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Data Caps for Home Internet Are a Terrible, No-Good, Very Bad Idea

15/04/2013
Cables_small

Want Internet?
It’s gonna cost ya.

I had been lucky enough to get in on AT&T’s unlimited bandwidth for the iPhone before they decided that they could make a boatload more money if they charged based on caps. You’re probably familiar with these caps if you have a smartphone of any kind. They’re a bank of data that you can use to send/receive over a predetermined amount of time, usually a month. They are confusing and infuriating, even for someone who knows how the technology works and keeps a close eye on it.

Now, they (companies like Time Warner Cable and Comcast) want you to use this system for your home internet as well. Which brings up a whole host of questions, like: How much is a gigabyte worth to you? Would you pay $20 for a gigabyte of bandwidth? Is that fair? What happens if I use over my gigabyte? Do I get a penalty or does my Netflix just shut off?

There are no good answers to these questions, because data caps are just a bad idea for home networks. It takes a relatively simple system, which already has a pricing scheme in place mind you, and needlessly complicates it. It adds nothing for the customer and in fact may drive people away, like similar price discrimination has hurt the airline industry.

The following article goes into more depth explaining why data caps are terrible in theory and practice:

From Gigaom:

In a recently published piece, Prof. Daniel Lyons of the Boston College Law School argued that broadband data caps are a reasonable form of price discrimination. Lyons believes that data caps allow ISPs to more equitably distribute network costs among users based on how much they value internet access. He then goes on to suggest the best model of price discrimination comes from the airline industry, and that ISPs would be wise to learn from them.

Okay, wait a minute. The airlines? I had to read that twice to make sure Lyons was actually recommending that companies like Comcast and Time Warner –  you know, two of the lowest-ranked U.S. companies in terms of customer satisfaction – ought to be taking marketing tips from the industry that rivals them for most-hated status. (Interestingly, according to the American Customer Satisfaction Index, the airlines are third from the bottom, followed by… the cable industry!)

Read More…

User Mcbeese had an interesting comment on the above article, where he argues that it may be treated like long distance telephone service. Users pay based on peak and non-peak usage times. So, a user who surfs all night (non-peak) would be charged less than someone who does so in the 5-7pm block.

That’s a fascinating alternative view (I hadn’t thought about the link between ISPs and long distance telephone services before), but as Elfonblog points out, it’s still “imposing rations on a resource which is not scarce in order to sabotage it’s use for competing purposes (Internet video).”

While I personally won’t go as far as a conspiracy, I can definitely see this as a method for ISPs like Time Warner and Comcast to squelch Hulu and Netflix so they can offer their own competing services. It almost seems too convenient.

-CJ Julius

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2 comments

  1. […] I’ve pointed out before, when you list the industries that consumers like least usually the cable companies make the top […]


  2. […] I’ve pointed out before, when you list the industries that consumers like least usually the cable companies make the top […]



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