Internet Data Caps Cometh

[Commentary] With its vision of millions of users engaging in live video chat across the Internet, the Microsoft-Skype deal is one more business plan that treats broadband as basically an unmetered resource. What if that calculation is faulty?

AT&T this month imposed for the first time monthly data limits on its fixed broadband subscribers. Cablers like Comcast and Charter have imposed their own caps in the last couple of years—albeit without penalty charges. Instead they invite chronic abusers to take a hike. By now, some 56% of fixed broadband subscribers face limits of some kind on how much they can download per month. "Data caps on nearly all wireless and wired networks in the U.S. seem likely to be in place soon," warns ComputerWorld magazine. "Who will start using the next high-bandwidth YouTube or Netflix when doing so results in big fees? If not done right, consumption pricing will cripple innovation," says the respected geek site Ars Technica. Two of the groups last heard declaiming about "net neutrality," Public Knowledge and the New America Foundation, recently wrote to the Federal Communications Commission demanding an investigation, saying data caps "carry the omnipresent temptation to act in anticompetitive and monopolistic ways." That bit of heavy breathing is characteristic.

In reality, data caps are not the acts of monopolists. Nor are they a devious strategy to deter users from dropping cable TV in favor of Netflix. Nor is there something metaphysically out of whack about charging overage penalties for access to a fixed-cost network, even if the cost of delivering the next byte is nil. Filling an empty seat at take-off time costs airlines little more than a bag of peanuts (if that), but even in their fiercely competitive industry they still get away with charging top dollar to late bookers. On the contrary: Migration to usage-based billing is evidence of a maturing broadband industry, in which growth has slowed and players increasingly must try to nab customers from each other.