Some ISPs Wait and See While Others Test Broadband Bandwidth Usage Policies

Among cable and phone companies we queried, a variety of approaches are in use or being considered. Some companies have already instituted new billing and metering methods, while others are just considering them. “What you're seeing right now is an appreciation of that the usage of the service is changing pretty dramatically and the people who are supplying the service have to respond to that,” said Steve Effros, a cable industry consultant. He said he believes some form of usage-based pricing or metering will be inevitable for ISPs. “I think all of them are going to be tried,” he said of the various approaches, including metering, caps or selling various consumption tiers.

A Frontier spokeswoman said there are no data caps “at this time,” but “we have sent letters in the past to particularly heavy users.” In April 2010 the company made news for sending letters to users whose monthly usage exceeded 100 GB, informing the customers that “a reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period.” The letters threatened disconnection if the users didn’t contact the company to set up a $99.99 monthly plan. Frontier hasn’t sent any similar letters since then, the spokeswoman said. She declined to speculate on whether the company would impose caps in the future.

CenturyLink has a monthly 250 GB limit for residential customers with service speeds over 1.5 Mbps, and a 150 GB limit for those with speeds up to 1.5 Mbps. The telco sends three notifications to customers who exceed the limit, threatening disconnection if they fail to reduce their usage or switch to a plan with a higher limit -- residential customers can upgrade to a business grade data service, which has no data restrictions.

"Of the more than 5.5 million CenturyLink High-speed Internet customers, less than 0.5 percent are expected to exceed download usage limits,” a spokesman said. “This small percentage of customers is on the extreme margin, using 30 to 1000 times the monthly volume of customers in the same speed tier.” Median residential customer usage is about 7 GB per month, with most customers having downstream usage in the range of 1 to 30 GB per month, he said. “As you can see, this is well below the threshold of 150 - 250 GB."

In May 2011, AT&T began limiting its U-Verse fiber customers to 250 GB per month, and its DSL customers to 150 GB per month. Overages are billed at $10 for each 50 GB, and only apply to customers who go over at least three times (CD March 15/11 p3). A spokesman said he couldn’t say whether the new limit has had its intended effect of reducing “congestion at certain points in the network.” Verizon does not impose a monthly usage cap on its FiOS or DSL services.

"I think there is a risk that we're going to see the end, to some extent, of all you can eat,” and that could be a good thing for consumers, said Stephen Posciask, president of the American Consumer Institute. Research shows that consumers are very sensitive to broadband prices, and a lower-end option -- like the one Time Warner Cable is testing in Texas -- could stimulate demand for ISPs, he said. “There is no reason why we should expect one size fits all” pricing, he said, saying higher prices for bandwidth hogs would be economically efficient, and “welfare maximizing” for consumers.

Among smaller cable operators, Suddenlink, began giving some broadband subscribers a monthly bandwidth “allowance” in October. Allowances are based on the speed tier purchased by a subscriber, according to information on Suddenlink’s website (http://xrl.us/bmwpyn). When subscribers exceed their allowance, Suddenlink responds with a series of notices. After the third notification, customers will be billed for the extra usage at a cost of $10 for each 50 GB.

So far, there has been “virtually no reaction from customers, and I think that’s because we set the allowances at a very generous level,” said Pete Abel, senior vice president of corporate communications for Suddenlink. Suddenlink’s historical usage data suggested less than 1 percent of its subscribers would encounter the limits and so far that’s bearing out, he said. “Our goal was not to focus on a big percentage of the customers, it was to zero in on the very small percentage who are using 15 to 16 times more than what everybody else is using and causing problems for other customers,” he said. Suddenlink has either introduced the allowances or notified customers that it soon will in about half of its service area, he said.

Other operators are still evaluating the technology and waiting to see how consumers react when industry peers introduce limits or usage tiers. “We want to be a company that carefully studies what other people are doing,” said Tom Larsen, vice president of legal and public affairs at Mediacom. “We're studying it and taking a close look when these things come up.” A Charter spokeswoman said the company currently has no plans to introduce metered billing.

Buckeye CableSystem in Ohio has been providing usage information to subscribers for the past couple of years, but hasn’t introduced any allowance limits, said Joe Jensen, the company’s chief technology officer. “That’s something that could change here in the near future,” he said. Giving customers information about what their usage so they can know what the allowances mean and how they are affected by them is critical, he said.