How ITMP-based data caps punish light instead of heavy users

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Artist’s rendering of a world without data caps

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Yesterday I noticed a pointer in Michael Geist’s blog to an intriguing post at Fiberevolution: Do data caps punish the wrong users? The post piles on the evidence that data caps are a lousy way to discipline what the author calls “disruptive users”…

“Data caps, therefore, are a very crude and unfair tool when it comes to targeting potentially disruptive users. The correlation between real-time bandwidth usage and data downloaded over time is weak and the net cast by data caps captures users that cannot possibly be responsible for congestion. Furthermore, many users who are “as guilty” as the ones who are over cap (again, if there is such a thing as a disruptive user) are not captured by that same net.”

Upside-down policy goals

Through most of 2011, we’ve heard lots of criticism about the use of data caps in Canada, concerning both their inherent unfairness to customers and their inadequacy as a way of managing congestion.

But there’s more to it. It’s also important to look at the cap swindle as a component of the CRTC’s failed ITMP framework. Logic dictates that subs who are heavy users should be hit with disproportionately high pricing as a disincentive to overuse, that is, “high” compared to prices set for light users.

In a post I wrote a year ago, however, I explained that Rogers then rate card stood this logic on its head. How so? By making both the flat price and monetary penalties for over-use much more punitive on its slower tiers than on its faster tiers. I appreciate that using the advertised tiers as a proxy for light vs heavy consumption is imperfect. Nevertheless, that doesn’t change the fact that, at least in Rogers’ case, consumption on the higher tiers is being effectively cross-subsidized, since the unit costs for both bandwidth and (over)usage are much cheaper than on the lower tiers. That’s right. I’m saying the policy outcome is exactly the opposite of what von Finckenstein kept insisting was the key goal: to stop forcing light users to subsidize the bandwidth hogs.

Here’s how I explained it in the October 2010 post (slightly edited, with figures that are probably a little out of date):

Rogers’ rate card is punishing light not heavy users

In the figure below, I’ve graphed a bird’s eye view of all of Rogers’ six access tiers from Ultimate on the left to Ultra Lite on the right, against two variables: the cost (Cdn $) of each tier in Mbps per month (purple line); and the maximum monthly fee payable on each tier when usage hits the highest penalty point, which is $50 a month for all tiers (blue line).

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This chart reveals something unusual. Far from even a modest surcharge for the privilege of fast connectivity, the four highest (i.e. fastest) tiers cost far less per megabit per second than the two entry-level tiers. In fact, UL subs are paying 28 times more per unit of bandwidth than Ultimate subs ($56 vs $2); 20 times more than Extreme Plus; 14 times more than  Extreme; and 12 times more than Express. The question is: why? UL is a 500 Kbps service with a cap of 2 GB. Yet it’s priced at $27.99 – and comes with cruel penalties. At $5, UL has the highest penalty per GB of over-usage. The penalties per GB actually drop as speed goes up.

Rogers’ rate card seriously undermines any rationale that might exist for the economic ITMP approach to fighting off congestion. The first flaw is the system punishes the wrong end-users. The second flaw is the cozy assumption that whoever is hogging the bandwidth, they ought to pay because bandwidth costs money and light users shouldn’t have to subsidize the hogs. […]

Who is getting priced out of the market on these entry level tiers? My guess is a lot of Canadians with little or no disposable income. They’re either staying away entirely or paying far more than they would under a system designed to encourage adoption among the under-privileged… a system the CRTC is scheduled to promote when Hell freezes over.

D.E.

One thought on “How ITMP-based data caps punish light instead of heavy users

  1. I completely agree with all the facts that you presented, but I think you’re stopping short of the final point, and most others are as well.

    The problem is that ISPs have framed the whole argument as a debate about disciplining “disruptive users” or “bandwidth hogs”, and when you debate that point directly, you are tacitly validating that framing. The CRTC is even more guilty of this.

    It’s almost like engaging an intelligent design advocate in an argument about evolution. You lose by even starting discussion, because in order to do so you have to acknowledge that there IS a debate to be had.

    It’s pretty clear from your analysis and that of others that ISP pricing structures have very close to zero correlation with costs. They are not designed to enforce fair internet usage practices in consumers, they are designed to maximize profit and create an artificial system of graduated pricing.

    That’s the point that needs to be made. ISPs are flatly lying. It’s not about congestion, it’s about profit. They’ve even stated as much in their press releases to shareholders.

    So that’s the real discussion that we need to have. Is it fair for the corporations that own key technical infrastructure to abuse that position to maximize profits? Even to the extent that it negatively impacts Canada’s standing in the technical world?

    Unfortunately it seems to be something of a faux pas to even mention the idea of curbing profit-seeking in formal regulatory discussions. It seems to be assumed that infrastructure owners are entitled to abuse consumers, and now we’re just quibbling over the method of abuse. You can see that in the UBB->AVP->Capacity pricing. The whole focus was on the billing method, and the end numbers only changed very slightly.

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