Yves here. The state of pricing and service levels for the Internet in the US is a disgrace that doesn’t get the attention it deserves. Other countries (South Korea is a prime example) made getting cheap, pervasive Internet connectivity a national priority because they saw it as a spur to innovation. And in the UK, our Richard Smith an ancient house in a little village has 55 Mbps download speeds. What gives? But not to worry. The pipeline providers are scheming as to how to wring even more out of customers.
By Dan Fejes, who lives in northeast Ohio. Cross posted from Pruning Shears
A couple of weeks ago, Yves Smith’s link roundup included a McClatchy piece about consumers dropping cable TV. She remarked: “Trust me, when you seem more consumers ditching cable, you’ll see the pipeline providers start charging based on how much you download a month.” Caps really aren’t necessary, though; connections are already capped by speed. You can’t download any more than the connection will allow. Consumers should be able to buy a connection at a set price, and the ISP should charge for it based on how much data it could transmit. Charge more for faster speeds, less for slower ones.
The big providers don’t want to do that, though, so instead they are trying to figure out ways to charge customers more for what they already pay for. And the amounts they are charging are exorbitant. For instance, Verizon Wireless’ HomeFusion service has a top tier of $120 a month for 30 GB, with a $10 charge for every gigabyte over that. Since, as the article notes, Netflix can take up to 700 MB for an hour of streaming, that cap will get blown through pretty quickly. And it’s completely inadequate for the next generation of video: you can forget about streaming a movie that takes 45 to 60 GB.
That’s not all of the bad news, either. Internet connections have traditionally worked like this: Select your package, pay for it, use it for what you want. That’s what you do with your ISP. That’s what Google does too. Everyone pays to get on. But now there’s an emerging talking point that web sites (for some reason called “edge providers” in a bit of unhelpfully obscure tech lingo) are somehow not paying to get on. Verizon is before the FCC right now arguing that prices are higher because edge providers – which, remember, already pay to get on the Internet – do not also pay to get off. In other words, when you use your Verizon connection to watch a YouTube video, YouTube is also somehow bundled in as a Verizon customer.
The reason they are doing this is because they want to do away with net neutrality. If lots of their customers are getting data from site A then site A is a problem. If only they didn’t have to connect their customers to it, or maybe if they could charge the site a premium! And that’s where usage based broadband pricing comes in. If Verizon succeeds against the FCC and net neutrality is gutted, web site owners face the prospect of being charged extra by providers for the privilege of delivering content to customers.
We are already seeing a version of that as providers make deals to serve certain content free of data cap usage. And when you’re on a plan that has a 30 GB per month cap with $1 for every GB over, that’s a pretty big deal. It begins to make sense to confine yourself to those sites that your ISP doesn’t count against your cap just to make sure you don’t accidentally blow through it. Of course, some take a more sanguine view:
The critics’ real worry, then, is that ESPN, by virtue of its size, could gain an advantage on some other sports content provider who chose not to offer a similar uncapped service. But is this government’s role – the micromanagement of prices, products, the structure of markets, and relationships among competitive and cooperative firms?
It’s a mighty expansive view of micromanagement that encompasses preventing monopolistic behavior and collusion of market leaders. Herding customers into walled gardens by forcing surcharges on unfavored sites and privileging others does not strike me as a victory for consumers – in fact, it is exactly the kind of circumstance an effective government regulator should take a very close interest in.
It’s also worth noting the industry’s apparent preference for wireless rollouts over wired ones in light of the more stringent net neutrality requirements for the latter. Verizon gave up on its wired FIOS service, and it isn’t hard to imagine the company breathing new life into it should the FCC case go its way.
One of the few promising alternatives to this is municipal broadband, which has only happened in a few places. North Carolina passed an industry-friendly law crippling such efforts. On the other hand, Chattanooga has rolled out a system that runs up to 100 Mbps – compare that to HomeFusion’s 5 to 12. For those looking for a way out of the capped and cornered Internet experience big providers have planned, a municipal broadband initiative might just be the ticket.
There is one other possibility, though I admit it’s a little outlandish: We could demand the service we have already paid for. Way back when we were first hearing about the Information Superhighway, the Telecommunications Act of 1996 was passed. It provided all kinds of breaks, money, and incentives for phone companies to build out infrastructure. It sure sounded great: “All 50 U.S. states and the District of Columbia contracted with their local telecommunication utilities for the build-out of fiber and hybrid fiber-coax networks intended to bring bidirectional digital video service to millions of homes by the year 2000.” And we’d be cruising along at 45 Mbps. What happened?
Over the decade from 1994-2004 the major telephone companies profited from higher phone rates paid by all of us, accelerated depreciation on their networks, and direct tax credits an average of $2,000 per subscriber for which the companies delivered precisely nothing in terms of service to customers. That’s $200 billion with nothing to be shown for it.
Bruce Kushnick has a much, much longer treatment (PDF) of the subject. One thing he points out is that the 45 Mbps promise may have been illusory all along (emph. in orig.)
How do we know this? Well, Verizon, of course, is one source. Verizon’s May 19, 2004 press release states emphatically that Verizon was only now, in 2004, doing fiber optic “field trials”.
Although the use of fiber optic technology is common throughout the telecom industry, Verizon is the first company to begin using it to directly connect homes and businesses to the network on a widespread scale… FTTP is moving from field trials and the lab to the real world.
The fact that Verizon’s fiber optic project, (FIOS), as of January 2006 still couldn’t deliver video services, now called IPTV, should make everyone consider this a case of fraud, and not simply market forces that caused Verizon to offer fiber-based services, only a decade late.
Whatever the reason, what we got was a lot less thrilling than what we were promised. Having failed to deliver on their earlier promises, it would be nice if they would at least stop trying to obstruct public entities trying to route around them. Because at the moment, an Internet provided by these companies doesn’t seem like much of an Internet at all.