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The main challenge for network en-
gineers is how to deal with demand during peak hours. The critical factor is the time of day when an indi-
vidual uses data, not an individual’s aggregate data consumption over the course of a month. Even major
ISPs have acknowledged this:
In a disclosure document required by the FCC, Comcast admitted that data
cops "do not oddress the issue oj network congestion, which results jrom trojþc
levels that vary from minute to minute.”
The cost of delivering broadband service is decreasing, not increasing.
The price of service is often cited as a justification for data caps. However, declines in network equipment
costs and costs to move data, including IP transit, mean that ISPs are now spending less while profiting
from more customers.
decrease in cost of
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Forecasts of a flood of mobile data have been overblown.
Carriers have justified caps by pointing to the imminent explosion in mobile data
usage. However, the projections they relied on have since been proven inaccurate: in
2008, for example, Cisco Systems projected that mobile data traffic would increase
18-fold by 2012. In 2011, when it became clear that this prediction would not come
true, the number was reduced to roughly 60% of the original projection.
increase in number
Comcast’s High-Speed Internet Service Explained: Customer
Growth vs. Network Expenses
2007 2008 2010 2009
Avg. No. of High-Speed Internet Customers Avg. Quarterly Operating Expenses
Data caps are about protecting legacy services. The Justice Department’s probe into
data caps drew attention to the ways in which cable companies attempt to use caps to protect their legacy
video services from new digital competition. These concerns are well-founded. A 2011 Credit Suisse pre-
sentation intended to advise cable ISPs outlined the ways in which data caps discourage consumers from
using web-based services:
Data caps are good for business. Verizon Wireless and AT&T Wireless have turned to
tiered data plans for revenue generation, earning growing profits from data overage charges in recent
years. In fact, AT&T told investors in a presentation in March 2011 that acquiring T-Mobile would be an
opportunity to implement “attractive tiered data plans” and enable “data growth to be mon-
etized” since at the time T-Mobile did not charge overage fees for excess data use.
For more information about data caps, read the full paper published by the New America
Foundation’s Open Technology Institute, “Capping the Nation’s Broadband Future?”
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“[O]ver the longer term, consumption based billing could reduce the at-
troctiveness oj over-the-top video options (e.g., Netµix ond Huluj, os the
economic attractiveness of such over-the-top options could be partially
offset by a [broadband] bill that is higher, due to overage charges that
would be driven by large amounts of data being streamed via a customer’s
Average Revenue Per User from Retail Postpaid Data
2009 2010 2012 2011
increase in ARPU
from postpaid data
for Verizon Wireless
increase in ARPU
from postpaid data
for AT&T Wireless