Broadband Data Caps Scrutinized By Internet Companies, Lawmakers
June 28, 2012

Broadband Data Caps Scrutinized By Internet Companies, Lawmakers

Lawrence LeBlond for - Your Universe Online

Various Internet companies, such as Netflix and Hulu, are imploring US lawmakers to stop cable providers from imposing online-data consumption limits for broadband customers.

When the broadband era began, the expectation was that users would be able to consume an infinite amount of data with no drawbacks. But now, they are being urged to contemplate the issue and think about exactly how much data they are in fact consuming.

One of those broadband providers, Time Warner Cable, is giving some customers in Southern Texas a “usage tracker” that adds up their data usage. Customers who sign up for a light plan, allowing them 5 gigabytes of broadband, would be rewarded with a $5 discount for every month they stay within their broadband limits. But they are charged $1 for every gigabyte they exceed that limit.

But Netflix, with more than 23 million subscribing movie watchers, feels that broadband plan could eventually hurt the company and has made its request at a hearing today before the House communications and technology subcommittee in Washington.

“When you couple limited broadband competition with a strong desire to protect a legacy video distribution business, you have both the means and motivation to engage in anticompetitive behavior,” David Hyman, Netflix's general counsel, told the Commerce subcommittee on communications and technology on Wednesday.

The US Dept of Justice is now investigating whether cable operators are improperly suppressing competition from Internet companies and online video services, according to people familiar with the probe.

“While we don't know the extent of this inquiry, it falls on this subcommittee to thoroughly examine the issue and ensure future innovation is not curtailed,” said Anna Eshoo, the top Democrat on the panel.

Eshoo noted that broadband providers are likely following in the footsteps of wireless providers, which have begun rolling out tiered, limited-data-usage pricing plans.

The issue also drew concern from Henry Waxman, of the House Energy and Commerce Committee. He said he was disturbed by the potential anti-competitive practices that could restrict consumer choice, and called for a careful examination of data caps.

However, Michael Powell, head of the National Cable and Telecommunications Association, argued that data caps and tiered pricing plans were all about fairness.

As an example, Powell said that people who keep their air conditioners on all day would be expected to pay more than those who choose to open a window instead. It´s all about fairly allocating “the cost of the network among users that have different uses,” Powell told Reuters. “How to do that fairly is the question cable companies are experimenting with,” he added.

Comcast Corp, the largest US cable company and top broadband provider, last month said it would experiment with usage-based billing in some of its markets, stating that it believed usage-based billing seemed fairer than keeping on with its broadband caps.

Comcast had been enforcing a limit of 250 gigabytes per Internet customer per month. And although only a very small amount of customers ever exceeded that cap, it became a lightning rod for companies like Netflix, which accused Comcast of unfairly favoring its own services.

“Our network is not an infinite resource, and it is expensive to expand it,” David L. Cohen, a Comcast executive, said at the time.

Gigi Sohn, president of consumer advocacy group Public Knowledge, acknowledged that data caps are not inherently bad, but could be used in an anticompetitive manner. Thus, she urged Congress to review how data caps are set, evaluated and changed over time to prevent abuse.

“I´m concerned about the potential impact of data caps on the growth of the streaming video market,” Eshoo said in an emailed statement prepared for the hearing. “It falls on this subcommittee to thoroughly examine the issue and ensure future innovation is not curtailed.”

Netflix said it could be forced to charge more for its services and could suffer because of the data consumption limits that cable and broadband Internet providers wish to enforce.

In response, Powell said that cable companies frequently promote video from Netflix, as well as a number of other video-streaming services, with owners that include Comcast and News Corp.

Greater Internet consumption is good for cable companies, he said. “It´s just flatly wrong” to suggest cable companies are harming Netflix´s growth.

While the Netflixes of the world wary the moves by broadband Internet providers, it is unlikely, barring any intervention from Congress, they have much ground to stand on.