On walkabout in life and technology

Bandwidth Caps Never Necessary

The carriers blame a small proportion of their users with hogging all the available bandwidth on their networks and thus explain why their networks are so slow. They then use this excuse to cap and throttle their users, us, and to charge us more per month.

I call bullshit.

There is plenty of backbone bandwidth available, its cheap and its getting cheaper, and carriers buy it in bulk. There is just no rational profit in it.

The real issue is that the carriers have created a massive revenue opportunity from nothing. Following the economics of scarcity rule, they can charge more for a scarce resource. So, by not providing enough bandwidth (even though its all there and available), they create a fake scarce resource, which they can then claim is scarce, overcharge us for it, and make huge profits on it. And since they are the only game in town, we just have to suck it up and pay.

Robert X Cringley, wrote in Bandwidth caps are rate hikes, well worth a read, points out the absurd built-in profit margins:

That 250 gigabytes-per-month works out to about one megabit-per-second, which costs $8 in New York. So your American ISP, who has been spending $0.40 per month to buy the bandwidth they’ve been selling to you for $30, wants to cap their maximum backbone cost per-subscriber at $8.

He goes on to explain that network and interconnect costs are dropping, network usage is growing (we all use Siri now) and with caps in place, the carriers will catch us on overages, just not now, later, when we all need the bandwidth even more, when its too late to do anything about it.

This is backed up by Time Warner CEO, Glenn Britt, who said in a conference call:

“I think that the conversation about usage based pricing should not be tied to a conversation about costs,” Britt said.  “This is not a rate of return regulated monopoly industry like AT&T was before 1984.  We have a lot of different products, a lot of different offerings and we’re aiming at different segments and different combinations and the pricing will relate to that.  This is not a strict cost-base thing so those facts are interesting but not terribly relevant to pricing.”

In other words, the caps and throttles and scarcity are all made up bullshit to enable overcharging and to maximize profits.

What is driving me to write this post is an article in today’s New York Times, who should know better, entitled Top 1% of Mobile Users Consume Half of World’s Bandwidth, and Gap Is Growing - not worth a read because its full of spin. In the article, the NYT claims that the top 10% of users are using half the bandwidth. Thats probably correct (see the Pareto principle), but then they spend the rest of the article spinning it that these users are chewing up half of a scarce resource (it isn’t), making the rest pay for it (nope, the carriers do this), compare this to the Wall Street fat-cats and the Occupy movement (ludicrous), and that these heavy users should be punished (that’s all of us soon, folks), pure utter bullshit. And their source is a company called Arieso whose sole purpose is to be paid by the carriers to publish reports claiming the scarcity of bandwidth is real so the carriers can screw us.

Are carrier caps and throttles necessary? The answer is no, has never been anything but no, and never will be anything but no.

Want to know more: Stop the Cap