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Cable Industry Finally Admits Caps are not about Congestion

Anonymous Coward writes | about a year ago

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An anonymous reader writes "by Karl Bode Friday 18-Jan-2013 tags: competition bandwidth Op/Ed cable consumers caps TimeWarner Cox
For years the cable industry insisted that they imposed usage caps because network congestion made them necessary. You'll recall that Time Warner Cable insisted that if they weren't allowed to impose caps and overages the Internet would face "brown outs." Cable operators also paid countless think tanks, consultants and fauxcademics to spin scary yarns about a looming network congestion "exaflood," only averted if cable operators were allowed to raise rates, impose caps, eliminate regulation or (insert pretty much anything here).

The problem of course was that real data from researchers like Andrew Odlyzko repeatedly showed that well-run fixed line networks don't have serious capacity issues, and that looming video growth was easily handled by even modest network investment.

It only took the better part of a decade, but the cable industry has apparently realized they can no longer pretend that caps are really about congestion. Speaking at a meeting this week, former FCC boss turned top cable lobbyist Michael Powell finally acknowledged caps weren't about congestion, though he did continue pushing the myth that caps are about "fairness":
National Cable and Telecommunications Association president Michael Powell told a Minority Media and Telecommunications Association audience that cable's interest in usage-based pricing was not principally about network congestion, but instead about pricing fairness...Asked by MMTC president David Honig to weigh in on data caps, Powell said that while a lot of people had tried to label the cable industry's interest in the issue as about congestion management. "That's wrong," he said. "Our principal purpose is how to fairly monetize a high fixed cost."
Except the argument that usaged pricing is about fairness has been just as repeatedly debunked. If usage caps were about "fairness," carriers would offer the nation's grandmothers a $5-$15 a month tier that accurately reflected her twice weekly, several megabyte browsing of the Weather Channel website. Instead, what we most often see are low caps and high overages layered on top of already high existing flat rate pricing, raising rates for all users. Does raising rates on a product that already sees 90% profit margins sound like "fairness" to you?

Another favorite industry argument is that providing broadband is so expensive for a carrier, the flat rate pricing model simply isn't sustainable, but that's also debunked if you eyeball quarterly earnings from any of the major broadband players. Yet another argument is that carriers are just "being creative" with pricing, but so far consumer wallets aren't feeling the creativity. What the industry's really doing is using the benefit of uncompetitive markets to price gouge customers, though Mike Powell obviously isn't paid to acknowledge that kind of reality at a press event.

Still, acknowledging that the Internet won't collapse if cable operators aren't allowed to charge $10 per gigabyte is at least a positive baby step and a victory for fans of reality. Perhaps in ten years the cable industry will acknowledge what caps are really about: driving up the cost of data for all users in order to offset the inevitable decline in TV revenues, while trying to retain the competitive upper hand in the age of streaming video."

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