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Usage based broadband pricing: It's good for you?

By | May 16, 2011, 4:08am PDT

Metered broadband access is inevitable and may even be good for adoption of speedy Internet access.

That’s the argument from Bernstein analyst Craig Moffett in a research note. Moffett sets the scene:

  • The FCC’s open Internet push allows for metered broadband.
  • AT&T has introduced usage caps across its wireline business. DSL customers are limited to 150 GB of monthly consumption. U-Verse subscribers get 250 GB, or the same as Comcast. Users will be charged an extra $10 a month if they exceed the cap and it’s $10 per 50 GB after that.
  • AT&T has already introduced tiered wireless plans.
  • Time Warner Cable has a few usage based pricing pilots underway.

Referring to the AT&T’s move last week on DSL and U-verse caps, Moffett said: “This move marks the beginning of the end of unlimited broadband.”

The end of unlimited broadband will annoy a lot of tech watchers, but give broadband providers another model. And this model has no incentive to penalize Netflix or any other potential rivals to cable. Moffett writes:

The goal of moving to usage based pricing is not to undermine competition from Netflix (or anyone else… although it certainly wouldn’t be good news for Internet video). And it is most decidedly not to simply “raise prices for broadband” as Public Knowledge or New America would have it (although it might well do precisely that, too). Instead, it is nothing less than to re-align the entire business model of today’s infrastructure providers with the next generation of communications… so that broadband providers might stop fighting against the tide and embrace it instead.

With usage based pricing, broadband providers, and Cable operators in particular, can create an “iso-profit” curve, where the amount they make from a physical connection is about the same whether someone uses that connection for linear video or, alternatively, web video. The goal is not to stifle competition, but instead to create indifference not just to the end state of video by-pass, but indeed for all points along the way. The adoption of usage based pricing would be transformational to the debate for Cable operators, inasmuch as it would essentially indemnify them against all potential outcomes.

Add it up and Moffett argues that metered broadband will actually increase adoption. Broadband adoption is in the 63 percent range today. A sizeable chunk of America refrains from broadband due to costs. Usage based pricing changes that equation and allows more people try out broadband.

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Topics

Broadband, Pricing Strategy, Moffett, Broadband Internet, Network Technology, Telecommunications, Pricing, Networking, Marketing, Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

Disclosure

Larry Dignan

Larry Dignan has nothing to disclose. He doesn’t hold investments in the technology companies he covers.

Biography

Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.

For daily updates, follow Larry on Twitter.

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RE: Usage based broadband pricing: It's good for you?
nevertell 29th May
It amazes me how STUPID people have become. They advertised and sold the public "unlimited" broadband, and then we find out they were lying, and there are caps or limits. This is nothing more than Fraud, and these isp's should be prosecuted immediately. Second, the isp's are now pushing even further because people aren't standing up for themselves. This "pay for usage" scam is an insult on every user. The internet was conceived to be a free form of communication. The only fee that should exist is the actual costs to maintain the connections. Make no mistake here, GREED is the root of this change. Cable companies don't want to loose their gravy train, by people getting all their media online. If the author of this article does think this "usage based pricing" is good, then he is nothing more than a shill for the isp's. Either that, or he is really, really stupid.
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RE: Usage based broadband pricing: It's good for you?
grazed 16th May 2011
Why would you even post this garbage?

If operators want to "embrace" UBB, they should charge people $0.00 if they don't use their connection that month and move up from there depending on usage.

Will that happen? No. Because it's a money grab like so many others have stated. They want to collect the amounts they already are collecting, and them some more. This in no way helps people who use lower amounts of bandwidth compared to others.
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Yes, why would you post this garbage?
Economister 16th May 2011
@grazed

It does cost the carriers something to have you as a subscriber, monitor usage and bill you, even if the bill is $0. Before you make such opinionated posts, you should have at least SOME understanding of how a business functions.
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RE: Usage based broadband pricing: It's good for you?
grazed 16th May 2011
@Economister

It was a simplified example. Real world costs wouldn't equate to more than ~$3.00. However, if they did charge said minimum to cover their costs, they would still lose a ton of money on people who only occasionally use their internet service.

Basically, if they were fair about it like electric/gas companies are, they would lose more money than they would make from metered billing. This is why it's a money grab and nothing else.
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RE: Usage based broadband pricing: It's good for you?
oldskooldj 16th May 2011
@Economister
Mom and Dad always gave him free internet, so should ISPs, right?
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RE: Usage based broadband pricing: It's good for you?
shanedr Updated - 16th May 2011
@Economister
What he meant was that if you meter usage you have to give a price break to low usage as you charge more to higher usage. What metering really means is the provider wants to provide a barely adequate system then charge a stiff price for those who want full speed in the hopes they will discourage such usage so the system won't be shown to be inadequate when it actually is.
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It costs them 3 cents / GB
rarsa Updated - 16th May 2011
@Economister : I thought that with that name you'd know a bit of economy:

The problem is not that it costs Something to provide bandwidth. The problem is that it costs them 3 cents / GB (Including operational costs) and they want to charge $10.

http://www.theglobeandmail.com/news/technology/gadgets-and-gear/hugh-thompson/what-is-a-fair-price-for-internet-service/article1890596/

I would not mind UBB if the price they wanted to charge was somehow realistic. Let's say $0.30 / GB (a 1000% markup)

If I use 1 GB I pay 30 cents
If I use 200 GB I pay $60

That is real UBB.

But they want to charge a base rate for "up to" a max amount, regardless of how much you use. $10/GB after that.

Do you now have SOME understanding of how a business functions?
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RE: Usage based broadband pricing: It's good for you?
J Hartsock 20th May 2011
@Economister

And those cable providers can charge whatever they wish BECAUSE THEY HAVE A MONOPOLY!!

End the monopolistic practices and licensing before instituting UBB!
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RE: Usage based broadband pricing: It's good for you?
Michael Kelly 16th May 2011
@grazed

Even the electric company won't charge nothing, because even the ability to use their service is something that costs them money even if you do not use electricity. However you are correct that a more realistic minimum charge needs to be established, and that a linearly based billing structure is needed to make this fair.
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Linearity and fairness
Economister 16th May 2011
@Michael Kelly

It does not need to be linear at all. The cost per GB could easily drop as volume increases.

"Fairess" is a highly misused concept. It usually means more for the person/group asking for fairness and less for everyone else.
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RE: Usage based broadband pricing: It's good for you?
Michael Kelly 16th May 2011
@Economister

Don't know if I agree with that. If an ISP needs to double its capacity, the customer who downloads 200 GB/month is twice the reason for that need than the customer who only downloads 100 GB/month.

If bandwidth were an almost unlimited resource (so long as the last mile exists) I'd agree with you, but in reality it is not even close to that. That's why electricity is billed linearly.

And in the interest of true fairness, I say this knowing that this method would be more "unfair" to me than most other customers, since I do use Netflix pretty much daily.
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So "fairness" to you....
Economister 16th May 2011
@Michael Kelly

does mean you would like to pay less, which is what I said about "fairness" in the first place. At least then we understand it is based on simple selfishness, which in itself is not necessarily a bad thing, rather than some higher moral consideration.

About linearity: Electrical power is often not billed linearly. Large commercial and industrial customers often pay much less per kwh than residential customers do. Whether unit charges are linear, increasing or decreasing with volume will depend on the cost of providing the service as well as incentives if any that the provider or society wish to apply. My point was that there is no inherent need for it to be linear, which still stands.
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RE: Usage based broadband pricing: It's good for you?
royalef 16th May 2011
@Michael Kelly , actually in states where solar powered homes give power back to the grid, home owners have deleted their annual electricity costs and they only pay $15-$25 in taxes/fees mandated by state/federal. So that statement has been proven to be completely untrue for a number of years.
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RE: Usage based broadband pricing: It's good for you?
tkejlboom 16th May 2011
@Michael Kelly

Not true. PG&E does not send me a bill for natural gas in the summer, when I don't use any.
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RE: Usage based broadband pricing: It's good for you?
tkejlboom 16th May 2011
@Michael Kelly

First, you don't know that the user using 200GB is the reason for an upgrade. It's in fact quite likely they're running at off peak times, anyway. In fact, your analogy to power is perfect, in that we have MASSIVE UNUSED CAPACITY in our internet backbone. Moffett's contention is NOT that this is the right way to deploy. His contention is NOT that it is fair. His contention is that if we just let the ******** running our last mile distribution screw over their customers, they'll rush to build out their networks so they can screw even more people.
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RE: Usage based broadband pricing: It's good for you?
Darr247 16th May 2011
@Michael Kelly - electricity is NOT always billed linearly. Many utilities charge less per KWh if you have an electric water heater, electric heat, electric car, et al. I count 10 different electric residential rates on the back of my utility bill, and over 50 different rates for non-residential.

Still, I think $1/GB for the first 40GB, $0.50/GB for the next 60GB, $0.25/GB for the next 100GB, and $0.10/GB after the first 200GB (that's half the proposed U-Verse excess-usage charge... or less than half, if what the article means is there's a $10 fine for overuse, PLUS the $10/50GB charge) would be enough incentive for them to make the last mile glass instead of copper and be offering 10Gb speeds by 2015.

If I ran a phone company I'd be replacing as much copper as possible with glass, anyway... at $4/lb, their wires would likely be worth far-more as scrap than they make hanging on poles.
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RE: Usage based broadband pricing: It's good for you?
ibanez1998 16th May 2011
@Economister
"The cost per GB could easily drop as volume increases."

Are you smoking crack that you actually believe they will drop the price and allow revenue to be lost in a pay as you go model? If the price per GB drops it will be realized and maintained by the ISP. It's not going to hit the consumer. They are also not trying to go to this model to lessen the cost of broadband for anyone. They are doing it to attract more customers who don't want to pay retail for unlimited, and stick heavy users with higher fees. It's a win win for the ISP. Today's internet doesn't really parallel the electricity usage model in that with 100% usage of electricity, 50% of that usage is not utilized to serve up advertisements to the subscriber. It IS that way with broadband. Am I going to pay for the bandwidth required to serve up ads? What about if I get a virus that starts sending email without my knowledge? I'll be paying for that too. Service Pack 20 just downloaded last night, oops, I guess that hits my monthly usage as well. This pricing model is designed to ease into this pay as you go structure so we're not immediately aware of the penis tip penetrating our asses. How do we stop this? It's bad enough the cell phone providers have the model in place so they are already full hump. I'd like to boycott any potential for double penetration now while we still have a chance. I hate corporate america!!
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RE: Usage based broadband pricing: It's good for you?
jsim@... 16th May 2011
In Australia, UBB is the norm and has been for years. It allows ISPs to manage the load/costs on their infrastructure and allows users to pick a cap that suits their needs. The bigger the cap, the higher the costs. I agree with others that a big driver of UBB is to protect the interests of cable TV providers. That's been the case here. But I would love unmetered broadband !!
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RE: Usage based broadband pricing: It's good for you?
Mad*Max 17th May 2011
@grazed

Next question: Why is broadband so outrageously expensive in the U. S. to begin with?

I've been living in Germany for close to a quarter of a century. Internet used to be prohibitively expensive here--now you can get a 16 megabit DSL contract for as little as 20 dollars per month, and a 50-megabit VDSL plus unlimited phone service to Western Europe and--yes--even the U. S. is 50 Euro per month (that's about $70).

Thus, broadband in the U. S. is expensive to begin with, probably due to a cartel-like situation among the internet providers. And they are making it more, rather than less, expensive. Wouldn't that be something for the FCC to look into?
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RE: Usage based broadband pricing: It's good for you?
daengbo 17th May 2011
@grazed
Pretty close. We need to give ISPs a reason to expand capacity, and that means moving to a minimal charge ($5?) for connectivity, and a sliding-scale charge per GB, decreasing as you get more toward wholesale level. The utility doesn't then need to worry about business vs. personal use or even whether you're reselling via WiFi.

If cost per GB is $0.03, then we should start at $0.06 (100% margin) and work toward $0.04 (33% margin) as we hit the 250GB mark. If my napkin math is right, that would make the formula for cost per GB something like .03+[.03/(e^.0044x)], where x is the number of GB used. Integrate and add $5 and you should be good.

THAT would give the industry a reason to expand capacity.
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RE: Usage based broadband pricing: It's good for you?
silvereagle38 18th May 2011
@grazed
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RE: Usage based broadband pricing: It's good for you?
silvereagle38 18th May 2011
@silvereagle38 Absolutely not, I pay for so much download speed and unlimited band width, why would I pay an additional fee, for what. This sucks. The government and the ISP`S are capitalizing on user fees, it`s just another tax on the po folks.
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RE: Usage based broadband pricing: It's good for you?
dortmunder@... 16th May 2011
"Add it up and Moffett argues that metered broadband will actually increase adoption." And how is that? Are they lowering the price of the internet connection? Someone that uses 1gb per month is paying the same $65 a month as someone that uses 249gb per month. Why don't they lower the price for people that use less? This is just a cash grab for lost TV revenue and phone cord cutters.
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RE: Usage based broadband pricing: It's good for you?
David Hoffman 16th May 2011
@dortmunder@... Thanks for the great description of the situation. Whether I use 15GB or 150GB, I will pay the same to AT&T each month.
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RE: Usage based broadband pricing: It's good for you?
stevethehawk 16th May 2011
@dortmunder:
Exactly. When they say it will "allow someone to try broadband", they forget to say that it will cost them what it currently costs everyone else in monthly fees. In other words, those that can't currently afford broadband, still won't be able to afford broadband. I'm not a heavy user at all, but I'm confident that I won't see any reduction in my bill. The only changes in billing amounts will be upward, you can bet on that.
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RE: Usage based broadband pricing: It's good for you?
Bob_DaBoob 16th May 2011
What a load of Baloney!! This is a cash grab, pure and simple.

Usage caps are absolutely intended to stifle cable competitors like Netflix. And it allows the cable companies to advertise high speeds, knowing that nobody will actually use all that speed for fear of getting charged extra.

Broadband is already way too expensive due to lack of competition. If there was real competition in broadband, Comcast and AT&T wouldn't be able to get away with this. Which is the number one reason why they are doing this -- because they can.
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RE: Usage based broadband pricing: It's good for you?
jpo@... 16th May 2011
@Bob_DaBoob
Bob, you are absolutely correct. And anyone without an axe to grind will agree. The problem with the situation we are in is that people like the author of this article, and our elected officials are paid by the corportaions. Last time I checked AT&T paid more money to Congress than any other corporation. Does anyone actually believe they would be doing that if they weren't getting back their desired results? As long as Congress works for the corporations and not the citizens, our country is doomed. We see those results more and each day.
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RE: Usage based broadband pricing: It's good for you?
d.j.elliott@... 16th May 2011
@Bob_DaBoob AMEN
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RE: Usage based broadband pricing: It's good for you?
1st+last-comment-ever 16th May 2011
Upwards of half a million Canadians would disagree with you: http://stopthemeter.ca/
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RE: Usage based broadband pricing: It's good for you?
Michael Kelly 16th May 2011
@1st+last-comment-ever

And that's upwards of half the population, right?

Kidding aside, I would venture to guess that most people who signed that are not thinking of the overall ramifications of not having metered broadband. Somebody has to get billed, and ultimately it is the person who is consuming the product who gets billed. The metered method of billing is by far the fairest way to do that for both the customer base and the provider. The provider gets to offer cheap internet for those who have no need for $40 a month plans. And even the customers who download the most get treated fairly, because if they billed the content providers instead of the customer directly, the costs would still be passed to the customer, and since there is now a middle man you can be assured the customer would wind up paying much more in the end than if the customer just paid the ISP directly.
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RE: Usage based broadband pricing: It's good for you?
grazed 16th May 2011
@Michael Kelly

Except that they're NOT introducing cheaper base plans. Also, bandwidth costs are virtually nothing and dropping fast. Carriers literally pay a penny or so for a gig of data transferred.

You're entire argument is misinformed.
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RE: Usage based broadband pricing: It's good for you?
Salman Pak 16th May 2011
@Michael Kelly:

In Canada, UBB is a blatant cash grab. From Michael Geist's blog: (FYI, for non-Canadians, BCE is Bell Canada Enterprises)

While Bell emphasized fairness once UBB became a political hot potato, the company had a far different emphasis when discussing UBB last year with financial analysts. In an August 2010 quarterly call, BCE CEO George Cope stated:

"...our data revenue growth was 3.8% for our Residential Services business, particularly driven through an increase in Internet ARPU of 3.3%. And interesting, almost all that increase now coming from usage based billing as the demand for Internet use explodes through the use of video services, and we?re continuing to see an increase in the revenue per customer."

Three months later in November 2010, Cope noted:

"...our residential services had an excellent revenue quarter from a data perspective, as well, with data revenue growth of 5%, driven principally by the bandwidth usage revenue being up 83% year-over-year."

Why is Bell doing this? Apparently it isn't about fairness, congestion or heavy users. In response to a question on the issue, Cope states:

"...as we see a growth in video usage on the internet, making sure we?re monetizing that for our shareholders through the bandwidth usage charges"
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RE: Usage based broadband pricing: It's good for you?
Michael Kelly 16th May 2011
@grazed

Well then your argument is against the implementation of metered billing, not metered billing itself. In which case I would say you should sign a petition asking to make metered billing fair to the customer, not abolish it altogether.
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RE: Usage based broadband pricing: It's good for you?
ibanez1998 16th May 2011
@Michael Kelly

What experiences have you had with corporate american greed that lead you to believe this will be BETTER for the consumer? This is about the ISP making more money, not lessening the fee structure. What's the matter with you? Are you really that ignorant?
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noted
p.vinnie@... 16th May 2011
I am in favour of metered broadband because it ensures we pay based on what & how much we use instead of paying based on purpose. However rest of article does not follow its main theme. Capped usage clauses and fixed cost per month does not match metered broadband principle.

I would like metered broadband in mobile internet market though. That is the place where network operators are discriminating based on who is using for what. I know metered broadband for mobile devices won't be as simple as $/gb; however I don't mind multi-tier metered broadband. As far as my network operator is not discriminating based on purpose of that byte consumed by my device.
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I agree
Economister 16th May 2011
@p.vinnie@...

The only thing I would add is that I would prefer some control over what I allow to be sent to my device if metered wireless becomes the norm. You could in theory use your entire monthly volume with nothing but useless ads and website animations.

I would love a much leaner web and usage based billing for mobile, as long as there is sufficient competition among carriers to drive the cost per GB down in the longer term.
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That's the whole problem with ..
thx-1138_@... Updated - 17th May 2011
@Economister .. the existing charging model for most ISPs.

Quote: "...The only thing I would add is that I would prefer some control over what I allow to be sent to my device if metered wireless becomes the norm."

The ISP isn't about to relinquish any control to you on the traffic management side of things - that's their real money shot: getting end-users to consume as much of their allowed bandwidth in as short a time as possible. Why? In order to get same end-users to have to purchase more bandwidth in (.. you guessed it) as short a time frame as possible.

Let's be perfectly honest here, average Jane and Joe don't have the faintest idea how the ISP 'actually' calculates usage versus how most lay-people 'perceive' as the way they're billed. The reality is, every bit that hits (inbound) to every bit sent to/from the gateway (e.g. on an ADSL router) is billed - not just the explicit, actual bits users are actively seen to be downloading / uploading. I'll wager the majority are completely oblivious.

"..You could in theory use your entire monthly volume with nothing but useless ads and website animations."

Though unlikely, you're right, technically if you leave a browsing session open on an unattended pc, it is consuming bandwidth even with, say, just a blank tab open.

The ISP love the fact that the masses in general are ignorant of the hidden dynamics behind their billing models / policies ... let alone that any of the finer points i mentioned actually happen .

".. I would love a much leaner web ..."

Fat chance! As long as Google control, in majority, the Ad space .. that ain't going to happen.
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RE: Usage based broadband pricing: It's good for you?
dhays Updated - 16th May 2011
@p.vinnie@...
Should the telephone company introduce the metered service it toyed with 25-30 years ago? I don't like the idea of meterd service. Then again, I have no idea what kind of usage I have, and no way of knowing. I do not use Netflix, Hulu or similar services, I do use ESPN3 to watch live streaming sports on occasion. Is that going to cost me much more to do that? Might as well get Cable TV or something similar, or are they going to meter your watching habits as well? Like my Mother, she uses her cable to watch local stations only, occasionally the local interest station. She does pay only about $20-$25 for only a simple package. She has only old analog TVs, so cable works good for her in that respect.
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RE: Usage based broadband pricing: It's good for you?
Peter Perry 16th May 2011
On wired plans, no way! I am forced to use a certain carrier because it is all the apartment complex allows in... To break the lease would not be worth he cost of switching.

As far as mobile goes, they had better give us more tethering options, like FREE or I don't want that either.
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Which is why...
Economister 16th May 2011
@Peter Perry

local tax payers/governments should own the "last mile" (hopefully fiber) and you can connect to the carrier/provider of your choice from there on. At least then you will not run into collusion between apartment building owners and carriers/service providers and you can turf out the local government if you choose.

In the US however, some people call that "socialism" and "government intervention". Of course those same people NEVER accept any kind of donations or other favor from the commercial interests in question. wink
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RE: Usage based broadband pricing: It's good for you?
jasonbutz 16th May 2011
@Peter Perry I completely understand the apartment situation. I am in it myself and I am not at all happy about it. The can only get TV through an antenna (not an option) or through the apartment complex. We can only get phone, and thus internet, through AT&T. I am waiting to see if AT&T is going to claim I went over for this past month since they started capping near the end and I was already 3/4 of the way through the "allowed amount" by then. (I used it while I could)

I have their 6Mbps plan. Now if i use that full 6Mb for 4 hours a day, and none any other time that comes to a total of 316.4 GB over the course of a month! Do the same thing for 3Mb and you will use 158.2 GB! I would be ok with AT&T doing data-caps if they were actually at reasonable levels.
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RE: Usage based broadband pricing: It's good for you?
talz13 16th May 2011
If the UBB drive is to combat congestion, make a peak/off peak system like providers in other countries have (i.e. 200GB peak traffic 8am-11pm, unlimited off peak) to encourage heavy use during the off peak times. Download programs should easily be able to be scheduled to take advantage of the "free" bandwidth time periods, and free up bandwidth during peak times for regular users, checking their email without having to fight through the heavy flood of downloads starting right after work / school. The peak traffic limits would be revisited every year or two to determine an appropriate (increasing) amount, so 10 years down the line your peak traffic usage limit would be ~500GB-1TB.

If the UBB is about fairness to light and heavy users, charge a flat connection rate (possibly related to your speed tier) of $5-10 / month, and a reasonable rate per GB ($0.01-$0.05 per GB). This rate would, of course, be revisited by the auditors every year or two to determine the market rate of a GB of transit costs (10 years from now, they'd probably only be able to charge $0.001 to $0.005 per GB).

Seems like it would be best if they just kept EVERYBODY on an overpriced tier like they do today, and continue raking in their record profits. Why poke the bear?
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RE: Usage based broadband pricing: It's good for you?
tkejlboom 16th May 2011
@talz13

Paying for connection rate based upon tier is only legit if they offered 100Mb, 1Gigabit, and 10Gigabit tiers. The TECHNOLOGY has no other tiers based upon rate.

What you and everyone who thinks this isn't customers getting screwed need to do is setup a home network for five users, figure out what your shared upstream bandwidth would be, and ask why the **** those costs aren't scaling with your ISP.
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RE: Usage based broadband pricing: It's good for you?
talz13 16th May 2011
@tkejlboom

Oh, I know there's no technical difference between offering 7/512k and 15/768k (my old RR available speeds), but just throwing a bone to their current ways of doing things.

I'm still riding the high of having docsis 3 available now. $10/month more than the 15/768k "turbo" tier gets me 30/5. It's still $10 more than "already too expensive", but my perceived value has increased, so, eh... Mostly I wanted the upgrade for the 5m up. It was PAINFUL trying to upload to crashplan on under 1mbps.
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RE: Usage based broadband pricing: It's good for you?
dampier 16th May 2011
Craig Moffett is a telecom industry stock fluffer. His interest is one thing: raise revenues to boost the stock price for his paying clients. He doesn't represent or care about consumers, so long as they don't cause the stock price to change through their departure.

Moffett's claims seek industry-wide repricing of broadband to guarantee higher prices for consumers, both now and especially in the future as consumption rises. But what he always leaves out is the fact the cost to provide the service is dropping... radically. It costs only $8 for a broadband connection they charge $40+ a month to provide, and that cost is dropping for them, rising for us.

Usage based billing = gouging. It can never be about fairness when the asking price comes with an ENORMOUS markup. Remember, it costs less than three cents per gigabyte for providers, yet they want to charge up to $20/GB.

The rest of the world is moving away from these pricing schemes while a comfortable duopoly in the US and Canada tries to move us towards them, and its all about profits. Bell's CEO in Canada even admitted it to shareholders.

Get the real facts about Internet Overcharging: stopthecap.com
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RE: Usage based broadband pricing: It's good for you?
huntm856 16th May 2011
@dampier Indeed. zdnet loses credibility when they republish the output of people like Moffett, uncritically and with no countervaling view.
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RE: Usage based broadband pricing: It's good for you?
WebNinja 16th May 2011
@dampier I don't know where these numbers are coming from - $40/month charged for $8/month of service? If that were the case, you would be turning away investor money with army tanks. Those kinds of profits can only be had from pyramid schemes.
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RE: Usage based broadband pricing: It's good for you?
talz13 16th May 2011
@WebNinja
Maybe he meant $8/month for bandwidth costs, in addition to the (relatively) fixed costs of salaries, capital, etc.
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broadband should cost a lot less or be 100 times faster than 10 years ago.
tkejlboom 16th May 2011
@dampier

I agree. I KNOW they're still buying massive volumes of the same 100Mb FX(laser type) transceivers they were buying 10 years ago. For the price they were paying 10 years ago for FX, they could be using 10Gig transceivers. Let's allow for the fact that they went cheap on the fiber and may need to roll out singlemode. They should be able to do that and buy gig for the same costs they deployed 100Mb, and they'd be able to use the same fiber for 10Gb and 100Gb. Either broadband should cost a lot less or be 100 times faster than 10 years ago.
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awful writer
mepug212 16th May 2011
who obviously is getting paid for posting junk like this. shame on zdnet and shame on you.
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Here in Canada
voska1 16th May 2011
60 GB and if $4 per GB that you go over. I know a guy who downloaded 400 GB in on month, well over that 60 GB limit. Just a good thing they aren't enforcing it. They just sent you bill saying what you will be paying in the future if that continues. They've been sending those out for about 7 years now and still haven't actually implemented it yet.
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RE: Usage based broadband pricing: It's good for you?
nevertell 29th May
It amazes me how STUPID people have become. They advertised and sold the public "unlimited" broadband, and then we find out they were lying, and there are caps or limits. This is nothing more than Fraud, and these isp's should be prosecuted immediately. Second, the isp's are now pushing even further because people aren't standing up for themselves. This "pay for usage" scam is an insult on every user. The internet was conceived to be a free form of communication. The only fee that should exist is the actual costs to maintain the connections. Make no mistake here, GREED is the root of this change. Cable companies don't want to loose their gravy train, by people getting all their media online. If the author of this article does think this "usage based pricing" is good, then he is nothing more than a shill for the isp's. Either that, or he is really, really stupid.

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