Former FCC Boss: Data Caps Not About Network Congestion 238
An anonymous reader writes "Broadcasting Cable reports on comments from Former FCC chairman Michael Powell (now president of the U.S. cable industry's trade association) confirming what many have long suspected: data caps on internet service aren't just about network congestion, but rather about 'pricing fairness.' 'Asked by MMTC president David Honig to weigh in on data caps, Powell said that while a lot of people had tried to label the cable industry's interest in the issue as about congestion management. "That's wrong," he said. "Our principal purpose is how to fairly monetize a high fixed cost." He said bandwidth management was part of it, though a more serious issue with wireless.' Powell went on to say that ISPs had huge up-front costs which had to be allocated out to consumers, and those consumers were familiar with usage-based fees from paying their power bill or buying food. He was part of a panel with three other former FCC chairs. Dick Wiley agreed with his cost argument, adding that the marketplace was responding better than new legislation could. Michael Copps thought the FCC could question data caps a bit more, but wasn't opposed in principle. Reed Hundt said he wants the FCC to focus on getting better, faster, cheaper internet to 100% of the population."
Fraud (Score:2, Interesting)
They underprice their services to get users (recurring!), then force users to switch to higher-tier plans when they consume more? This is classic bait-and-switch.
http://en.wikipedia.org/wiki/Bait-and-switch
So who were these wrong people? (Score:5, Interesting)
"Powell said that while a lot of people had tried to label the cable industry's interest in the issue as about congestion management. "That's wrong," he said."
So who were these wrong people who said it was congestion management?
Oh, that's right, THE CABLE COMPANIES THEMSELVES.
And if they want to talk about "fair", then what about the salaries of these executives?
Up-front costs? (Score:4, Interesting)
Okay, I don't get it. The companies in question are showing record profits...and what he's saying makes it sound like the capital expenditures necessary to have built out the networks in the first place are on some other set of books that don't come into effect. Isn't it the case that companies usually finance capital expenditures, and then pay off the debt over time? Under those circumstances, if the price of connectivity had to stay high in order to pay off that debt, the level of profitability wouldn't be rising the way it is. His argument sounds like bullshit to me.
Re:Fraud (Score:4, Interesting)
no, they price a few users into paying more
lots of customers like my parents' generation only uses 10GB a month at most on their home internet
this is why i haven't run p2p in years. its cheaper to buy blu rays or pay for netflix and be on the cheapest internet plan or a cheaper tier than pay $100 a month for internet and the high electricity costs to keep your stuff on 24x7
you only need 5mbps for netflix. about the same for itunes streaming media. less for most youtube crap. i pay $50 a month for 20/1 to time warner cable and don't see a reason to pay more
By this logic (Score:5, Interesting)
shouldn't we also have usage-based pricing for the TV they sell us? So that we pay "fairly" for for the fixed cost of establishing the network? Why would that model be different, since it's not really about congestion, as admitted in the article?
The electric bill and buffet examples in the article are terrible: when we pay for electric usage, we actually are paying for utlization/generation; use more and something (coal, natural gas, etc.) actually gets consumed more. And most buffets are all-you-can-eat; if you're paying by weight or something, the analogy is the same — you're actually consuming something. But both bandwidth and TV channels are there no matter how much they're "consumed." Bandwidth can be saturated (the congestion problem) but it can't be actually consumed.
If we're going to talk about "fairness", let's talk about:
Use it or lose it ! (Score:2, Interesting)
Bandwidth can't be stockpiled. Any bandwidth not used is lost forever.
So while it's fair to sell priority access but it's not fair to block traffic from empty lines.
That's obstructionist.
Eminent domain exists to seize private assets for the public good.
All natural monopolies should be co-ops.
what infrastructure build-out? (Score:5, Interesting)
the phone company here runs DSL off copper at least a generation old and refuses to build-out to serve customers past 3 miles from a CO.. even though it's possible to bring the per-subscriber cost of extending DSL down to as little as $100.. and even though they charge nearly double the 'in town' rate for a fraction of the speed past about 1.5 miles.
the cable company hasn't upgraded anything outside of its headend since they moved into town in the 80s, except for dropping a neighborhood node on each end of town for data. cable internet rates go up at least once per year even though it's a small town with a big fat, underutilized uplink.
each wireless company has exactly one tower here, and when one is down (happens a few times a year) there's not even an agreement between them to carry calls on the other company's tower. towers are well under capacity but data rates go up and caps go down. what was a reasonable $50 for uncapped unthrottled data no longer exists thanks to verizon's buyout of alltel and the fcc for allowing that to happen.
and oh yea.. all four companies receive federal funds to provide service to this rural area....... it just never makes it here.
Re:Large company trying to be "fair"? (Score:3, Interesting)
love of money placed before the love of God
I'd say "love of God" comes pretty high on my list of evils.
Christianity: murder count [truthbeknown.com] that makes Godwin cry, depriving billions of people of joys of life, robbing them blind of wordly possessions, setting back science and culture by ~1.5k years; being less evil recently not because of good will but because of the Western civilization shedding religion quickly.
Islam: denying the right to live to infidels (some religions being merely dhimmied), doing everything of the above.
Christianity went on their rampage as soon as they seized power (Constantine the "Great", Theodosius the "Great"); Islam, after Muhammad's warlordy rule, had a benign era until around 12th century, then became murderous closed-minded barbarians they are to this day.
Then we have communism, which is a religion in everything but name (prophets, scripture, clergy, portraits of deities/saints, rituals, fighting heretics and unbelievers, their own "science" (dialectical materialism [wikipedia.org], Lysenkoism [wikipedia.org], etc).
Ordinary greed is nowhere as vile as the above organizations.
Bait and Switch (Score:5, Interesting)
Why are you surprised?
There are a couple fundamental issues with capitalism that are failing to be addressed here: monopolies, and natural monopolies.
Capitalism really is less about competition and more about accumulation of capital. The competitive behavior is the goal, but it comes with the built-in problem of monopolies. You can't allow people to 'win' this particular game. Taken to an extreme, you might end up with one company that simply owned everything.
Capitalism in this sense is kind of a bait-and-switch. We're sold on the idea of an efficient competitive marketplace, but end up with monopolies and rent-seeking.
The problem of natural monopolies is even worse. Your ability to start a competing business is almost entirely a function of how much initial capital it takes to enter said market. It's far easier to start a restaurant or web company than to start a company that lays undersea fiber optic cable. This is why people talk about 'barriers to entry' as a bad thing: they reduce the efficiency of the market. Further, there are some services where competition would have negative utility -- no one really needs multiple companies laying water, power, or sewage lines to their home.
The answer to both of these problems is government. The government's purpose is to prevent or eliminate these market failures.
With natural monopolies, there is no real purpose behind allowing them to make a profit. It's a form of taxation, and can justly be called a theft from the public. These markets are the natural purview of government.
We have a slightly larger toolbox for dealing with large companies. We can break them up entirely, levy progressive business taxes, or subsidize potential competitors.
We need to start divorcing the idea of competition from the idea of capitalism: they're not synonymous. Yes, I am anti-capitalist -- but very pro-competition. Which side are you on?