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By imposing data caps on consumers, ISPs can charge content providers to be exempt from those same caps.
The quest to determine why data caps really exist may be starting to wind down. ISPs have admitted, either explicitly or implicitly, that monthly data caps have nothing to do with network congestion. And, while some have started to portray data caps as legitimate forms of price discrimination, that argument did not hold up to close scrutinty either. So what's left? Why are ISPs going to all of this effort to make customers deal with something they hate?
AT&T CEO Randall Stephenson has finally let the cat out of the bag. Data caps are all about forcing content creators to pay in order to reach subscribers. By creating data caps, ISPs create a new market that never needed to exist and never existed before: the market for not being counted against data caps. And that market can be big money. But it can also fundamentally change the way the internet economy functions.
There are problems with this market. Many of them, as we detailed late last week when we saw stories about ESPN trying to buy its way out of the caps , were identified by the FCC in its Open Internet Order. It gives ISPs an incentive to keep data caps low and overage fees expensive, in order to make its “data cap exception service” attractive to content creators. It creates an arms race where content providers compete on their ability to negotiate deals with and pay big bucks to ISPs, not on the quality of their offering. And it increases the barrier to entry for new services, thereby reducing the number of new products and competitors entering the market.
Fundamentally, this market turns ISPs from services that connect people to the internet into arbiters of which services succeed and fail online. This kind of “fast lane” (or “uncapped lane”) for some content while everyone else is stuck in the slow (or capped) lane is exactly what net neutrality is designed to prevent.
ISPs will continue trying to damage the open internet for fun and profit for as long as they can. That is why it is time for the FCC to step up and prove that it stands behinds the words in its Open Internet Order.