Recent news that Comcast Corp. (Nasdaq: CMCSA, CMCSK) and other Internet service providers are starting to draw the line on what comprises sufficient Internet bandwidth raises a couple questions. First, how much is enough? And second, will capping consumer usage set Internet development back a few notches?
Comcast has announced it will be capping bandwidth use for its Internet access customers at 250 Gbytes per month. Compared to the 95-Gbyte allocation provided by Rogers Communications Inc. (NYSE: RG; Toronto: RCI) in Canada, Comcast's setting seems generous.
Other carriers are setting caps as well. Cox Communications Inc. has caps ranging from 5 to 75 Gbytes per month. Time Warner Inc. (NYSE: TWX) is evaluating caps between 5 and 40 Gbytes.
Is that enough bandwidth for most users? Comcast, which has said that caps would affect fewer than 0.01 percent of customers, says its cap would still allow up to 125 standard-definition movie downloads per month; the ISP puts average consumption per customer at 2 to 3 Gybtes per month.
Comcast has advised customers to seek out tools on the Internet to help understand their bandwidth consumption. Disappointingly, Comcast won't supply its own measuring tool to end users. Still, there are tools readily available online for this purpose, ranging in cost from free through donationware to commercial software costing over $100.
On the free end, you can find solutions like ShaPlus Bandwidth Meter or MZL & Novatech Traffic Statistics. Do they work? Yes, so long as you run Windows. Another tool, NetFlow Analyzer, runs on Windows and Linux. (Google it, though -- the URL is painfully long.)
The outcome of the advisory may turn out to be what the ISPs really wanted. As a consequence of capping, some customers have been reporting that they are reducing their Internet use for fear of being cut off if they exceed their allocation.
So why would ISPs actually seek lower traffic from their customers?
To explore this question, let’s consider movies on demand, something many cable and DSL providers offer. Prices are comparable to lining up at a video rental store, but the convenience factor is higher, even if the selection is smaller. Enter companies such as Apple Inc. (Nasdaq: AAPL) with the iTunes store or Netflix Inc. (Nasdaq: NFLX) Online, and the game changes. Now the ISP becomes the provider of the highway with no revenue increase, because the rental revenue goes to the movie provider. The bandwidth cap psychologically drives the customer back to the traditional service because there is no cap on that older type of service.
Meanwhile, consumer demand for bandwidth will only increase. In traditional Web browsing, it would be hard to hit even the smaller caps introduced by ISPs. But trends like cloud services, embedding more active content in Web pages to attract viewers, streaming video, and uploading content, particularly from social networks, will increase the demand for bandwidth.
So the situation is this: As demand for bandwidth grows, ISPs, which don’t necessarily see revenue opportunities from new services, are introducing caps.
I understand that bandwidth isn't free. But does limiting access without options to purchase more bandwidth, or introducing overuse charges that more closely resemble penalties, encourage Internet evolution? Likely not. And if the actions of ISPs in terms of caps, throttling, or deep packet inspection cause changes in the behavior of Internet users -- in the same way changes to cable services changed user behavior -- does this change the Internet itself?
It certainly could, and not, I think, for the better.
— Ross Chevalier, President and CTO of Novell Canada Ltd.