Cable, Telecoms see data caps as future success

Just a few years ago, the Internet seemed like the biggest threat to the cable and telecom business. But now, through their ability to charge for access to the Web, those broadband service providers see the Internet as their key to future success. Their business models, analysts say, may lie in data caps — the monthly tiers Comcast, Verizon, AT&T and others have set for consumers on broadband to the home and on mobile devices.

“An obvious reason data caps are important to wireless operators is they generate additional revenue. A less obvious reason it they may help operators persuade content companies to pay their way out of caps,” said Paul Gallant, managing director at Guggenheim Securities research. That business model poses a problem for a company like Netflix, which has a competing video product to cable television, analysts say. Neflix’s CEO Reed Hastings complained on his Facebook page recently that Comcast wasn’t counting its XFinity XBox streaming service against its 250 gigabyte data cap. So when will data caps really become a major issue for consumers? Even though consumers aren’t hitting their monthly data limits today, they soon will as a flood of more bandwidth-intensive applications like real-time video chats and multiplayer HD gaming become more popular, according to Sandvine CEO David Caputo. Caputo said average broadband use in March increased 40 percent from the previous year to 32 gigabytes a month. That 40 percent increase has been the trend for years.