January 21, 2013
Former FCC Chair Says Forget Network Management, Data Caps In Place To Generate Revenue
Here’s a bit of news that actually no one should find surprising except for the fact that someone who knows is stating it. Data caps implemented by Internet providers are there to generate revenue and not to alleviate network congestion. The person stating this is former FCC Chairman Michael Powell. He is currently president of the National Cable and Telecommunications Association (NCTA), a trade association that includes ISPs. Powell recently participated in a panel discussion with three other former heads of the agency at the Minority Media and Telecommunications Association Broadband and Social Justice Summit.
Powell was asked about data caps and the impression they were there as a mechanism for congestion management. "That's wrong," he said. "Our principal purpose is how to fairly monetize a high fixed cost." That would be digging up streets and putting wire in the ground or setting up cell towers in the case of wireless. These are admittedly high cost items, but I wonder how many times a company such as AT&T has to rip up the same street to put in the same wire? None of the other former members of the FCC disagreed with Powell. Former member Michael Copps said the Commission should be a little more skeptical about caps but didn’t disagree that they are part of a valid business model.
Not everyone agrees. Advocacy groups complain that companies use caps to discriminate against competing services. Netflix is a high bandwidth service where heavy use can easily rack up gigabytes of data per movie. ISPs tend to exempt their own media services from counting against a data limit. The Hill quotes NCTA spokesman Brian Deitz as saying:
Our point is we see this as a consumer fairness issue. Every consumer doesn’t have the same bandwidth needs.
Deitz’s statement came as a response to Senator Ron Wyden’s bill, the Data Cap Integrity Act which would require the FCC to set standards for data caps as a network management tool. The NCTA is opposed to the legislation, calling it ill conceived:
Usage tiers give consumers more choices to better fit their bandwidth needs, and they rightly distinguish between low-volume users and high-volume users, as is true for many products and services.
On the other hand, ISPs do not offer customer rebates for unused bandwidth at the end of the service period. Charges are generally set by tiers of speed.
This should get a little more intense in the coming years with the trend to store everything in the cloud. Vendors such as Apple, Google, and Amazon now have music match services where they will stream purchased music to a device rather than store it locally. Windows 8 relies heavily on SkyDrive acting as the main point of storage in a world of screens with comparatively low capacity solid state drives. Accessing those cloud drives for whatever takes up bandwidth. Maybe it’s a little, or maybe it’s a lot. Companies such as AT&T and Verizon see this as an opportunity to increase revenues even further. Let’s not pretend what’s going on here. [MG]