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July 19, 2011 10:51 AM

The Conundrum of Bandwidth Caps and Internet Innovation

One of the most important intersections where broadband networks, applications, and policy collide is in the area of broadband providers introducing bandwidth caps on their users.

A recent Wired.com article entitled "Comcast Bans Seattle Man From Internet for His Cloudy Ways" has done a spectacular job of painting a detailed picture of one case where bandwidth caps on broadband service are clearly limiting innovation.

This article tells the story of Andre Vrignaud who "committed the foul of using more than 250 GB of data on Comcast two months in a row, triggering the company's overage policy that results in a year-long ban from using its services."

Typically so-called "bandwidth hogs" like Andre are assumed to be illegally sharing movies through peer-to-peer networks, but the article highlights that isn't the case this time.

Andre's crime is simply that of being a technology enthusiast. He takes high quality digital photos, listens to high quality digital music, backs up his computers in the cloud, and watches all of his TV and movies over the Internet.

The issue isn't that he's doing any one of these things, it's that he's using all of them extensively, plus he has roommates who are also consuming bandwidth, and now as a result he's banned from Comcast for a year for crossing his bandwidth cap two months in a row.

So what's he supposed to do? In the immediate term, he's stuck with lesser broadband options like DSL and wireless which tend to have much lower caps than Comcast's 250GB/month. Which points to the longer term issue of how he's going to be able to use or, perhaps more accurately, not use the Internet in the future.

Is he supposed to give up watching movies online, or sharing photos with friends? Listening to music online, or backing up his computer in the cloud? These are the kinds of questions that bandwidth caps force users like Andre to ask themselves and that will inevitably suppress usage of some or all of these applications. Less usage means less demand which will likely mean less innovation.

Yet there's a reason I used the word "conundrum" in the title of this post as unfortunately the issue of bandwidth caps isn't that cut and dry.

From the perspective of broadband providers, power users like Andre represent a real challenge to their business plans.

For one, all-you-can-eat broadband plans provide no mechanism for providers to recoup additional costs associated with supporting power users like Andre. Plus they're understandably a bit bitter that this consumption of bandwidth tends to be associated with some form of commerce and profit-making activity that they're not able to participate in. Their costs go up but their revenue stays flat while others are making money.

Now, this point is actually a bit more nuanced than this as the primary costs to operate a broadband network are related to overall capacity vs. paying for each bit sent and received, which is why many criticize providers for implementing caps that charge based on bits transferred.

But where providers really don't like power users is that what's currently a small segment of the population is trying to force their hand to accelerate improvements in their networks' overall capacity and performance. It's that top 1% of users that can never have enough bandwidth and always want more capacity and better performance.

So from a provider's perspective, power users like Andre are consuming an order of magnitude more bandwidth than average users, are demanding accelerated investments in network upgrades to suppor this usage, and yet in today's world offer no promise of additional revenue.

With this in mind, as a provider, I might actually hope that by imposing bandwidth caps I'm dissuading power users from consuming too much bandwidth and expecting too much from my network. If the vast majority of my customers are fine with what I'm offering, and I've got healthy margins with the way things are, why change trajectories to accommodate a small number of outliers who offer no additional return on my investment?

The problem with this detente is that it seriously risks our country's future competitiveness in the digital economy. It's my belief that with other nations around the world investing in truly next generation networks, there's going to be an explosion over the next decade in innovative applications that take advantage of these high capacity high performance fiber networks. But if America stays stuck in the paradigm of bandwidth scarcity, this explosion of innovation and ultimately economic development is more likely to happen elsewhere.

While power users like Andre may seem like outliers today, they really represent the first fully realized generation of digital natives, which are more likely to become the norm than not in the coming years. What I'm hoping is that through these discussions on the merits of bandwidth caps we can start getting serious about really important related issues like long-term capacity planning for our country's broadband infrastructure.

Solving these problems given the characteristics of the American broadband marketplace won't be easy, and at this point trends seem to be headed in the wrong direction, with bandwidth caps becoming the norm and the debate being about whether or not they're evil rather than how they're symptomatic of larger structural issues in the market as a whole.

But I'm hopeful that if we can start building consensus on the fact that we want a future where guys like Andre are empowered to continue being power users and finding new ways to leverage these next generation networks to improve their lives that we can make forward progress towards finding solutions to this conundrum.

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