AT&T To Cap Monthly Broadband Usage: Big Implications for Streaming Video Users

[Woochifer]

And so it begins ... in May, AT&T will start capping monthly broadband usage for its household DSL and U-Verse data subscribers. DSL subscribers will be limited to 150 GB and U-Verse customers 250 GB every month.

Rather than view this as an aberration, I see this as the logical progression of a trend that has already taken hold in the wireless market where other providers have announced that they will follow AT&T's lead in discontinuing unlimited data plans. I suspect that other household broadband services will also begin capping their monthly usage.

Obviously, this has the biggest implications on households that have begun heavily using online video -- whether that's streaming or downloading or P2P piracy. To put the cap into perspective, I estimate that an hour of "DVD" quality video on Netflix consumes roughly 675MB to 900MB per hour (this assumes a bandwidth requirement of about 1.5 to 2.0 Mbps using the VC-1 codec). Figure that a 150 GB cap on DSL service would allow for about 5-6 hours of video watching every day.

But, since this data usage would go much higher with "HD" quality video, it easy to see how quickly the cap would be reached, especially if P2P video is factored in. Given that an iTunes "HD" download requires over 2 GB per hour, you're already close to the daily average with just one HD movie download. A 1080p download would require even more bandwidth.

Usage from Netflix alone has already taken over a huge chunk of U.S. internet usage during the evening hours. Heavy users remain a small percentage of the total subscriber base, but the usage among heavy users has grown exponentially.

All the while, DSL, cable, and fiber broadband services remain very high overhead, low margin businesses. If anything, ISPs are looking to limit their infrastructure investments as much as possible, so the last thing they want is usage to keep growing at the current pace.

Of course, there are other factors in play as well. Let's not forget that many ISPs, the cable companies in particular, also serve as content providers. Consumers transitioning over to internet video programming are more likely to discontinue their pay TV service or not subscribe at all. Even though the evidence shows that "cord cutting" is more techie-hyped myth than reality so far, the growth for pay TV has been flat for the last few years.

So, we're now seeing the canary in the coal mine with AT&T serving up the first residential broadband service caps. If things hold up okay for them, then count on other ISPs following this lead in short order.

[3LB]

Isn't that just like how the drug pushers work? they give it you cheap at first, get you hooked, then, BAM - jack the price on you.

[Woochifer]

Isn't that just like how the drug pushers work? they give it you cheap at first, get you hooked, then, BAM - jack the price on you.

In all fairness, the caps that AT&T has proposed supposedly won't impact 98% of subscribers. The average monthly usage is 18 GB, which is well under the 150/250 GB limits that they have proposed. They're clearly targeting the 2% that have the heaviest internet usage, and the 150/250 GB monthly is more generous than some other previous experiments with capped usage, which put the limits under 40 GB per month.

[bobsticks]

Monopolies/duopolies with tacit government sanction engaging in a bait and switch scheme and protecting their outdated video delivery business model...It is constantly being pointed out that the majority of users do not have any real understanding of what a Gb is. The main reason given for not charging by the 95th percentile method(what ISPs are charged by) is that no one would understand it. Well what is the difference between charging them by Gb/month (when they do not understand what a Gb is) and charging them by the 95th percentile method? The differences is that they would not be able to point a finger at a small group and say it was there fault. The majority of users would have the same 95th percentile usage, which is why ISPs initially decided to go with a monthly bill based on Mbps. The FCC needs to audit ISPs and inform the public what the costs actually are. The ISPs will do just about anything to keep this from coming out. 250Gb/month * $.05/Gb= $12.50 /month. Now if we assume that the average connection cost $40/month, where is the other $27.50/month going? Remember most DSL users are running over copper that has been in place for decades. Most areas are not seeing massive hardware upgrades every year(or even every three years). Once fiber conduits(which are expensive to put in place) are installed adding more capacity(whether added frequencies or additional fiber) is relatively cheap. Do not forget that the cell phone backhauls run fiber through the same conduit as the internet fiber does(often over the same fiber). Maintenance for fiber is also very low, assuming no one accidentally cuts it (which the cutter pays for). Anybody look what upper management is getting paid or how much the internet is covering the rapidly becoming extinct land line business?

Edit: quoted from the enclosed article...is this comment worth discussion?

[bobsticks]

In all fairness, the caps that AT&T has proposed supposedly won't impact 98% of subscribers. The average monthly usage is 18 GB, which is well under the 150/250 GB limits that they have proposed. They're clearly targeting the 2% that have the heaviest internet usage, and the 150/250 GB monthly is more generous than some other previous experiments with capped usage, which put the limits under 40 GB per month.

I guess I'd assume that there has been thought given to the effect on fanilies with multiple subscriptions to Netflicks? What about those that stream Hi-Def sports? Wouldn't just one or two of those events exceed the limit?

I guess I'm trying to wrap my hands around their ultimate goal, if there is one, over and above, pure profit. Is this a play to ensure that their investments in wired technologies (i.e. U-Verse) payoff and folks are apprehensive about eliminating hardwired tech from their households?

[Mr Peabody]

What happens if some one hits a cap, does your connection stop until the next pay cycle or do you begin to pay a premium like when you go over your cellphone minutes?

The cap is a stumbling block for internet features on consumer electronics.

[pixelthis]

In all fairness, the caps that AT&T has proposed supposedly won't impact 98% of subscribers. The average monthly usage is 18 GB, which is well under the 150/250 GB limits that they have proposed. They're clearly targeting the 2% that have the heaviest internet usage, and the 150/250 GB monthly is more generous than some other previous experiments with capped usage, which put the limits under 40 GB per month.

Its like the income tax. When that started it didn't affect 98% of the population either.
A frog bolling in water.
BUT WITH A FREE MARKET ATT won't be able to even impose this modest limit.
With all of the complaints I got while shopping UVERSE (surprizing, really) they had better
concentrate on delivering a decent product more than taking stuff away.
A STREAMING WORLD is on the mind of a lot of folks, this seems counter-intuitive.

[Woochifer]

Edit: quoted from the enclosed article...is this comment worth discussion?

This was not in the article, but I assume in one of the comments. This quote sounds like a typical geek -- focused only on the hardware and shiny stuff with blinking lights. During the dotcom boom/bust, you had hundreds of ISP startups ramping up to cash in on the internet gold rush. They saw broadband as the future, and they were right. What they underestimated was the cost of supporting residential customers, and most of them garnered massive losses before going under. The telcos and cable companies have a built-in advantage in that they already have the customer support infrastructure in place, along with economies of scale that accompany having local service monopolies for phone and cable service.

Unlike with residential phone service, the rates for broadband service are not set by any governing body. If this commenter wants full disclosure of proprietary cost data, then he's asking for broadband service rates to be regulated like they are for phone service and other utilities.

I guess I'd assume that there has been thought given to the effect on fanilies with multiple subscriptions to Netflicks? What about those that stream Hi-Def sports? Wouldn't just one or two of those events exceed the limit?

I guess I'm trying to wrap my hands around their ultimate goal, if there is one, over and above, pure profit. Is this a play to ensure that their investments in wired technologies (i.e. U-Verse) payoff and folks are apprehensive about eliminating hardwired tech from their households?

I think there's two sides to this -- one that's reasonable, and the other that's total BS.

The Reasonable Explanation
First, here's the reasonable side. The main issue that broadband providers have is with peak period network usage. That's where Netflix and online video sites are or will soon start straining network resources. The number of users and the average viewing time are actually small, but when you have most of that viewing occurring within a confined time frame, then that's where the trouble potentially starts.

Utility systems that deliver limited resources are built around handling peak usage periods -- that's how water systems and the electrical grid are designed. Broadband is no different When typical peak period usage begins to approach capacity, then utilities will either invest big bucks in new infrastructure capacity, or they will impose/encourage conservation.

By implementing a broadband cap, AT&T is really trying to reduce the peak period usage. If people are more conscious of their internet usage, then they will likely reduce their heavy usage activities if they know they would pay more for overages. DSL is actually a low margin service with high support costs. AT&T has been in the market because it was also a high growth market. But, with growth beginning to plateau (and customer acquisition costs increasing, as all the "low hanging fruit" has already been picked), AT&T now wants to limit how much they invest in infrastructure. The longer they can get by with their existing capacity, the more profitable it is.

The BS Explanation
And here's the BS side. Basically, AT&T wants to avoid being a "dumb pipes" provider, so they are using broadband caps to stifle competition for their "upselling" services. In much the same way that residential landline service and basic cell phone services made little to no money (the real money was in long distance calls for landlines, and text and data plan charges for cell phones), their DSL and U-Verse services also make relatively little money until you start upselling additional package services.

Among all of AT&T's services, U-Verse is probably their fastest growing product segment. And it's a big money maker because it packages TV and residential phone services into a single DSL line. The U-Verse TV service allows for up to four TVs to run off the same line, and average TV viewing time in HD will easily exceed 250 GB/month.

But, AT&T doesn't count the U-Verse TV viewing against the broadband cap, even though it uses a DSL line -- they only count the internet usage, which just happens to support services like Netflix and Hulu that compete against U-Verse TV.

Another fishy side to all this gets back to my point about peak period usage. I would venture to guess that the heaviest users are likely loading up a lot of data at all hours, not just during the peak hours. The bandwidth that they use in the middle of the night sharing Bit Torrent files has less of an impact on AT&T's network than someone watching a Netflix program at 8pm. Yet, they are getting penalized more under AT&T's plan, even though their overall usage patterns strain network resources no more than someone who only uses a lot of data during prime time.

Again, this gets back to AT&T serving as both an ISP and a pay TV provider. I suspect that they have presumed that the heaviest data users are likeliest to do illegal P2P downloading (it is a fair assumption because Bit Torrent heavily uses both the downstream and upstream, whereas Netflix and Hulu use just the downstream). If they really wanted to be fair, based on who actually strains their network, they would have capped the peak period internet usage. This is no different than how long distance phone rates used to be structured.

But, I think AT&T has a lot of angles they're playing with this broadband cap. And with cable companies even more invested on the content side (e.g., Comcast and Time Warner), they will likely follow suit.

[kexodusc]

At least the overages of $10 for every 50 GB isn't too unreasonable compared to previous attempts at this - $1 per 5 GB, or $0.20 per GB isn't crippling. On some level I agree in principle with a pricing system that passes costs on to heavier users.

I do find the timing critical - I bet over the next few years that 98% figure will look a lot different as data consumption skyrockets. Get people hooked on the principle of paying by the GB now, the ISP's cash in later...

[Woochifer]

What happens if some one hits a cap, does your connection stop until the next pay cycle or do you begin to pay a premium like when you go over your cellphone minutes?

Read the article.

The cap is a stumbling block for internet features on consumer electronics.

With AT&T, Comcast, and Time Warner all in the pay TV business as well, I don't think that's their concern. A 150/250 GB broadband cap only affects those who watch a lot of internet video, and that would be the whole point of a cap, especially if it inordinately affects P2P users (whose usage is heavy with both the downstream and upstream, and often connected 24/7). Audio streaming, social networking, messaging, and basic web surfing would be very hard pressed to go through that much data in any month.

Keep in mind though that a lot of these internet features getting added to TVs and other living room devices are not used very much, so I don't see how this would be a stumbling block for most consumers.

[Woochifer]

At least the overages of $10 for every 50 GB isn't too unreasonable compared to previous attempts at this - $1 per 5 GB, or $0.20 per GB isn't crippling. On some level I agree in principle with a pricing system that passes costs on to heavier users.

Like electricity, bandwidth is limited. Seems that we're cycling back to the early days of online services, when everything was metered. The cost isn't particularly high.

I agree in principle that heavy users should pay more, but OTOH, the real costs are determined by peak period usage. Network capacity has to be built around peak usage, yet someone who uses more data in the off hours actually strains the network less than someone whose heavy data usage is concentrated around the peak hours. Although AT&T has other motives, I think it's simpler to penalize heavy users, regardless of peak hour usage, than it would be to charge everybody extra for heavy peak hour usage.

I do find the timing critical - I bet over the next few years that 98% figure will look a lot different as data consumption skyrockets. Get people hooked on the principle of paying by the GB now, the ISP's cash in later...

I suspect that AT&T has seen its network usage accelerate in recent years, and all the while they've minimally invested in their residential DSL network. Yes, there is a revenue component in that they know the data usage will only increase, so they're looking to cash in as the network usage continues to ramp up. But, there's also the cost side, where they don't want to invest in a service with low margins and high support costs.

[harley .guy07]

Well I think it is all crazy as I am not a big fan of AT&T to begin with, Their customer service is horrible and 90% of the time they don't give you the bandwidth that they advertise anyway. So in my opinion why pay additional costs when you don't get what you are supposed to be in the first place as far as speed and customer service. I am not saying that internet infrastructure is free to set up or maintain but overall with other big countries killing us in bandwidth speeds why should I pay any more than I already am for speeds that don't even come close to other people I know in other countries. I know one thing for sure its like any other big company the bottom line is all that matters and if the president and main 10% of the company can't afford to buy there next Ferrari then to hell with everyone else.

[Feanor]

In Canada, (as some of us AR denizens live here), the federal government has block the CRTC, (regulator), ruling that unlimited broadband service should no longer be allowed.

Strong arguments for and against have been made. The "For" came says the the high demand (hence capacity strain) is coming from a fairly small minority of users who in fairness ought to pay more. On a basic level I agree with this perspective.


The "Against" camp maintain that the ISPs -- specifically the infrastructure (home delivery conduit) providers, almost everywhere a "duopoly" -- are extremely profitable but have postponed infrastructure to the point where Internet speeds in Canada has declined from a world-leading to a 3rd world standard. I also full understand this argument.

I have a standard-type, DLS Internet connection the provides "up to 5 Gbps", effectively about 2 Gbps; I have a limit of 100 Gb with a surcharge of $0.25/Gb about that. If I wanted to go to "up to 25 Gbps" with 200 Gb limit, I'd have to pay $100/month.

Here in Ontario, our electrical utilities are going to "time-of-day" measured usage billing. This is basically reasonable. In any case electricity rates here will be going up because of the need for huge infrastructure replacement and expansion. I don't' know what the rates ought to be, or whether a similar formula ought to be appled to Internet usage, but I do know that electricity price regulation is a lot more transparent here than is Internet regulation such as it is.

[winston]

this is really really not surprising that ATT is doing this.. and for sure the rest will follow, the fact of the matter is, "IMHO what they should be doing at this time is trying to explained to CONSUMERS about their monthly bill, for example why is (each) service that you get from them has all these extra charges attached to your monthly bill??

here in the south Florida, a single land line from ATT cost $13.00 that's all good!! "however the same $13.00 ends up <> $26.00 after all the taxes added??!! and remember that's just one service. "and forget about the BUNDLE cause as y'all knows it ends up like a sub prime mortgage after the promo period ended.

all that being said sorry if I went off topic, from the original OP!! (but its six of one and half a dozen of the other) my meaning, its the same you know what?

our only options with these GIANTS is to take what ever other options available and here in America we do have a few

[Woochifer]

Well I think it is all crazy as I am not a big fan of AT&T to begin with, Their customer service is horrible and 90% of the time they don't give you the bandwidth that they advertise anyway. So in my opinion why pay additional costs when you don't get what you are supposed to be in the first place as far as speed and customer service. I am not saying that internet infrastructure is free to set up or maintain but overall with other big countries killing us in bandwidth speeds why should I pay any more than I already am for speeds that don't even come close to other people I know in other countries. I know one thing for sure its like any other big company the bottom line is all that matters and if the president and main 10% of the company can't afford to buy there next Ferrari then to hell with everyone else.

Well, that's different from my experience. The speed that I get on my DSL connection is pretty much spot on with the level of service I'm paying for. And the couple of times I've contacted customer support to address a problem, they spent a lot of time with me getting the issue diagnosed.

The issue with AT&T right now has nothing to do with speed, but rather with capacity/caps.

You're right though that we're way behind other countries in both broadband adoption and the level of service. One difference though between the US and other countries is with how much spread out rural and suburban territory our telecom networks have to serve. It's much simpler to build a broadband network if the infrastructure is relatively new and the cities are dense. And other countries have made broadband a national priority, so the infrastructure is subsidized.

this is really really not surprising that ATT is doing this.. and for sure the rest will follow, the fact of the matter is, "IMHO what they should be doing at this time is trying to explained to CONSUMERS about their monthly bill, for example why is (each) service that you get from them has all these extra charges attached to your monthly bill??

You're going to wind up with that on any utility bill. The landline portion of the bill is regulated (i.e., rates are set by the regional utilities commission, and any increases must go through a public approval process), but the broadband portion is not. That's why AT&T can take a unilateral action to impose usage caps.

[winston]

hey Wooch" maybe AT&T have a lot more that Broadband capping coming for us, I just saw this is this good or bad for consumers!!??

http://tech.fortune.cnn.com/2011/03/...-t-mobile-usa/

[pixelthis]

hey Wooch" maybe AT&T have a lot more that Broadband capping coming for us, I just saw this is this good or bad for consumers!!??

http://tech.fortune.cnn.com/2011/03/...-t-mobile-usa/

BOTH.

[Woochifer]

hey Wooch" maybe AT&T have a lot more that Broadband capping coming for us, I just saw this is this good or bad for consumers!!??

http://tech.fortune.cnn.com/2011/03/...-t-mobile-usa/

I doubt it will have any impact on home broadband caps, since T-Mobile does not serve the home market. But, it will further entrench the trend towards broadband caps on mobile service.

The articles I've seen today seem to indicate that AT&T's proposed merger with T-Mobile will result in better mobile coverage and quicker deployment of 4G services, but also higher costs and less competition.

[pixelthis]

I doubt it will have any impact on home broadband caps, since T-Mobile does not serve the home market. But, it will further entrench the trend towards broadband caps on mobile service.

The articles I've seen today seem to indicate that AT&T's proposed merger with T-Mobile will result in better mobile coverage and quicker deployment of 4G services, but also higher costs and less competition.

LESS, but not non-exsistent.
More and more bandwidth means the price goes down, simple as that.
If ATT does not offer a fair price, someone else will.
Execs at ATT need to go back to business school and stop believing in monopoly,
start believing free markets .
Because, like god, you don't believe in them, they will sure believe in you.

[bobsticks]

LESS, but not non-exsistent.
More and more bandwidth means the price goes down, simple as that.
If ATT does not offer a fair price, someone else will.
Execs at ATT need to go back to business school and stop believing in monopoly,
start believing free markets .
Because, like god, you don't believe in them, they will sure believe in you.

Umm...no, unfortunately, it's not that simple once a society moves beyond the vacuum of a fixed population and bartering marketplace...

...perhaps ponder that the next time you pump gas.

[Woochifer]

LESS, but not non-exsistent.
More and more bandwidth means the price goes down, simple as that.
If ATT does not offer a fair price, someone else will.
Execs at ATT need to go back to business school and stop believing in monopoly,
start believing free markets .
Because, like god, you don't believe in them, they will sure believe in you.

Problem is that AT&T's the only national player left offering home DSL service. Between AT&T, Comcast, Time Warner, and Cox Communications, they control 92% of the U.S. broadband market. And in many areas, particularly rural areas, you have one broadband provider and that's it. Anyone can opt for satellite broadband, but that's not real competition because it costs over $100/month and it's slower than DSL. Leased T1 lines are another option, but that's enterprise class service that also costs a lot more.

Verizon's FiOS service had some promise because it was a home fiber-to-fiber service, with blazing speed. But, it cost more than cable and DSL broadband service, and Verizon has already said that they will not expand FiOS service beyond the markets that they already serve.

On the mobile side, the AT&T/T-Mobile merger means that there are only three national mobile service providers left, and the Verizon/Sprint merger rumors are flying fast and furious. Yes, there are other regional mobile providers, but those do not have national coverage and might offer a more limited selection of phones.

With fewer players in the broadband (home and mobile) markets, it raises the probability that usage caps will get implemented across the board. Smaller players might step into the fold and offer up unlimited plans, but they lack national coverage, which leaves a lot of people without competitive options.

[Sir Terrence the Terrible]

I am really puzzled by all of this. In 1984 AT&T was broken up by the Dept of Justice. Now some 27 years later we are back to a monopoly. Does this make any darn sense to anyone?

I have T-Mobile, and I like their service quite a bit. Every since I got a cell phone, my goal was to stay away from companies like AT&T and Verizon. Now AT&T is buying T-Mobile, and no matter what, I am stuck with being with one of these big guys, and I don't like it. I seriously hope this sale does not go through period. No deals, no divestitures, no nothing but not acceptable. Our choices keep getting limited by these big buyouts, and the consumer just keeps getting screwed by them.

[pixelthis]

Umm...no, unfortunately, it's not that simple once a society moves beyond the vacuum of a fixed population and bartering marketplace...

...perhaps ponder that the next time you pump gas.

Its always that simple, and I AM REMINDED of that every time I PUMP GAS.
That is why I am a libertarian. Free markets and freedom always exist, because they are a product of human psychology. EVEN in Russia at the height of the cold war .
AND ATT is going to be reminded of the free market principles that made this country
the greatest on earth. Sooner or later.

[Woochifer]

I am really puzzled by all of this. In 1984 AT&T was broken up by the Dept of Justice. Now some 27 years later we are back to a monopoly. Does this make any darn sense to anyone?

The issue there was about AT&T using their monopoly to lock out competitors that wanted to offer long distance service and different equipment options. Recall that during Ma Bell's heyday, you had no choice of long distance providers and you could only use phones leased from AT&T.

The anti-trust action was launched by the feds back in 1974, and AT&T fought it for years.
It was only when AT&T wanted to expand into new lucrative markets like PCs and cellular service that they agreed to breakup terms.

Even though it seems like the old Bell system is coming back together, the overall communications market is much more varied today. Yes, AT&T has their tentacles in most of those markets, but they don't have nearly the same market power that they did under the Bell System. Still, the proposed merger has a lot of implications on the mobile market that bear some resemblance to the Bell System monopoly.

I have T-Mobile, and I like their service quite a bit. Every since I got a cell phone, my goal was to stay away from companies like AT&T and Verizon. Now AT&T is buying T-Mobile, and no matter what, I am stuck with being with one of these big guys, and I don't like it. I seriously hope this sale does not go through period. No deals, no divestitures, no nothing but not acceptable. Our choices keep getting limited by these big buyouts, and the consumer just keeps getting screwed by them.

A lot of things are in play with this merger. But, the article linked below has some excellent insights on the balkanized mess that makes up the US cellular system.

http://www.asymco.com/2011/03/23/the...up-for-a-rout/

In theory, regulators are to make a determination on whether the deal will reduce customer choice. But the question is really choice of what? The focus is presumably on the choice of service plans. That’s understandable, however coupled to that choice is the choice of devices and even more importantly, the choice of platforms.

The trouble is that US consumers have never had much choice and the US wireless marketplace has been a minefield of incompatibilities and obstacles to market forces.

In a nutshell, all of the national mobile providers have created market barriers by building parallel networks that deviate just enough from one another to prevent easy transition from one provider to another. It's expensive, it's redundant, it keeps lower priced options from taking hold in the market, and it ensures that each provider will have major gaps in their network coverage.

AT&T and T-Mobile both use the GSM standard, so their networks can merge. But, even so, there are still incompatibilities.

Basically, AT&T bought T-Mobile for their 4G LTE network (AT&T is way behind in rolling out their 4G network, because they're still fixing gaps in their 3G network). 4G will supposedly get all of the providers on the same standard. In theory, this can create more competition in the long run, because the market is no longer split between autonomous GSM (AT&T and T-Mobile) and CDMA (Verizon and Sprint) fiefdoms. Under this scenario, the network potentially gets eliminated as a competitive factor, so the providers need to compete on other terms, i.e., pricing, plans, customer service, etc.

But, in the short-term, AT&T gobbling up T-Mobile will definitely reduce the number of plans to choose from, and probably further push mobile broadband usage caps and raise prices. Personally, I've never had issues with AT&T, then again I'm at the bottom of the mobile food chain (I have prepaid mobile service) and I do know people who've had problems with AT&T.

[atomicAdam]

Free markets and freedom always exist, because they are a product of human psychology.

How do you create a Free Market for clean air?