FCC Boss: Broadband Caps Are Good... No, Bad... No, Good... Wait, Who Am I Talking To Again?

from the politics dept

FCC boss Julius Genachowski has been busy lately paying lip service to Silicon Valley, most recently telling a bunch of Silicon Valley conference attendees that caps were something we should be "concerned" about, after telling cable companies just a few months earlier he thought caps and overages are nifty and innovative. Speaking again to Silicon Valley folks yesterday at a speech at Vox Media headquarters, Genachowski hashed out his muddy position a little further, again insisting he was "concerned" about caps -- sort of -- maybe

One, caps (and especially usage fees) are not technically or economically necessary whatsoever. Flat-rate broadband is perfectly profitable and despite doomsday prognostications designed to scare regulators (it apparently worked), most networks consistently keep pace with demand thanks to dropping bandwidth and hardware prices and improved engineering. Ten years of ISP earnings reports are proof the flat-rate pricing model is sustainable.



Two, they're not being imposed in a "competitive market"; they're just price hikes on already-expensive service, designed to protect TV revenues from Internet video -- and they're made possible specifically because of limited wireline competition, a problem the FCC refuses to seriously tackle. Most modern, well-managed wired broadband networks don't see much congestion. Caps and overages are an executive and investor pipe dream; an entirely new unnecessary fee system layered on top of what is already some of the most expensive broadband service in the developed world (OECD data).



Genachowski appears to have swallowed the lie that money gleaned from overages goes back into the network; yet CAPEX and wired network investment is dropping like a stone for most incumbents, and most of the cash gleaned goes into the pockets of CEOs and investors. While that's the public corporation's primary objective, pretending that caps are helping to create the networks of tomorrow is not supported by the facts. If the money from overage fees actually went back into the network, Canada would have some of the most advanced residential broadband networks in the world. Go ask our Canadian forum users exactly what caps have done to improve the quality of their services.

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For many years, we've talked about why metered and capped broadband is bad for innovation. Beyond the fact that it introduces serious mental transaction costs ("do I really want to watch that video, or will I hit my broadband cap?"), it creates the exact wrong incentives for broadband companies. They have incentives to keep the caps low and toinvest in infrastructure improvements. Of course, as with the net neutrality fight, the appearance of meters and caps are really a symptom of a larger problem, not the problem itself. The real problem: a serious lack of competition. Meters and caps don't do anything that awants. Quite the opposite. They only serve the needs of the broadband provider. If there were real competition, then broadband providers wouldn't be able to get away with caps and meters, because customers would quickly move elsewhere, and companies that focused on not limiting users would be winners in the marketplace.Over at Broadband Reports, they've been chronicling FCC boss Julius Genachowski's constant flip-flopping on whether or not broadband caps are good or bad . Tellingly, it seems to depend, in part, on what audience he's speaking to.As the article makes clear, beyond tailoring his remarks to his audience, Genachowski seems to be discussing thingswe were in a world where there was real competition, where meters and caps were used to offer lower prices, where the meters actually worked, where money from these activities goes into greater broadband investment and where such things were needed to make broadband profitable. The problem: exactly none of those things appear to be true. It's kind of tough to make competent policy when all of your assumptions are basically wrong. More from Broadband Reports:These things are important if we're going to actually get broadband policy right. The FCC has often seemed way too timid in recognizing that what the telcos tell them is often a complete fabrication. Given how that's been the case for decades, you'd think sooner or later someone would pick up on it and use it to try to fix things, rather than kowtowing to their latest talking points.

Filed Under: broadband, broadband caps, fcc, julius genachowski, metered broadband