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Last Call At the All-You-Can Eat Broadband Buffet

It’s the beginning of the end for unmetered broadband in America.

Starting May 2, AT&T will cap DSL subscribers’ monthly usage (150 GB for regular DSL; 250 GB for U-verse DSL) and charge 10 bucks extra for every 50 GB beyond that.

But don’t expect cable to tout its unlimited-usage advantage — major MSOs including Time Warner Cable, Cox and Charter are probably going to follow suit, according to Sanford Bernstein’s Craig Moffett (see Cable Likely To Follow AT&T Into Usage-Based Broadband Pricing: Analyst).

On March 1, Charter CEO Mike Lovett said the operator is considering usage-based pricing for lower-end tiers (see Charter Looks To Snag Dial-Up Customers). Cox, for its part, left the door open with this statement today: “As with all ISPs, we continually evaluate the best pricing and product offerings for our customers, but we have no immediate plans to implement a usage-based billing mechanism.”

The last time metered bandwidth was explored by a big U.S. operator — Time Warner Cable, in the spring of 2009 — it rapidly became a PR nightmare, with one congressman threatening to introduce a bill outlawing consumption-based billing (see Time Warner Cable: Three Mistakes on Usage Pricing).

Is the climate in 2011 more hospitable to usage-based plans? Note that usage-based pricing is explicitly allowed under the FCC’s proposed network neutrality rules outlined last December.

Among the first complaints about AT&T’s move: advocacy group Free Press on Monday issued a statement condemning the move as an “overcharging plan.”

“AT&T’s actions are another troubling symptom of a broadband market that lacks meaningful competition, and this move may be the start of a race to the bottom among other providers to see who can squeeze its customers the most,” said Free Press’ Derek Turner.

Critics say that with caps and usage-based billing, broadband ISPs are either trying to discourage cord-cutting, squeeze even more profits from broadband, or both.

But broadband providers large and small need to manage usage over their Internet networks, particularly with the spectacular rise of video streaming thanks to Netflix and others. To me, usage-based pricing is the most logical and fairest way to (a) ensure the heaviest users are paying a bigger portion of the outlay needed to build out additional broadband capacity; and (b) provide an economic incentive for people to use bandwidth more efficiently (see The Enemies of Usage-Based Broadband).

Am I personally excited about the prospect of having to monitor my own household’s broadband usage, when (not if) my ISP adopts a cap-and-surcharge model? Of course not! Look, I’m a stingy guy — it’s irritating to me that most airlines now charge extra per piece of luggage and force you to purchase in-flight food.

But as long as the terms are reasonable and the usage caps are high (in the 150 GB+ range) I’m not going to scream highway robbery. (One Gigabyte is roughly one hour’s worth of SD streaming video.) Because the alternative would be more congestion and/or higher prices for everyone.


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