As the piece points out, implementing overage fees runs the risk of giving FiOS (and, to a lesser extent, U-Verse) an even bigger edge on cable broadband. AT&T and Verizon, because of their last-mile network architectures, are less susceptible to congestion caused by heavy users than Comcast, with its shared cable network. AT&T and Verizon have gotten by without terminating heavy users or even charging them extra.
Yet right after Karl finishes explaining about how overage fees will change the competitive landscape, he starts ranting about the prospect of “investor pressure constantly forcing caps downward and overage fees upward.”
Competitive pressures make this scenario a remote possibility, especially as content portals serving massive files like Apple TV and Xbox Marketplace gain mainstream appeal. If Comcast wants to deflect criticism from other ISPs over bandwidth limits, any cap must be high enough to ensure very few customers even approach it. Arguably, 250GB a month is enough to satiate even power users, at least for a couple more years.
ISPs are competing fiercely to attract subscribers, so providers regularly make hay out of trivial product differences such as the “ugly cabinets” that AT&T sometimes installs when upgrading a neighborhood’s DSL speeds. Imagine the ads Verizon will run if Comcast starts charging customers for heavy use—“With Comcast, you never know when you’ll be hit with an enormous monthly bill if your kids go on a YouTube frenzy or your computer is overtaken by hackers. Here in FiOS land, rest assured there are no extra fees, no matter how much you download.” It’s not hard to see this message resonating with customers, especially those living in households with multiple Web-savvy residents.
Making things harder for Comcast is the fact that most U.S. customers aren’t used to explicit bandwidth limits (unlike Canadians). Currently, the only major U.S. ISP with an outright cap on consumption is Cox Cable, but even then enforcement is highly selective. Time Warner is testing the waters with bandwidth caps in a handful of markets, but otherwise most ISPs have either no caps at all or hidden ones affecting a tiny fraction of users.
The “Save the Internet” brigade’s insistence on neutrality and transparency has left Comcast with little choice but to resort to a metered solution to network congestion. Of course, I’m pleased that Sandvine and the “invisi-caps” will soon be history, and I look forward to consuming 249.99 GB each month on my Comcast connection.
But what about non-neutral solutions to last-mile congestion? To be sure, Sandvine was far from perfect, but who knows what innovative network management technologies will go undeveloped because of the stigma, and threat of regulation, against traffic discrimination?
It wouldn’t be surprising if we soon see calls for government to impose price controls because Comcast’s $1.50 per GB is “excessive” and “unfair.” For many proponents of government regulation of private networks, I suspect having neutral ISPs isn’t enough. They yearn for a utopian marketplace that offers limitless bandwidth, neutral networks, and affordable prices. And who doesn’t? But the best way to make this vision a reality is to foster private investment and let emerging technologies fill today’s competitive void.