supposed coming of 5G, although they finally gave in to their marketing arm and started labeling the latest version of 4G LTE as if it is 5G.

But overall, AT&T is hard to like as a company. AT&T puts stock prices and Wall Street above everything else and is probably as good of an example as any of large corporations gone amuck. AT&T clearly values the bottom line over employees, customers, and the public good.

If you look back a few years, you can find numerous times where AT&T lobbied against net neutrality and broadband regulation. The company repeatedly said that unfair regulation was stopping them from making capital investments and promised that if the government would lift regulations that they would invest more. The FCC handed them even more than they had publicly asked for when the agency eliminated Title II regulation along with net neutrality.

AT&T didn’t react to the end of regulation by increasing capital investment as promised. They instead laid off a lot of employees and in the year after net neutrality was eliminated spent about the same for capital – only due to big spending on their sole-source First Net contract. Then in 2019, capital spending dropped by $1.9 billion and they are planning to cut an additional $3 billion this year. The drop in capital spending is hard to reconcile with the supposed 5G race that we are supposedly waging against China.

AT&T also joined with other large corporations and publicly pledged that if the government would lower the corporate tax rate that they’d hire thousands of new high-paying tech jobs and again promised to increase capital spending.  The unions that work for AT&T claim that since the enactment of the 2017 tax act that AT&T has laid off nearly 38,000 employees and are down to under 248,000 employees. Rather than investing in new capital and people, AT&T has been spending billions to buy back their stock to help keep stock prices high. The company used excess cash to buy back almost $2 billion of its stock in the fourth quarter of 2019 and had announced $4 billion of additional buybacks this year that was just recently put on hold due to the COVID-19 pandemic.

Meanwhile the company significantly raised consumer prices. There were moderate rate increases for broadband and cellular customers, and larger ones for video customers. But the biggest increases came when AT&T ended promotional pricing on video and expected customers to pay full price at the end of contracts. This move raised video rates significantly and led 4.1 million customers to drop DirecTV, U-verse TV, and the online AT&T TV in 2019. The company has said they were glad to be rid of low-margin customers.

In the summer of 2019, AT&T was sued in a class-action suit alleging that the company was selling real-time customer location data for cellular customers, even though the company had repeatedly told customers that they were not doing so. A series of reports by Motherboard showed that AT&T, Sprint, and T-Mobile had continued selling customer data even after promising to stop the practice.

AT&T recently made headlines by dropping data caps during the COVID-19 crisis. What’s worth noting is that the company has perhaps the most restrictive data caps in the country, particularly on DSL and fixed-wireless. The data caps at AT&T are clearly in place to make money over and above any rates promised to subscribers. Hopefully, there will be a huge public outcry when the company quiets puts the data caps back in place.

During all of the above, the company has significantly increased compensation for its CEO Randall Stephenson. His salary in 2019 was more than $32 million, up from $29 million the year before. However, much of that number is based upon stock bonuses, and shares of AT&T closed under $29 last week, down from over $39 at the start of this year. The company announced a new CEO last week and we’ll have to wait to see how he is compensated.

It’s honestly hard to say much nice about AT&T these days. I think back to when I worked at the company pre-divestiture, when the company made a steady, but unspectacular monopoly profit. The company and employees in those days were proud of the US communications network which was second to none in the world. It’s been clear for a long time that none of that old Ma Bell thinking is left in the company that now is driven to maximize stock price over everything else.