Americans' Increasing Data Use Is on a Collision Course With Data Caps

This week, cable giant Comcast announced that American broadband consumers are using more data than ever.

The problem is that consumer trends like 4K video streaming will have customers increasingly running into ISP broadband usage caps and overage fees—costly restrictions experts say have no technical justification and are little more than glorified price hikes driven by a lack of meaningful broadband competition.

"Our customers' demand for speed and data usage keeps increasing," Comcast CEO Brian Roberts said on the company’s earnings call this week. "Our median broadband home now uses over 200 gigabytes of data per month, an increase of 34 percent year-over-year, which accelerated from the fourth quarter."

Increasingly, a significant portion of that bandwidth growth is video streaming services that compete directly with Comcast’s own cable TV service. But Comcast has long had a secret weapon in its battle against streaming providers like Netflix: broadband usage caps. Nervous about consumer backlash and regulatory action, Comcast bumped its usage cap from 300 gigabytes to 1 terabyte back in 2016. Now, Comcast imposes a 1 terabyte monthly cap on customers in all territories but the Northeast, where the company sees notably more competition than elsewhere in the country. Users who bypass this usage allotment have the choice of either paying $10 for each additional 50 gigabytes consumed, or paying an additional $50 per month to avoid caps entirely.

While 1 terabyte sounds generous, the rise of 4K streaming and on demand game streaming services like Google Stadia are likely to drive more and more users toward additional usage surcharges. A household filled with heavy gamers, video streamers, and countless connected devices will soon make quick work of even the larger allotments.

A January study by research firm Openvault found that the average household’s bandwidth consumption grew 40 percent in 2018 to 269 gigabytes per month. The same study found that the number of households consuming a terabyte of data nearly doubled last year.

When contacted by Motherboard, the company would not specify what percentage of its users run afoul of the company’s monthly limit. It directed us to its usage FAQ stating that only a “very small percentage” of users are impacted. Over the last decade, US broadband providers have slowly but surely imposed expensive and confusing monthly usage caps and “overage fees” on American consumers. But experts contacted by Motherboard said there’s no technical justification for these restrictions.

Dane Jasper, CEO of independent California ISP Sonic, told Motherboard in email that contrary to industry claims, such limits do nothing to manage network congestion. “Usage caps are not rational as a response to congestion on a network, because the network must be built for peak prime-time load,” Jasper said. While most customers aren’t yet hitting Comcast’s terabyte usage caps, other ISPs have imposed far more draconian limits. AT&T, for example, imposes usage caps as low as 150 GB on its DSL customers, charging $10 for each additional 50 gigabytes of data consumed.

Jasper noted that since ISPs must build their networks to handle this prime time load, monthly restrictions on usage do absolutely nothing to seriously address these overall peak capacity issues. Issues he says can be handled by some fairly modest network upgrades anyway. “Think of it like a school bus system: you need a seat for every student who goes to school (prime-time peak), but if some of the students also ride the bus in the middle of the night and on the weekends (total consumption during other times), it doesn't mean you must buy more buses,” Jasper said.

He also noted that such limits are little more than glorified price hikes, only made possible by a lack of broadband competition in many markets.

“In a duopoly (or, for power users seeking speeds faster than DSL, perhaps a cable monopoly), there is little to no competitive market pressure that would curtail these practices,” Jasper said.

While the previous FCC took some action on this issue—the agency banned Charter Spectrum in 2016 from imposing usage caps and overage fees for six years as a condition of its merger with Time Warner Cable—the regulator has historically done very little to police usage caps and overage fees, despite it being based entirely on a falsehood.

Regulators also have done little to nothing to rein in ISPs that use these limits anti-competitively. AT&T, for example, eliminates data caps if you use the company’s own streaming video services, resulting in a higher bandwidth bill for customers that use third-party alternatives like Netflix.

Electronic Frontier Foundation lawyer Ernesto Falcon told Motherboard in an email that as US phone companies refuse to upgrade (or in many instances even repair) their aging DSL lines, it’s giving cable providers like Comcast a greater monopoly over faster speeds than ever before.

“If the networks were being upgraded there really isn't a need for usage caps because the capacity of fiber networks is really through the roof,” Falcon noted. With neither healthy competition nor meaningful regulatory oversight keeping them in line, ISPs have increasingly imposed confusing, costly, and wholly unnecessary limitations to not just make more money (US consumers already pay some of the highest rates for broadband in the developed world), but to try and hamstring the rise of streaming video competitors. As it stands, experts say ISPs have glacially imposed such restrictions in the hopes American consumers wouldn’t notice they’re punitive and wholly unnecessary (imagine the boiling frog fable, with you as the frog). But with the streaming market exploding and 4K game streaming just over the horizon, American broadband consumers will soon start to feel the heat.

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