Thursday, June 19, 2008

Capping the Internet – Gangsta style

Tobold stirred up a hornet’s nest with his opinion on the recent news that Time Warner is testing internet usage caps and AT&T revealed that it is considering a similar plan. I’m not going to rehash the flame war that ensued other than to apologize for my contribution. However, Tobold’s view on these caps is similar to one that is also being propagated by Jack Schofield at the Guardian.

The basic premise for justifying caps as a solution by Tobold, Jack and the Service Providers is that a small number of users consume the most internet bandwidth. In the various articles on this topic, the numbers floating around have ranged from 5% of users consuming 50% of bandwidth, to 10% consuming as much as 75%.

This type of reasoning is intended to misdirect our attention away from the fact that far more than 5% or 10% of the users will be impacted by a usage cap. You will note that at no point do they say that x% of our users use more than 40GB (the proposed cap by Time Warner). This is called a fallacy of composition because it infers that the only people to pay more under the new plan are the 10% of users who consume the most bandwidth.

However, the reality is that if Service Providers want to simply maintain current revenue levels, they need to get more money out of ALL of their Internet subscribers. Why? Because much of their current business model is failing.

Consider that in the US, all our service providers derive revenue from three areas:
  • Internet
  • Cable TV
  • Phone service
Ten years from now, they will derive almost all of that revenue from one area:
  • Internet
The Cable TV and Phone service business units will have dwindled drastically as they are replaced with comparable services over the Internet. If they simply want to MAINTAIN the current levels of revenue, then they need to convert your $40 internet + $40 cable TV into a single $80 internet bill. If they just let the current market trends dictate the situation, then that $40 for cable TV is simply going to go to some video streaming service on the internet that offers you more choices.

Cable TV is about control. They selectively choose which channels to offer you for various plans and charge you dramatically for premium services. Moreover, the Cable companies also receive significant Advertising revenue that is based on the number of Cable subscribers. What happens to that Advertising revenue when all the Cable subscribers turn to Online alternatives that offer a wider selection of content? It doesn’t disappear, it simply starts going to online advertising giants like Google instead. The thing that drives the Cable and Telecom giants nuts is that they can’t control that content any longer. A perfect scenario for them would be something like your cell phone network where they have complete control over what you can and can’t access through your cellular phone.

An $x per GB system allows them to start setting the groundwork for a payment plan that favors them in this new Internet age. My issue is that it is not about them offering more service, but about them being able to make the same profit in a changing market place. The market forces at play are destroying their business and rather than adapt, they want to use their regional monopolies to exercise control over it.

That being said... the article by Jack Schofield in the Guardian does raise three good points worth addressing:
  • Digging up thousands of roads is expensive and takes a very long time.
    • The whole idea that Internet companies need to charge more for services as more people use the Internet is related to this idea that it’s expensive. And while I agree with that sentiment to a point, I also know that our government (federal, state and local) have heavily subsidized the deployment of these networks. In many ways, we are already paying for these improvements in the form of sales, income and property taxes. In addition, more users means more subscribers which means more revenue. I don’t want to pay for the “losses” that are incurred by Telecom and Cable in other areas of their business which are in decline.
  • If you provide more bandwidth, people consume more bandwidth faster. If they can download a 2GB movie in five minutes instead of 50 hours, more people will download more movies.
    • True – but only to a point. One family can only download and watch so much content. Popular content can also be “cached” by providers to ease up on the overall burden on the network.
  • The over-exploitation of shared resources, which can lead to the resources' usefulness being destroyed.
    • This last point is an area in which we should be concerned. However, any solution should be addressed at the 5% (or 10%) that are actually causing the problem rather than the entire community. As Jack suggests, technology restraints designed to limit the effectiveness of Bit Torrent sharing would be an alternative that would meet a lot less resistance and be focused at the actual offenders.


Anonymous said...

Actually, Schofield's article contains some -I'll call them erroneous in hopes they weren't malicious - assumptions. I particularly liked this one:

"Thus, the arrival of mass-market broadband this century has apparently resulted in a dramatic decline in the web."

Excuse me? Measured how?

The whole argument of limited resources is one of those "true but no now" situations. The fiber network - to include literally thousands of fiber currently planted but not in use (think startups that were too early) - is way below capacity. Eventually - assuming we don't continue to both expand the network AND quit improving how efficiently we use it - we may run into that wall. But for now, it's claiming a problem that doesn't exist.

Those article about a certain proportion of users taking up a large slice of the bandwidth make one minor sleight of hand that it's worth keeping in mind. The 5%/50% (for example) is not 50% of AVAILABLE bandwidth, it's BANDWIDTH USED. To give an exaggerated example:

Say 9 friends and I are sitting at a banquet table in a restaurant that seats a few hundred. My friends decide to just have a snack, while I have a full course, multiple plate meal. I use 10 times as much table space as any of them - 50% of the table space used. But we're at one table in an otherwise empty restaurant. I'm not taking 50% of the total capacity.

The more realistic example I put in place is to suggest anyone thinking there might be a problem needs to look at places that use a LOT more bandwidth per person than we do, and without these restrictions. I speak of Japan as it's the easiest source. We are nowhere close to that density, and even there they've room to grow.

It might be a problem down the road. But the arguments I've seen all act as though the problem is immediate, or at best in the very near future, and so need a quick fix however distasteful.



sid67 said...

Excellent points, Kirk. Obviously I agree with you. This whole 5%/50% thing is just a slick way to misdirect our attention from the real issue that they want to put a measures in place that will allow them to charge more for services as our internet usage increases.

I was talking about it with my wife last night and she asked what we could do about it.

That's an interesting question because most of these companies are regional monopolies that have relationships at a local (rather than national) level. Obviously, I can and will vote with my wallet, but what else can I do?

I could write my congressman, but what am I going to say? My local public officials are pretty shortsighted, so I don't have much faith in their contribution to the problem.