US catches up to the UK on broadband pricing
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.