THOUGH they pay way too much for their web connections and put up with wimpy broadband speeds compared with people elsewhere, the vast majority of Americans have at least been able to download all they can eat from the internet for a fixed monthly fee. Throughout North America, internet service providers (ISPs) have tended to shy away from the kind of monthly download limits and metered pricing widely accepted elsewhere. On May 2nd, however, the country's era of carefree internet surfing began finally to draw to a close. One of the leading carriers, AT&T, announced that, henceforth, it was introducing monthly data caps on subscribers using its fixed-line connections (as it already does with its mobile services). Those exceeding the data ceiling would be charged accordingly.Actually, AT&T is not the first ISP in the United States to cap monthly downloads. Numerous smaller access providers have been doing so for quite a while. Meanwhile, Comcast, the country's biggest cable TV company and ISP, started imposing a monthly download limit on residential customers back in 2008—in a bid to crack down on a tiny minority of users who consumed a disproportionate amount of bandwidth. The Federal Communications Commission (FCC) subsequently ordered Comcast to cease doing so. Limiting the amount of data subscribers could download, or throttling their download speeds, was seen as a breach of network neutrality , the principle that no restrictions whatsoever be placed on the content, services or applications carried over the internet.In April 2010, however, a federal appeals court ruled that the FCC did not have the legal authority to sanction Comcast—a bitter blow for the FCC's chairman, Julius Genachowski, who had hoped the issue would set a legal precedent that could be used to thwart further erosion of the net-neutrality rule. Though Mr Genachowski managed eventually to get net neutrality adopted (by a slim 3-2 vote) as an official FCC regulation, the principle had to be watered down considerably to gain the commissioners' acceptance (see “ Politics and the web ”, December 24th 2010).The original idea of net neutrality was to create a free and open internet. In that, it succeeded beyond anyone's wildest dreams—and ushered in an era of unprecedented online innovation and business activity. Unfortunately, the original concept had an inherent flaw. By capping the price carriers like AT&T could charge internet companies such as Google to a fraction of the cost involved in carrying Google's traffic, large internet companies had no financial incentive to use the network efficiently. The implication: demand for internet bandwidth would rise inevitably at an unsustainable rate. This is precisely what has happened.If truth be told, the FCC's new ruling is little more than a Band-Aid. Fixed-line carriers like AT&T and Verizon, as well as cable companies such as Comcast and Time Warner, are now free to throttle download speeds in the name of "network management". They have also been granted the freedom to experiment with different pricing models—in other words, start charging by the megabyte instead of offering a flat rate.

Under AT&T's new policy, customers using digital subscriber line (DSL) connections to the internet will have a monthly download limit of 150 gigabytes. Customers with “U-verse” connections (optical fibre to the neighbourhood, then copper wire to the home) will have a 250-gigabyte cap. Subscribers will be charged overage fees only after they have exceeded the limit three times. By any measure, that is remarkably generous. Users would have to download at least 65 high-definition or 360 standard-definition movies a month to exceed the 250-gigabyte limit. AT&T reckons only 2% of its subscribers will bump up against such limits.

But downloading movies is not the only thing clogging the internet. People are using a lot more bandwidth than they did in the past on other things—often without realising it. Video-game consoles such as PlayStation, Wii and Xbox are nowadays connected to the internet so users can play one another online. Wi-Fi-enabled tablets, phones, cameras and other devices have become ubiquitous. The latest television sets and video players come with internet connections for streaming entertainment from websites like Pandora, YouTube, Hulu and Netflix.



According to Sandvine, a broadband-traffic consultancy based in Waterloo, Canada, Netflix alone accounts for more than 20% of downstream traffic on the internet during peak hours in North America. BitTorrent, the peer-to-peer file-sharing protocol that was once the ISPs' biggest bugbear, accounts for only 8% of bandwidth during peak hours. For a mere $8 a month, Netflix subscribers can stream as many movies they like from the internet. And they often do so, for a mere $2 more, in high definition—which gobbles five to six times the bandwidth of standard-definition fare. Soon, they may be doing so in 3-D as well, which will only add to the network burden.



As far as bandwidth is concerned, the big difference today is that users now spend hours at a time streaming movie-length content from Netflix and the like, where once they spent only minutes watching clips from YouTube. Over the past year alone, the amount of video watched online has doubled, to over 15 hours a month, says comScore, a digital market-research company based in Reston, Virginia.



The problem is that online consumers have come to expect instant access to everything that catches the eye. The preference now is for streaming—so videos, movies or games can be consumed in real time—rather than downloading for later viewing. The streaming technology has become so slick, the price of the content so cheap and the selection of material so wide that downloading bootlegged videos courtesy of some clunky peer-to-peer client is no longer worth the hassle. Thanks to Apple, the lesson iTunes has taught us all is that there is a price point at which convenience trumps cost.



The downside is that the demand for instant access to content on the web incurs considerable hidden costs. When everyone wants to stream their favourite television show from Hulu or latest movie from Netflix at the same time, the internet chokes. The only solution is to rein in the greediest users, while continuing to invest in additional network infrastructure to handle the explosion in video traffic—now growing at over 200% a year.



Which brings us back to net neutrality. With all the concessions made by the FCC to turn the principle into a pillar of internet regulation, you would have thought that the ISPs (and the telephone carriers, in particular) would have embraced it. Not so. Verizon has already challenged the new regulation in court. Telcos like AT&T and Verizon are hurting because it is difficult, under net-neutrality rules, to get popular websites (eg, Facebook, Google, Amazon, eBay, Yahoo, Netflix, etc) to pay for the traffic jams they cause on the network.



And yet the Googles of the world realise that, without a lot more infrastructure investment by the carriers, their own businesses will cease to expand. Hence the secret agreement Google struck with Verizon last August to ensure that its online customers would always get preferential treatment. Level 3, the network firm that delivers Netflix's movies to subscribers' screens, recently did a similar "peering" deal with Comcast. Such deals violate even the watered-down version of net neutrality.



Is net neutrality heading for the trash can? It would certainly seem so. Cyrus Mewawalla of CM Research, an investment-research boutique in London, believes that net-neutrality rules that prevent telecoms firms from providing preferential access for specific internet traffic are poised to collapse around the world. As Mr Mewawalla sees it, net neutrality has created a massive industry bottleneck which, under normal circumstances, would be solved by allowing the ISPs to charge more for carrying high-priority traffic (ie, streaming video). As the net-neutrality rules prevent that from happening, they will have to be revised yet again or simply ignored. The betting is the latter.