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We have been talking more and more about the arbitrary limits that ISPs (both wired and wireless) have been imposing on consumers’ internet connections. These limits are arbitrary because they do not seem to be based on any sort of technical evaluation. AT&T wireless and Verizon wireless impose a 2 GB limit on their standard data packages – why 2GB as opposed to, say 1 GB or 3 GB? Similarly, AT&T (wired) imposes a 150 GB limit on customers [update: AT&T imposes a 150 GB cap on DSL customers and a 250 GB cap on U-verse customers]. Comcast’s limit is 250 GB. Where did these limits come from? No one (outside of the company) has any idea. For all we know, the companies just spun a big wheel to choose the cap. In this murky world the only thing that is clear is that, while AT&T and Comcast’s network supports hundreds of TV channels, their internet limits prevent you from getting rid of their pay-TV offering and replacing it with a competing internet video service.
Internet-delivered pay-TV services have the potential to greatly expand competition. Today, consumers’ choice in pay-TV services is limited by which companies connected a wire to your home or your ability to mount a satellite dish facing south. Companies offering cable-like pay-TV services over the internet would greatly expand the number of options available to consumers. But that cannot happen if the companies selling you pay-TV packages today limit your internet connection.
According to Nielsen, the average American watches 154 hours of TV per month. In order for a one person household to confidently replace their Comcast cable or AT&T U-verse subscription with internet-delivered video, they would need to be confident that they could watch an equal number of hours of programming at roughly equal quality. Of course, a multiple person household would probably need to replace more than 154 hours per month. Also, any size household would probably prefer to have enough room under the limit to be able to make other uses of the internet in that month besides streaming video. However, for the sake of illustration let’s assume that there is only one person in the household and that person only wants to use their internet connection for streaming video.
According to Netflix, their “best quality” transmits 2.3 GB per hour of video watched. Using that as a benchmark for high quality internet-delivered video, a consumer would use 354.2 GB of data per month to replace cable or satellite video service.
At that usage level, the consumer would hit AT&T’s 150 GB limit or Comcast’s 250 GB limit well before the end of the month. An AT&T customer would run out of data around the 12th of the month. A Comcast customer would probably make it through the third week. It would most likely provide the customer little comfort to know that simultaneous subscriptions to both AT&T and Comcast would provide enough data for cable or U-verse replacement (with just under 50 GB to spare). [correction: AT&T and Comcast both have a 250 GB cap on the internet access service associated with their pay-TV offering. As a result, there would be no difference between the time to reach the cap between the services. Customers of both services would likely run out of data by the third week of the month.]
Also, it is important to keep in mind that if a Comcast customer hit their monthly limit two months in a row, they would be banned from Comcast internet service for a year. That is a pretty strong incentive to stay well under the cap.
Increased consumption of high-definition video might lead to congestion on networks. But arbitrary internet limits are not the way to deal with that. Arbitrary limits are a blunt tool for addressing network congestion. Monthly limits make no distinction between network use during high-congestion times and use during low-congestion times. Streaming HD video during primetime has a much different impact on the network than backing data up at 3am, but monthly limits treat them the same.
AT&T and Comcast (along with other ISPs looking to impose monthly limits on customers) have thus far been unable to answer simple questions about how they set their cap. How was the limit determined? How is its effectiveness evaluated? What would cause the limit to be changed? Why did you choose monthly caps over more targeted alternatives?
Until ISPs decide to shed some light on these limits, we are forced to make due with the information that is publicly available. ISPs like AT&T and Comcast offer pay TV services. Internet-delivered video can compete with pay-TV services. AT&T and Comcast impose limits on internet use. Those limits make switching to internet video impossible.