Sonic CEO: Broadband Usage Caps Just Aren't Necessary We've long noted how broadband usage caps on fixed-line networks are little more than glorified rate hikes on uncompetitive markets. Caps serve all manner of purpose for the ISP, including not only letting carriers charge more money for the same service, while letting ISPs simultaneously hinder and cash in on streaming video alternatives. As we've seen with "zero rating," caps can also be used for anti-competitive effect, letting companies exempt their own services from the limits, while competitors' services remain hamstrung.

Granted it used to be hard to find an executive willing to publicly admit any of this. Most executives will desperately try to claim that caps are necessary due to congestion (not true), are financially necessary to build the next-generation networks of tomorrow (also not true), and are primarily about providing consumers with "choice and flexibility" (absolutely not true). Sonic CEO Dane Jasper, who has made a career out of going toe to toe with bigger broadband providers like AT&T (which just started capping all customers last month), tells CIO.com that broadband provisioning costs are dropping, making usage caps unnecessary: quote: "The cost of increasing [broadband] capacity has declined much faster than the increase in data traffic," says Dane Jasper, CEO of Sonic, an independent ISP based in Santa Rosa, Calif. Jasper, of course, has reason to challenge his much larger rivals. However, he also backed up his argument with real numbers. A few years ago Sonic (formerly Sonic.net) spent about 20 percent of its revenue on basic infrastructure. Since then, the cost of routers, switching equipment and other related gear declined so much that Jasper says the company's infrastructure costs are now only a bit more than 1.5 percent of its revenue. Again, most ISP executives have a vested interest in not admitting that. Most would prefer you believe that bandwidth is an amazingly scarce resource, dug from deep in the earth using solid gold and diamond-encrusted magic drills and fairy dust. Again, most ISP executives have a vested interest in not admitting that. Most would prefer you believe that bandwidth is an amazingly scarce resource, dug from deep in the earth using solid gold and diamond-encrusted magic drills and fairy dust. But if you pay attention, even companies looking to implement caps, like Suddenlink, have admitted that for bigger companies, bandwidth is relatively cheap to provide and is getting cheaper. Take this recent quote from outgoing Suddenlink CEO Jerry Kent, who effectively admitted that the days of ISPs having to spend big on networks are effectively over, and the name of the game now is milking those networks for all they're worth: quote: “I think one of the things people don’t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,” Kent said. “Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.” Frontier Communications quote: "The nice part of technology and what has happened is that transport costs continue to decline and by putting in the packet optical fabric it takes away a lot of those constraints," McCarthy said. "There may be a time when usage-based pricing is the right solution for the market, but I really don't see that as a path the market is taking at this point in time." If caps are little more than a punitive rate hike on uncompetitive markets, what can consumers do about it? If they have the choice of ISPs that don't cap (like Sonic, Google Fiber, or Verizon FiOS) they should immediately vote with their wallet. If they have no choice they can Frontier Communications admitted as much this week as well:If caps are little more than a punitive rate hike on uncompetitive markets, what can consumers do about it? If they have the choice of ISPs that don't cap (like Sonic, Google Fiber, or Verizon FiOS) they should immediately vote with their wallet. If they have no choice they can file a complaint with the FCC , urging the regulator to take action against ISPs that impose such anti-competitive limits on what are already some of the most expensive broadband connections in the developed world. Occasionally users find themselves surprised by the response. One thing consumers shouldn't do is blindly accept Comcast and AT&T's obvious plans to impose dramatic broadband rate hikes on the eve of the cord cutting revolution.







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Most recommended from 18 comments



battleop

join:2005-09-28

00000 6 recommendations battleop Member For the most part Dane is correct but... There are still some providers (WISPs mostly) that are still in some pretty remote areas where their transit costs are hundreds of times what it cost him to get transit and peering. In those cases it may be justified though rate limiting would probably be a better choice.



I'm not talking about a remote Centurylink/Fairpoint markets because they are the reason why these WISPs get their eyes gouged out.

TIGERON

join:2008-03-11

Boston, MA 5 recommendations TIGERON Member At least Dane gets it Too bad he won't expand everywhere in California. We need guys like him.

GlennLouEarl

3 brothers, 1 gone

Premium Member

join:2002-11-17

Richmond, VA 5 recommendations GlennLouEarl Premium Member "milking those networks for all they're worth" You mean "milking those customers for all they're worth" goonierag (banned)

join:2003-07-18 1 edit 3 recommendations goonierag (banned) Member What suddenlink/altice is doing since its a french company now. What they are doing in uncompetitive states like WV



In the state of WV. They moved the system up and the lowest tier in the state is 50/5. In some area's they can only get 50/5 or 75/7.5 and can't get any higher. What they are doing in WV besides the forced move up to get the unlimited for extra they have a restriction that 100/7.5 must be availible in your area. Some area's in WV don't offer the 100/7.5 so them people are stuck on the lowest caps of all the broadband isp's,("don't count dsl") 50/5 250 cap and 75/7.5 350 cap which is no good anymore,maybe was 10 years ago.



But also like you I have 3 speed availible 50/5,75/7.5 and 100/7.5. I can pay the $20 to move up to the 100/7.5 to get the unlimited and like you in 24 months there will be charges putting my bill up to $73.80 and thats if there ain't no other charges added, online rep said there is a $3.50 add fee to the broadband coming this year. Can't really complain about the actual service I get cause its 50/5 and usually it stay about that. I will and am complaining about the caps 250 gigs is worthless nowadays.



And I should'n have to move up to a higher priced tier to get the unlimited. And then pay for the unlimited on top of that.



You will notice at&t,comcast,etc. Moved their caps up at&t to 600 gigs comcast to 1terabyte but at&t and comcast also has the unlimited on all tiers for a price. Unlike suddenlink that is restricting their service in their uncompetitive area's like WV where some are stuck paying for the lowest caps of the broadband isp's. They also lie in their press release they say unlimited is availible on the two highest tiers in your area. They proved that wrong by not offering unlimited for some in WV and like me its only availible on the 100/7.5 why not my 75/7.5.



Reason suddenlink/altice is doing this in uncompetitive area's is so one they can stop the cordcutters like me that uses an OTA antenna and the broadband is for stuff like sling.("lots of people in WV are,more then half the state lives on minimal wage of $7.25 an hour") So they are saying you will either pay for our cable or you will be paying way more for your broadband. And to take as much money as they can from the people in uncompetitive area's.



Hopefully in a month or two when the results of the court case come out and the fcc wins, Wheeler will say no more caps on broadband and if leaves caps makes them reasonable, say for 25/25 750 gig cap,30/30 800 gig,35/35 850 gig,40/40 900 gig,45/45 950 gig,50/50 1000 gig,55/55 1050 gig,60/60 1100 gig,etc. And make it they have to raise the gigs on all speed so much each year. Also starts metering the meters,not let the isp's control the meters. Like the other utilities, water,electric,gas, I consider broadband a utility,unlike cable.



P.S. People need to get a complaint into the fcc,ftc and ag's on what suddenlink is doing so hopefully we can put a stop to this, Whats worse is Altice a french company bought both suddenlink and cablevision making it the 4th largest cable company in the USA and plans to buy more isp. They got to buy both companies without any conditions added on them at all unlike it seem the US companies always seem to have conditions if want to buy or merge. Like they are giving altice a free pass cause its a french company.



This is going to really look bad on the fcc,ftc and ag's to the people if they keep letting suddenlink be able to have the lowest caps of the broadband isp's and put certain restriction on their service to force as much money out of people they can get away with in uncompetitive area's. Like have to have at least 100/7.5 or pay to move up to it. $20 if on the 50/5 tier. Then pay for the unlimit which is added in next 24 months or in areas of WV that they only offer 50/5 250 cap and 75/7.5 350 cap and are stuck paying overages cause can't move up to the 100/7.5 cause they don't offer it there.



Like the story says, Caps are just a moneymaker for the isp's and a way to stifle the competition like sling,hulu,netflix,vue and others. And to force you to take their cable service.