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US catches up to the UK on broadband pricing
Wednesday 04 June 2008 15:49:10 by Andrew Ferguson

Since 2004 when BT Wholesale drastically altered its pricing model so that higher speed broadband connections could be sold at attractive prices to consumers, the UK has seen broadband services gradually switch from unlimited to having usage allowances. Even the products that are sold as unlimited downloads often have systems in place to stop people from downloading too much.

The United States which does not have a bogey man in the form of BT Wholesale who dominates the market is now rapidly moving towards usage allowances, and the debate between those that see some sense and others screaming 'horror' has erupted. The comments both for and against are all very familiar.

The Time Warner trial is set to use caps ranging from 5GB to 40GB and charge people $1 for each additional Gigabyte used. The 40GB cap will be the cap on the fastest cable service which connects at 15Mbps. Comcast, another US provider, is exploring usage caps but is looking at a much larger 200GB limit and charging $15 for every 10GB chunk over that.

One probable reason for these moves in the US market is that the spare low cost bandwidth capacity that used to exist has now largely been used up and adding the hardware to create more capacity will cost money. At a time when global money markets are in flux, raising this money may not be cheap or easy. So rather than staying just ahead of the combined usage of its customers, providers are looking for ways to ensure doing the average sort of thing with their broadband can carry on, but the small number downloading material as fast as they can burn it to DVD and creating their own Internet library may see the party coming to an end.

Currently in the UK if your usage requirements are beyond the common 40GB allowances, then a number of LLU providers offer deals that have no download limits or fair usage policies are not enforced, allowing people to consume 500GB or more a month. The fact that US providers are altering their pricing models acts as a warning that even when BT is removed from the equation the bandwidth has a cost and at some point in the future the fair use policies may start to be used. Experience suggests this will not happen until the initial network investment has run its course and the networks are approaching maximum capacity. While revenue is increasing as more people sign-up, spending more on capacity makes some sense, but if the day arrives when all those who want broadband have it and revenues are static, something will have to give. The choice being raise prices and risk losing many customers to competitors, or make life a little unpleasant for the heaviest users.

Of course, given that across the whole UK broadband population the average usage is somewhere between 3GB and 7GB a month, many people have nothing to worry about. If those providers using unbundling were to implement caps it is very likely they would be more generous than what providers using BT Wholesale based services manage, so limits of 100GB to 200GB would probably be more likely.

For those sticking to the position that this will never happen, remember there was a four year period from 2000 onwards when almost all broadband in the UK was unlimited and now look at the market.

Comments

Posted by herdwick over 9 years ago
"Tragedy of the Commons" - provide unlimited on the basis of sensible sharing and a few will run off with excess demand and spoil the party. Cap them, throttle them or make them pay for what they use so the majority get a fair deal.
Posted by jrawle over 9 years ago
By all means introduce usage limits when the network reaches capacity, particularly if those limits are reasonable, such as 100 or 200GB. But providers have to be made to stop calling their products unlimited when they are not - I bet companies in the US don't do that, as customers would sue if they tried.
Posted by Saltank over 9 years ago
Excuse me for the bad example but this is akin to hiring an escort for $1000 a night, then having her tell you she is tired and leaves after an hour leaving you empty handed and unsatisfied.

Internet should be unlimited. Totally.

Providers have to invest in more capacity to ensure continuous growth rather than limit and reduce growth; if they can't sustain current levels then it is abysmal of them considering how digital we all live now and will live in the future.
Posted by andrew (Favicon staff member) over 9 years ago
There are providers in the US who make no mention of limits or traffic management techniques and do use them.

In response to invest in more capacity. If the number of customers is static, i.e. same revenue month in month out, are people happy to pay more?
Posted by Dawn_Falcon over 9 years ago
Andrew , yes, they allowed BT to shaft broadband growth. We know.

herdwick - stuff that. The 1% problem makers? Kick them off the service. And then provide a deacent service to the other 99%.

And also offer packages designed for shared houses and the like (multi-line discounts, more IP's, etc.): there's sod-all for us!
Posted by bosie over 9 years ago
I'm with Saltank - the internet should be unlimited. Price cuts are only one reason for the current complaints over profitability and this the industry brought this upon itself. Downright misdemeanour by people with too much sway is the other.
Posted by Somerset over 9 years ago
Bosie - so I, and everyone else, should be able to download at eg 5M continuously?
Posted by AndrueC over 9 years ago
@Bosie/@Saltank:You guys need to return to reality. The Internet and related technologies are not some magical realm where anything is possible. They exist in the real world and as such have to operate within real world constraints.

You cannot have truly unlimited bandwidth. The universe that we all live in does not support the concept. Human technology doesn't even come close.
Posted by CARPETBURN over 9 years ago
Blah blah difference is those in the US and cananda that get caps imposed by their CABLE provider because the service is often a base entry service.... People like bell, comcast, verizon etc etc etc still have unlimited super fast cable services available, if they are willing to pay $10 or $20 more for it rather than getting their broadband basically for free with their cable TV.
Posted by CARPETBURN over 9 years ago
Their situation is nothing at all like the UK and i have to say whoever wrote this story is ill informed about broadband in the USA and Canada... Most people out there have broadband as part of a cable service not an entirely seperate paid for service like the UK and broadband over a phone line.
Posted by c_j_ over 9 years ago
Of course folk can have unlimited bandwidth. They just need an unlimited bank account to pay for it.

Folks in the US and Canada *are* getting upset because folk like Bell are even less regulated than BT. Bell still have both retail and wholesale arms, and the *wholesale* (monopoly) arm of Bell is proposing to deploy Ellacoya-style traffic management, so ISPs retailing Bell services (and competing with Bell Retail) are affected.

Personally I think traffic management has a place, but I *don't* think that place is in a monopoly wholesaler.
Posted by bosie over 9 years ago
Yes i think it would work like parking spaces in Kensington - there are plenty more cars than resident spaces but not all cars want to park at the same time. Most people have better things to do than spend their time downloading the internet so we don't need to waste money building models to limit access just because a minority will do it.
Posted by jrawle over 9 years ago
@andrew: it's one thing to make no mention of limits and traffic management. It's quite another to say explicitly in advertising material that it's "unlimited" when it isn't.

If ISPs aren't spending their monthly income on improving the network, what are they doing with it? The argument about number of subscribers levelling out doesn't wash, as they built the network up to the current standard with far less income.
Posted by AndrueC over 9 years ago
@jrawle:What monthly income? Most ISPs are losing money or barely breaking even. If they do have any spare income it likely gets taken out as somewhat meagre profits.

If you think that ISPs are rolling in cash and making huge, swingeing profits off us then you need to think again. It ain't happening with today's margins and customer demands.

As for the use of 'unlimited' I agree..but that wasn't my point. I was addressing the actual bandwidth available not discussing adverts (which afterall rarely match reality for any product or service).
Posted by AndrueC over 9 years ago
@bosie#2:Thank you - that's much more sensible than claiming that the internet should be unlimited. It's actually a pretty good analogy. Now all you have to do is come up with a system of controlling Kensington parking which all the motorists and residents will be happy with :)

Bandwidth is a limited resource and we all have to share it. Those who won't play fair need to be educated and if they won't learn, kick them off.
Posted by shaunhw over 9 years ago
"You cannot have truly unlimited bandwidth. "

Fair comment. Therefore the providers should not be able to claim that their customers can, and mislead them with terms such as "unlimited use" etc.
Posted by jrawle over 9 years ago
I just don't see how it makes a difference whether they are gaining new customers or not, the cost per customer should be the same. So either they have money to invest in the network or they don't! The market will never be static because if providers lower their usage allowances, people will move to an ISP who's invested more. Once everyone has broadband, it could be even more essential for ISPs to provide a decent service or else lose customers.
Posted by Somerset over 9 years ago
'I just don't see how it makes a difference whether they are gaining new customers or not, the cost per customer should be the same. '

Please explain. Costs depend on equipment and circuits along with utilisation.
Posted by bosie over 9 years ago
@AndrueC, you see for me unlimited is like the Kensington permit - you can park anywhere in the borough provided you can find a space. But the internet products out there are nothing like this - deliberately snaffled, capped, shaped, squeezed just to save a few quid and that's where I oppose the status quo. BT Wholsale's model is wrong, rubbish and stinks like it. For me only one ISP remains that's worth a look and they're not perfect but it's Be*.
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