Cross posted from Pruning Shears.
A couple of weeks ago, Yves Smith’s link roundup included a McClatchy piece about consumers dropping cable TV. She remarked: “Trust me, when you seem more consumers ditching cable, you’ll see the pipeline providers start charging based on how much you download a month.” Caps really aren’t necessary, though; connections are already capped by speed. You can’t download any more than the connection will allow. Consumers should be able to buy a connection at a set price, and the ISP should charge for it based on how much data it could transmit. Charge more for faster speeds, less for slower ones.
The big providers don’t want to do that, though, so instead they are trying to figure out ways to charge customers more for what they already pay for. And the amounts they are charging are exorbitant. For instance, Verizon Wireless’ HomeFusion service has a top tier of $120 a month for 30 GB, with a $10 charge for every gigabyte over that. Since, as the article notes, Netflix can take up to 700 MB for an hour of streaming, that cap will get blown through pretty quickly. And it’s completely inadequate for the next generation of video: you can forget about streaming a movie that takes 45 to 60 GB.
That’s not all of the bad news, either. Internet connections have traditionally worked like this: Select your package, pay for it, use it for what you want. That’s what you do with your ISP. That’s what Google does too. Everyone pays to get on. But now there’s an emerging talking point that web sites (for some reason called “edge providers” in a bit of unhelpfully obscure tech lingo) are somehow not paying to get on. Verizon is before the FCC right now arguing that prices are higher because edge providers – which, remember, already pay to get on the Internet – do not also pay to get off. In other words, when you use your Verizon connection to watch a YouTube video, YouTube is also somehow bundled in as a Verizon customer.
The reason they are doing this is because they want to do away with net neutrality. If lots of their customers are getting data from site A then site A is a problem. If only they didn’t have to connect their customers to it, or maybe if they could charge the site a premium! And that’s where usage based broadband pricing comes in. If Verizon succeeds against the FCC and net neutrality is gutted, web site owners face the prospect of being charged extra by providers for the privilege of delivering content to customers.
We are already seeing a version of that as providers make deals to serve certain content free of data cap usage. And when you’re on a plan that has a 30 GB per month cap with $1 for every GB over, that’s a pretty big deal. It begins to make sense to confine yourself to those sites that your ISP doesn’t count against your cap just to make sure you don’t accidentally blow through it. Of course, some take a more sanguine view:
The critics’ real worry, then, is that ESPN, by virtue of its size, could gain an advantage on some other sports content provider who chose not to offer a similar uncapped service. But is this government’s role – the micromanagement of prices, products, the structure of markets, and relationships among competitive and cooperative firms?