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Comcast Draws Fire for Broadband-Usage Trials

Comcast’s decision to expand trials of usage-based broadband policies has attracted criticism over concerns that they are being instituted to gouge Internet customers while also crimping competition from increasingly popular over-the-top video providers.

But the nation’s largest cable operator holds that the policies, which are still in the trial phase, are “based on principles of flexibility and fairness” and meant to apply to a small group of Comcast customers that use a disproportionate amount of network capacity.

Granted, the vast majority of residential broadband subs don’t gobble up enough bits to trigger any usage-based fees that are tied to Comcast’s broadband usage trials. According to notices being distributed to customers in the test markets, Comcast said that the “median usage” for Xfinity Internet customers is 40 Gigabytes of data per month — well below the 300 GB data ceiling set for the primary data allowance plan the MSO has been testing.

USAGE ON THE RISE

However, usage patterns could continue to rise as more consumers turn to alternative, OTT-based offerings, such as Sling TV and Sony’s PlayStation Vue, as their primary way to obtain pay TV service. Netflix, the world’s largest OTT video-service provider, has said its subscribers can expect to chow down on about 0.7 GB of data per hour for a standard-definition stream, up to 3 GB per hour for HD and 7 GB per hour for content streamed in Ultra HD/4K.

Comcast confirmed last week that it is expanding the broadband usage trials to smaller markets in parts of Tennessee, Virginia, Louisiana and Arkansas. With the exception of Atlanta and Miami, Comcast thus far has not introduced the tests in many of its larger markets, like Boston, Chicago, Denver, Seattle or Philadelphia.

In the test markets, Comcast has been kicking the tires on a set of usage-based policies — those with soft caps that charge extra when those data thresholds are exceeded, an option for lighter Internet users, and a newer, fee-based unlimited data option (see chart).

Comcast has not said when or if it intends to expand the data trials to other markets, but notes in an FAQ posted on the Web that current consumer trials “may be discontinued at any time.”

Comcast’s data-usage plans do not currently apply to customers on the MSO’s fiber-based Extreme 505 and Gigabit Pro services, and also do not apply to Comcast business service customers and those on “bulk Internet agreements.”

About 10% of Comcast customers consume almost half of all the data on the operator’s network, and Comcast says the trials aim to maintain the balance between light, medium and heavy Internet users.

Critics, though, believe they are in place to generate additional broadband service revenue while keeping growing OTT video competition in check as traditional pay TV services continue to be pressured by a small but growing cordcutting trend.

“Data caps have a very real impact on Internet users’ wallets and online behavior,” Matt Wood, policy director of Washington, D.C., advocacy group Free Press, said in a statement about Comcast’s decision to expand the trials. “These kinds of limits dampen the use of broadband by discouraging use of the applications that drive economic growth and innovation from Internet content creators.“

MSOs have said that fees tied to these monthly data plans apply only to a small fraction of customers — but Suddenlink Communications CEO Jerry Kent also pointed out that “overage charges have become a significant revenue stream for us.” Kent, on the company’s earnings call Nov. 5, also said Suddenlink is being careful that those overage fees don’t become “too big,” because that could lead to more disconnects.

Suddenlink, which is being acquired by Altice, has implemented a usage-based policy whereby customers can purchase buckets of additional data if they exceed their monthly allotment. Suddenlink does not break out the revenue from its data plan policy, but a FAQ points out that “relatively few” customers exceed their monthly allotments.

MoffettNathanson principal and senior analyst Craig Moffett has estimated that 23% of pay TV subscribers (mostly attributable to AT&T) are currently under plans that impose caps and overage fees. That could rise to 44% if Comcast applied usage-based policies across the board.

SOME OPS ARE RELUCTANT

While MSOs such as Comcast, Cable One, Suddenlink, Mediacom Communications and GCI have tested or rolled out usage-based broadband policies, other major U.S. operators, including Cable vision Systems (also in line to be acquired by Altice) and Charter Communications, have shunned them.

Charter, which is in the process of acquiring Time Warner Cable and Bright House Networks, has been particularly adamant about its stance.

“We don’t do it,” Tom Rutledge, Charter’s CEO, said last month on the company’s third-quarter earnings call. “We don’t do it because we want to sell more services. That’s our business model.”

Charter has also been OTT friendly in other ways as it looks to win approval for the deals, including a settlement-free peering policy with edge providers. Netflix, which has reluctantly agreed to paid peering deals with Comcast, Verizon, AT&T and TWC, has extended its support to the Charter deals as long as Charter intends to extend its current settlement-free interconnection policy to the acquired systems.

Usage policies are expected to get more attention as the Federal Communications Commission moves ahead on a proposal to reclassify some OTT video providers as MVPDs. In September, FCC general counsel Jon Sallet said the Commission’s media vetting team’s opposition to the now-scuttled Comcast- Time Warner Cable merger centered on online video distribution and the combined company’s ability to “throw sand in the gears” of OTT competitors.

Testing Usage-Based Broadband

A snapshot of the usage-based policies that Comcast is testing in several markets, such as Huntsville, Ala.; Little Rock, Ark.; Fort Lauderdale and Miami, Fla.; Atlanta; Shreveport, La.; Jackson and Tupelo, Miss; and Chattanooga and Nashville, Tenn.:

A soft, monthly usage cap of 300 Gigabytes per month that charges $10 for each additional bucket of 50 GB above that threshold. Comcast has also implemented a “three-month courtesy program,” meaning customers won’t be billed for the first three times they exceed the monthly 300 GB limit. Comcast is also testing a more variable usage-based policy in Tucson, Ariz., that adjusts the monthly consumption ceiling based on the speed of the customer’s data tier.

A “Flexible Data Option” tailored for Internet users on the MSO’s Economy Plus and Performance Starter tiers. That opt-in trial applies a monthly 5 GB ceiling before customers are subject to per-Gigabyte fees. Customers who do not exceed the monthly 5 GB ceiling receive a $5 credit, but will be charged an additional $1 per gigabyte consumed beyond the 5 GB threshold.

An “Unlimited Data Option” that costs an additional fee of $30 to $35 per month, depending on the market. Comcast first began to trial this option in select parts of Florida in October, noting then that a customer survey with a group of heavy data users found that the majority (60%) “expressed interest in an unlimited data plan option at the predictable, flat price of around $30 a month.”

Comcast has implemented data meters to help customers track their usage, and has systems in place to alert customers in trial markets when they have reached 90%, 100%, 110%, and 125% of their monthly data usage plan.

Mike Farrell and John Eggerton contributed to this report.