Capped Internet: No Bargain for the American Public

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Download the full paper (PDF).

Regarding this paper, I do agree with the opening premise that there is a lot of dubious juxtapositioning on why companies have implemented usage caps. For mobile wireless it is clear, the issue is cost as Cellular providers must also purchase radio spectrum, back-haul, cell sites etc that drive the Internet cost per bit multiple well above traditional cable, DSL or Fiber access networks.

The reality is usage caps for fixed broadband providers are about changing consumer demand and behaviors. Specifically for video content from OTT suppliers, and having to deliver competitors content under the auspices of net neutrality. This not only impacts service providers capital and operational cost but also lost MVPD revenues. Bandwidth hungry streaming video services like Netflix directly compete with the main revenue channel of cable companies. More to the point taking TV subscription and TV ad revenues while enjoying a free ride into the homes of consumers on the backs of fixed broadband providers.

“Move to usage-based pricing on cable broadband is about reaping ever-higher profits, not fairness” …. Any hypothesis on the motives or intentions of this think tank? I certainly would spend some PR dollars with them to position cable companies as monopolistic over priced Internet barons if I were a OTT competitor.

While the majority of cable companies are enjoying great margins on high speed Internet products, they also have to deal with major network upgrades every 18~20 months to handle speed upgrades to combat bandwidth pricing elasticity. Making the claim that the networks are paid for entirely by Cable TV business and just factoring revenue is questionable accounting. So to be fair to the Cable Co’s the ROI needs to consider the bigger picture and factor in the number of homes passed, life-cycle of the network technology and customer acquisition cost.

I do agree, many cable companies are typically slow on innovation. In lieu of playing defense with usage caps, they may start to consider playing offense by packaging/monetizing OTT content and services.

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