Raising Data Caps

comcast-truck-cmcsa-cmcsk_largeBrace yourself, because I am about to say nice things about Comcast. Last week Comcast announced that it was raising its month data caps countrywide to 1 TB (terabyte). This is an increase from the current caps of 300 GB that the company has implemented in a number of markets starting last year. This is good news for me. My household easily exceeds the 300 GB data caps. It’s a relief to know that I am not going to be seeing the small data cap.

There are probably a few reasons why Comcast decided to raise the cap. First, the FCC just required that one of the conditions for Charter’s purchase of Time Warner is that they impose no data caps on customers for seven years. In making that statement the FCC said that they had serious concerns about ISP data caps if those same ISPs also owned video programming, like Time Warner. In such cases, the ISP imposing data caps is favoring their own content over Netflix, Amazon Prime and Hulu delivered over the Internet.

And of course, the ISP that owns the most content is Comcast. They not only own NBC and other TV networks, but they just announced last week that they are going to buy DreamWorks. And so the company probably raised the data caps voluntarily rather than have it imposed on them during any investigation of the DreamWorks purchase.

Comcast was also taking a lot of bashing about the data caps. Data cap complaints have soared to become the most common consumer issue at the FCC. People complained that Comcast wasn’t measuring their usage correctly and that the caps were penalizing them for watching online video rather than buying Comcast video.

I always found the numbers that Comcast quoted about data caps to be suspicious. When they imposed the 300 GB data caps they said that only 8% of their customers exceeded that cap each month. They said last week that 1% of their customers exceed the 1 TB limit. I always thought the 8% number sounded too small, and if the TB number is correct it probably is. It’s hard to think that any household that watches a significant amount of online video doesn’t hit the 300 GB cap.

In addition to video, anybody who downloads games and 4K movies are surely exceeding that cap. It’s not unusual for a game or 4K movie file to be between 40 GB and 60 GB, and it wouldn’t take long for files that large to blow the 300 GB data cap.

But what perplexes me is that if the FCC is generically against data caps, why did they just impose a cap on the new Lifeline data programs? They imposed a cap on any customer getting a landline data subsidy to a 150 GB monthly cap and imposed an unbelievably paltry cap on mobile data of ½ GB per month. I’ve been scratching my head since I read the order trying to figure out why there are any data caps at all on the Lifeline plan.

This is particularly perplexing since one of the major stated purposes of the Lifeline plan is to close the “homework gap.” From everything I read, a large part of homework these days is assigning videos for homework. Students watch schoolwork videos at home, saving valuable class time to then discuss the video. But having data caps on homework plans – or allowing mobile data to be used for this purpose – is puzzling.

There are still a few big players in the industry with data caps that the FCC is surely watching. Both Verizon and AT&T now have video products as part of their monthly service that don’t count against their mobile data caps. It’s hard to think that this is going to be allowed to stand. Mobile data in the USA is close to the most expensive data in the world and hopefully the FCC can find a way to get the wireless carriers to raise data caps in the same way that they are getting the big landline companies to do so. I think the FCC just missed a big chance by not requiring removal of data caps as a requirement to buy new spectrum.

People in the rest of the world are amazed at our data caps. For most of the world, if you have a mobile data plan you can use it pretty much as much as you want. Foreign cellular providers don’t make any promises that mobile data will always be available, but they expect customers to actually use it.  The fact that US cellular carriers impose incredibly stingy data caps is frustrating and I hope the FCC has the wireless carriers in their crosshairs.

The Puzzling Lifeline Order

USACThe FCC has released more details of the revised Lifeline program order. It’s a long order and I won’t even try to summarize the order in this blog since the Internet will be full of such summaries in a few days.

Instead, I am going to highlight a few parts of the order that truly have me puzzled. The intent of the Lifeline order was to help to promote broadband adoption for low-income households. Unfortunately there are parts of the order that I think might accomplish the opposite of what is intended.

My primary beef with the plan (and it’s a huge one) is that the fund can be used to subsidize 3G cellular service. Not only that, but it will support cellular data plans with a monthly data cap of only 500 MB (half of 1 gigabit). This is mind-boggling to consider.

One of the stated purposes of the Lifeline plan is to help close the “homework gap” by providing data connections for school age children. What sort of homework gap does the FCC think it is closing with a 3G connection and a miniscule monthly data cap? The FCC is basically supporting a flip-phone data plan.

There has been a lot of recent press about how some broadband customers are now opting for mobile data over landline data, and I figure this has to mostly be to save money. The people who are choosing mobile data as their only option either aren’t big data users or else they have access during the day somebody’s WiFi on a landline data connection.

A few weeks ago I was in eastern Washington State at a hotel that had data speeds so slow that I couldn’t even open email. And so for two evenings I used my mobile data to connect my laptop. I didn’t watch any video and just conducted business, followed some election news and looked at Facebook a bit, and in two short evenings I used over 2.5 GB of data. It is impossible to use mobile data to do normal functions over the Internet.

And yet, somehow a family with school kids is supposed to be able to use a 3G mobile connection that has a data cap for the whole month of half of a gigabit? Have you ever tried opening a big web page on 3G? The FCC’s plan is beyond ludicrous. I’m picturing that AT&T and Verizon are either going to cut people off the Lifeline connection when they reach the tiny monthly cap or else they are going to nail the poorest households with data overage charges – and those households will end up spending more for mobile data than they do today.

I guess the FCC thinks the ½ gigabyte cap is too small and the cap will grow to 2 GB by the end of 2018. But even that will provide almost no real functionality for kids doing homework. I’m picturing kids watching assigned videos on their phone and using their monthly data cap on the first school day of the month. The FCC has caved in to special interests and has handed a huge revenue stream to the wireless carriers that is downright sickening. This one provision basically ruins the functionality of the Lifeline plan in my eyes because the wireless carriers are going to siphon off huge amounts of Lifeline fund for worthless data plans.

The other part of the plan that I dislike is the cap on wireline data. This requires that low income households be given connection speeds of at least 10 Mbps downstream and 1 Mbps upstream. This is not great (and not broadband according to the FCC) but it is good enough for the homework gap. Yet anybody getting this assistance can still be subjected to a monthly data cap of 150 GB.

And so, a household today that might already have a data plan with no cap is going to get a data cap slapped on their household due to taking advantage of a $10 per month subsidy from the FCC. Comcast just raised their data caps to 1 TB (terabit), something that I was very happy to see. But now the FCC comes along and imposes a much smaller data cap on Lifeline landline connections. Should a customer who is paying $40 today for a data connection be penalized that heavily because they accept a $10 subsidy on their broadband? This feels vindictive to me, as if the sentiment is “No on-line video for you poor people!”

I honestly don’t understand why the FCC would impose data caps on Lifeline plans, and particularly don’t understand why they would impose data caps that are more stringent than what the carriers already have in place today. Hopefully the carriers will ignore these caps and let customers have the same cap as anybody else with the same plan. But I fear otherwise, and that makes the practical application of the Lifeline order pretty rotten in my mind.

Government and the Digital Divide

Capitol_domeThere were two interesting announcements from politicians in the last week concerning the digital divide. First, there was an announcement from President Obama saying that he wants to connect 20 million more Americans to broadband by 2020. Then Greg Abbott, the governor of Texas, announced that he wants to connect all of the 5.2 million schoolchildren in Texas to the Internet by 2018.

President Obama’s announcement was accompanied by a plan called ConnectALL. The plan was prompted in part by a recent study that shows that households making less than $25,000 per year are half as likely to have broadband as households that make more. The plan makes a number of specific proposals for things the federal government can do to increase broadband penetration rates:

  • The primary tool proposed is to revise the Lifeline program that subsidizes telephone service for low income households and to redirect the $1.2 billion spent annually on that program to subsidize broadband connections instead. This is something that is already underway at the FCC and the proposed rules on how this might work are expected out later this year.
  • The plan also includes an initiative to improve digital literacy skills. The plan would engage a number of volunteer and non-profit organizations to make this a priority. This would include AmeriCorps volunteers as well as organizations like the Corporation for National and Community Services, and the Institute of Museum and Library Services. The plan would also promote more computer skill training at two-year colleges.
  • The plan would also promote the reuse of computers and similar equipment no longer needed by the federal government.
  • The plan would also direct the NTIA to get more involved in supporting community broadband planning. It would also bring in a number of non-profits and philanthropic groups to help with this effort.
  • The plan also calls for ISPs to offer more lower-price products for low-income households.

The Texas governor has not yet released any details of how he might go about connecting all school children to broadband in such a short period of time. The only solution I can imagine that could happen that quickly would be some sort of cellular plan just for kids to get connected to school servers. 2018 is practically right around the corner in terms of solving broadband issues.

These kind of announcements always sound great. Certainly both politicians have identified real issues. It’s becoming quite clear that poor households are increasingly finding broadband unaffordable. But one has to ask how much success the federal plan might really have. Certainly subsiding internet connectivity for low-income households will bring some new households onto the Internet. But you need to ask how much of an incentive $10 per month is for a home that can’t afford broadband today.

Certainly the $1.2 billion per year in Lifeline funding can reach 20 million people – that amount will provide cheaper broadband to 10 million homes. But you would have to think that a lot of those homes are already receiving this same subsidy today for their home phone, and when a household swaps a phone subsidy for a broadband subsidy they are no better off in terms of total telecom spending. They will just have swapped a $10 per month discount from one bill to another.

And all of the other proposed solutions sound wonderful on paper – but will they work to get more people on the Internet? I know that computer literacy training can work well if done right. I have one client who has been holding training sessions for customers for well over a decade and over the years they have brought a lot of elderly in their community onto the Internet. But they say that it takes a major time commitment for each potential customer and a concentrated effort for this to work – they often will work with a given customer for many months before that person is comfortable enough to buy Internet at their home.

And none of the federal ideas really fix the underlying problem of affordability. The Lifeline program will reduce broadband by $10 per month, but in homes that are surviving on jobs that pay $12 per hour or less, broadband at any price is hard to afford. I certainly don’t have an answer to this problem, but there are other ideas that I think ought to be considered as well. For example, $1.2 billion per year could supply a lot of broadband by building a huge number of neighborhood WiFi transmitters that could bring cheap or free Internet to many homes at the same time. I’ve always thought that the cities that are looking to provide free WiFi broadband are on the right track because that brings broadband the neediest households  without the paperwork and expense that comes with subsidy programs.

The last item on the list above has the most promise. A lot of good could come from pushing the major ISPs to offer a $10 or $20 broadband alternative. But this was forced onto Comcast a number of years ago and they largely shirked the responsibility and provided low-price broadband to very few homes.

I’ve been skeptical for years that the Lifeline program makes a lot of difference. It probably did when the program first started in 1985 and the typical phone bill was under $20. But the $10 discount that was a lot in 1985 is worth a lot less now. It just doesn’t feel like enough of an incentive to make the difference the government is hoping for.

Broadband Adoption and Income

eyeballThe Brookings Institute just released a report, Broadband Adoption Rates and Gaps in U.S. Metropolitan Areas, that looks at metropolitan broadband rates around the country. The report uses a broad definition of broadband that includes cable modem, DSL, fiber, cellular data, satellite, and fixed wireless service.

The report acknowledges that broadband is still growing and the country saw 2.6 million households add broadband from 2013 to 2014, bringing the overall national penetration rate to 75.1%. But Brookings found that there is a lot of variance in the penetration rates in different parts of the country.

There are metropolitan areas like San Jose where the broadband penetration rate is greater than 88%. The top ten metro markets for broadband has Washington DC in tenth place at 84.7%. But there are a number of other cities that lag behind these national statistics. At the bottom is Laredo, TX at 56.2%, joined at the bottom of the list with places like McAllen, TX, Visalia, CA, Dothan, AL, and Beaumont, TX.

Brookings looked at a number of different factors that affect broadband usage for households. It’s not surprising that household income is a factor. Households with an annual income greater than $50,000 have an 88.8% broadband penetration rate while those with less than $20,000 income are only at 46.8%. Education also seems to be an influence and 91.5% of households with somebody with a bachelor’s degree have broadband while households where nobody finished high school are at 54.1%.

The report did not find a big correlation between race and broadband adoption. While there were cities where blacks or Hispanics have low broadband adoption rates, there were others where they did not. The report concludes that the determining factor is household income and not race.

The report also found some correlation with age and households that have a family member under 18 had a penetration rate of 81.9% while those with everybody over 65 were at 64.5%. But the correlation with age did not hold across all markets and the places where the elderly have lower broadband acceptance seems to be where their income is the lowest. So again, income seems like a more important factor than age.

The report found a few correlations that make a lot of sense. For instance, it found that almost all homes that include a telecommuter have broadband.

Overall the report concludes that metropolitan areas with the highest incomes, with the highest percentage of tech workers, and with the highest average education also have the highest broadband penetration rates.

The report observes that households widely value broadband and that the rate of broadband subscriptions continues to climb. But they conclude that we cannot make the transition to an all-digital society until broadband penetration rate is as ubiquitous as the rates for water and electricity. They conclude that it is going to take targeted assistance programs to get broadband into more homes. While they point to the federal Lifeline and the newly named ConnectHome programs as being a needed part of the solution, they don’t see these kind of programs closing the digital divide. They recommend many more local initiatives, including programs by carriers, to try to get broadband into more households.

FCC Issues for 2016

Alexander_Crystal_SeerIn what seems to be the new normal the FCC has a lot of issues on their plate at the end of this year. Following are the regulatory issues that I think will most affect small telcos, cable companies, and ISPs in the coming year.

Net Neutrality: Assuming that the courts don’t completely overturn this, this is liable to be at the top of the list for several years to come. The ink is barely dry on the new rules and companies like Comcast, T-Mobile, and Verizon are pushing new products that will test the FCC’s resolve to implement net neutrality. And if the courts uphold the law, expect to see a slew of arbitrations between content providers and ISPs. If the courts overturn parts of the new rules, expect the FCC to take one more shot at fixing the parts that don’t pass court muster.

TDM to IP Conversion: This is an ongoing process that is looking at modernizing the backbone telephone network to IP. The large telcos like AT&T and Verizon have commandeered the docket to try to use it as a way to get rid of rural copper lines. The FCC has been micromanaging this process so far and there should be a lot of activity in 2016.

USF Reform: The FCC wants to transition the Universal Service Fund from paying for rural telephone lines to paying for high speed data connections. This process has already started but there is still a lot to be decided. Further, the FCC is facing a crisis in funding the USF and the latest USF contribution factor, representing the ‘tax’ on interstate telecom services, is up to an astounding 18.2% for the first quarter of 2016. The FCC is going to have to find some other ways to help fund this as interstate telecom revenues keep shrinking. This is becoming a big burden on carriers that are buying interstate special access.

Lifeline Reform: Lifeline is another part of the USF that is used to help pay for telecom services for low income households. The FCC decided last year that this should cover both telephone and data expenses for low income households and there is not enough money in the fund to do that. So this year they need to figure out a way to make it work.

Skinny Bundles and OTT: There has been a docket open for most of 2015 that asked for comments on how the FCC ought to regulate video services on the web. There hasn’t been a lot of talk about this for a while, but it’s likely that the FCC is going to have to do something with this in 2016, and anything they do will be groundbreaking. Further, the FCC is in the process of cleaning up their operating rules and Congress is also mandating that they resolve dockets sooner, so this is liable to be forced to come to a head in 2016.

WiFi versus LTE-U: The large wireless carriers really want to dip into WiFi to make cellular data connections using a technology they are calling LTE-U. In places where cellular data is already overloaded this would almost certainly swamp WiFi, making it hard for anybody else to use. The FCC is going to have to decide if and how cellular carriers might be allowed to do this. In a related area, the FCC is also likely to look at opening up new public spectrum next year.

Federal Legislation: While this is nothing to count on, there has been a lot of noise about seeing a new telecom act of some sort out of Congress. If that happens there is no way to predict what Congress might tackle. If a new law passes expect the FCC to get swamped with implementing new law like they did after the Telecom Act of 1996.