Congressman Wants to Ban Download Caps

[David Farber <dave () farber net>]

Begin forwarded message:

From: Ken Deifik <kenneth.d () roadrunner com>
Date: April 14, 2009 4:45:54 PM EDT
To: dave () farber net
Subject: Congressman Wants to Ban Download Caps

Of possible interest to your readers. -K

Congressman Wants to Ban Download Caps
By Ryan Singel EmailApril 14, 2009 | 10:46:35 AM
http://blog.wired.com/business/2009/04/congressman-to.html

Time Warner Cable plans to test its controversial, new scheme to have  
users pay by the gigabyte in Rochester, New York, but the area's  
freshman congressman calls usage caps greedy and plans to introduce  
legislation to stop it.

New York Democratic Rep. Eric Massa called TWC's proposal to switch  
its 8.4 million cable broadband customers to metered internet billing  
an "outrageous plan to tax the American people."

Massa, a longtime blogger at the liberal site DailyKos, says he will  
be joined by a "legion of activists" and called the fight against  
usage caps a "national issue of generational consequences." However,  
Massa's fight will not get far without support from powerful House  
members,including Virginia Democrat Rick Boucher who now controls a  
key committee on telecoms and the internet.

Critics say usage caps will cost users more and hurt innovation on the  
net — especially in new video services, as subscribers begin to  
calorie-count their internet usage.

TWC's new tiered pricing structure for its Roadrunner internet service  
starts at $15 for a plan that allows 1 GB a month with an overage  
charge of $2 per GB. The company say bandwidth hogs need to pay their  
fair share and maintain that if the company doesn't get enough money  
to build new infrastructure, "internet brownouts" will be inevitable.

Company spokesman Alex Dudley said the company cannot comment on the  
proposed legislation because it has not seen it, but company officials  
did participate in a townhall meeting with Rep. Massa last Thursday.

In a conference call with reporters Tuesday, Massa dismissed those  
arguments, describing TWC as a greedy, unregulated monopoly providing  
a utility service. His yet-to-be-introduced bill would seek to  
increase competition among broadband providers and regulate  
monopolies, he said, though he declined to give specifics.

"They are providing a utility and frankly you should not be able to  
impose cascading rate increases without justifying them," Massa said.  
"What Time Warner is saying is not true and their own SEC filings show  
that. This is AIG-style greed."

Company spokesman Alex Dudley said the company cannot comment on the  
proposed legislation since it has not seen it, but emphasized the  
company is trying to test whether this is the right pricing model, or  
not.

As Wired.com first pointed out, Time Warner Cable's 2008 annual report  
shows its high-speed data costs actually declined by 12 percent to  
$146 million. Meanwhile subscribers increased by more than 10 percent  
to 8.4 million, and high-speed data revenues climbed to more than $4  
billion.

But TWC's Dudley says that the $146 million it paid in 2008 was simply  
the cost to transport traffic across the internet backbone. The  
company is warning that net traffic rose 'exponentially' at 30% a year  
-- putting the net in danger, but its cost to transfer that data  
across the net's backbone fell from $164 million in 2007.

Still, according to Dudley, the company has other costs, including  
labor, vans and hardware, that also go up with increased usage. Those  
are typically considered fixed costs that don't vary much whether a  
customer uses the net some or a lot, though Dudley disagrees.

"That $146 million is a small part of the variable costs," Dudley  
said. "Demands placed on network are a factor, such as 'Do we have to  
split a node to accommodate heavy use?' Those are capital costs that  
are directly related to use."

TWC first tested the plans in Beaumont, Texas, and is now collecting  
usage data in Rochester, NY and the Texas cities San Antonio and  
Austin, in preparation for an expanded metered billing test later this  
summer.

The plan has faced intense criticism since the company announced the  
changes at the beginning of the month. Hoping to mollify its critics,  
the company modified its tiers last Thursday, increasing the usage  
caps for each tier and adding a $150 all-you-can download plan.

Nearly all U.S. residential broadband providers sell their services  
based on bandwidth speeds, with no mention of a usage cap. Experts say  
that's in part because there's little data for the companies to base  
their pricing on, and because if one company offers unlimited data,  
the others do as well, at least in markets where there is broadband  
competition. Broadband usage continues to grow, most recently thanks  
to an explosion in online video services, but the cost of moving those  
bits also continues to fall.

Time Warner isn't alone in its campaign to crack down on heavy net  
users. AT&T announced last November that it would test monthly  
bandwidth caps and overage fees. Comcast installed a 250-GB cap last  
August; Canada's Rogers enforces a 60 GB limit; and New York-based DSL  
provider Frontier has a miserly 5-GB limit (though public pressure  
forced the company not to enforce it).

Timothy Karr, a campaign director at the consumer advocate group  
FreePress, argues that TWC is unfairly trying to protect its lucrative  
cable television business from customers switching over to online video.

"Charging consumers penalty fees on top of what they are already  
paying to download a movie or show will cripple online video," Karr  
said last week. "This is a win-win situation for Time Warner. Congress  
must investigate these anti-competitive practices before they become a  
nationwide problem."

A Massa spokesman said the text of the bill would be ready late in the  
week.

This story has been updated with comments from Time Warner Cable.




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