Comcast set off a firestorm by announcing a 250 GB bandwidth cap for its residential broadband customers. Om Malik over at Gigaom did a nice job of outlining how such caps would stifle innovation, which I tend to agree with. But, private providers are not bound by any law or obligation to promote innovation, at least not that I'm aware of. In fact, I tend to view placing bandwidth caps on a service - at least in situations where these caps are disclosed to the consumer, as well within any provider's right - even if I don't like it.
The bigger problem, in my view, is how bandwidth caps can have the effect of favoring these providers' own content and services, while disadvantaging similar content and services from other providers.
It's my view that, at least based on how these caps are currently structured, the practice is downright anti-competitive.
Network operators continue to struggle with the dumb-pipe dillema. With the growth of rich media - from digital music, audio books, streaming movie clips, and standard and high-definition movie downloads - operators are required to carry more and more data across their local networks - often with no incremental increase in ARPU from the subscribers. To meet this demand, operators have to invest in expensive capital upgrades, again without increases in revenues being tied to those expenses. Woe is them, right.
Consider the following extreme example: In the case of mobile operators, they have been able to charge as much as $1,000 per MB of data carried for services like SMS. Clearly, the reason they can do this is that the sending and receiving of those messages are entirely under their own control. But, in the case of a residential broadband consumer who downloads a 2.5 MB song from iTunes, a 100 MB audio book from Audible.com, or a 2 GB standard definition movie rental from Amazon Unbox or Netflix, incremental revenues accrue not to the operator, but to the content providers. And the operator is again left with the requirement to carry exponentially larger volumes of data over their local network facilities.
If you play this trend forward to the advent of high-definition and 3D high-definition movie content, things really get interesting. Comcast has stated that the mean bandwidth consumed by its customers is in the 2-3 GB per month range today. A consumer who downloads a single HD movie from Amazon Unbox will basically quadruple that mean number.
Now, think about the impact of a bandwidth cap on consumers who purchase rich media content on a regular basis. If a consumer happens to favor movie rentals from Amazon Unbox - let's say instead of the video-on-demand (VoD) services offered over the cable company's set-top-box/DVR - they would inevitably have to consider the "penalty" of continuing to rent from Amazon. They would have to "watch the meter" when using Amazon, and potentially pay additional overage fees at the end of the month.
It seems to me that there is a relatively simple solution to the issue; cable companies need to use their "reasonable network management" practices; third-party content providers need to be protected against having their content and services disadvantaged by network operators; and consumers need the right to 1) be aware of all terms of services and 2) be free to purchase rich media from whatever source they want.
Why not require that the operators who implement bandwidth caps meter the bandwidth consumed for their own VoD content and other services in the same way that content from third parties is metered? In other words, if a subscriber purchases a VoD from the cable company, the bandwidth consumed eats away at the bandwidth cap in the same way it would if they had downloaded the rental from Amazon, Netflix or any other third-party providers. Sure, maybe there are some technical differences with how IP-based content is delivered over a broadband connection vs. how similar content is delivered to a DVR, but this can't be rocket science.
If this approach was put in place, at least the cable operators and third-party content providers would be on the same playing field. No preference for VoD content from the cable provider over IP-based downloads from third parties. If a consumer rented 100 VoD movies from the cable company, they could expect to see the same additional charges for exceeding the cap. Oh, and I bet you'd see the bandwidth caps dropped as a technique for reasonable network management.