• How They're Trying to Control Your Web Use

    Aug. 1, 2012
    As you read this, the landscape for how you use the Web and how you'll be charged for it is changing. The repercussions may be profound, if not immediately,

    As you read this, the landscape for how you use the Web and how you'll be charged for it is changing. The repercussions may be profound, if not immediately, then down the road.

    Comcast, the largest home Internet and cable TV provider in the United States, and Verizon, the largest U.S. wireless communications provider, just announced changes in their “data cap” policies. This affects the amount of text, music and especially video that you can stream or download on a monthly basis using your personal computer, tablet, smartphone and other devices.

    In test areas, Comcast will be boosting its data cap from 250 to 300 gigabytes per month and more importantly, won't be terminating users who repeatedly exceed this limit. Instead, it will be charging them.

    At first look, this seems like a sensible plan. You pay for what you use. But increasingly, people are using Internet services that compete with Comcast's TV offerings, particularly Netflix (netflix.com), Hulu (hulu.com) and YouTube (youtube.com).

    Netflix is especially worrisome to cable and fiber-optic TV providers such as Comcast and Verizon. Provided that users have fast broadband Internet connections, Netflix lets people use the Internet to conveniently obtain movies and TV shows at a lower cost than strictly through their televisions, just $7.99 per month. Fewer offerings are available this way, with live sporting events being the most commonly missing, according to users. But enthusiasts say that for them, the cost savings more than make up for this.

    Comcast recently rolled out an Internet video service to compete with Netflix, called Streampix (comcast.com/streampix). Depending on what other services they subscribe to, some Comcast customers will receive Streampix for free, while others will have to pay $4.99 per month. Verizon reportedly is planning a similar service.

    All this raises questions in the minds of some about the fairness and legality of one company controlling access to the services of competing companies. “Net neutrality” is the buzzword for a level playing field that gives equal advantage to all who compete in a particular market segment.

    Still, Comcast's data caps are generous … for now. Only about 1 percent of households exceed 300 gigabytes of data per month, with the average usage being about 32 gigabytes, according to Sandvine (sandvine.com), a company that makes cable network management tools.

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    But as high-definition video offerings over the Internet increase in popularity, more people will probably be paying extra in the future.

    Verizon, which is competing aggressively with Comcast for Internet as well as TV and phone customers, doesn't have an Internet data cap for its wired Internet customers, not yet anyway.

    On the other hand, Verizon recently announced it was eliminating unlimited data plans for its wireless customers. Users who stream lots of movies, TV shows and other video will wind up paying more.

    Some wireless companies still have unlimited data plans or throttle the speed of customers who exceed a monthly threshold. But if this trend plays out the way it appears that it will, many or most wireless companies will follow Verizon's lead and make customers pay for what they use.

    As history has shown, large companies have a history of engaging in cooperative efforts that can limit competition in order to “stabilize” prices. There's no reason to suspect that this has stopped.

    In a widely discussed story in eWeek.com(http://tinyurl.com/bobb5tm), Wayne Rash alleged that Verizon is leading an effort to create an arrangement with cable companies to fix prices for wireless access to the Internet.

    Not all of the consequences of the changes under way are anti-consumer. Cable companies, including Comcast and Time Warner, are also cooperating to give customers free access to one another's WiFi hotspots for Internet access when traveling.

    What's more, one benefit of the pay-per-usage pricing model is that it decreases the chances that a minority of heavy users in a particular geographical area will compromise the wired and wireless experience of the majority of users.

    Demand for video and other data-intensive content by PC, tablet and smartphone users, which can compromise others' Internet experience, is exploding. Internet traffic around the world is expected to quadruple in 2015 compared with levels in 2010, according to networking equipment manufacturer Cisco (cisco.com), with most of this increase coming from high-definition video.

    Comcast, Verizon and other service providers are investing heavily in infrastructure to handle future increases in traffic. They rightly deserve to profit from their investments. But benefits to society as a whole, including U.S. economic efficiency, will be maximized if competition is kept open and vigorous.

    Reid Goldsborough is a syndicated columnist and author of the book, Straight Talk About the Information Superhighway. Contact him at [email protected] or www.reidgold.com.