If you’re a Comcast customer, chances are you’re now operating under an effective 1TB data cap. This new plan, dubbed the Xfinity Terabyte Internet Data Usage Plan, restricts users to 1TB a month of combined upload and download across 38 Comcast markets by November 1. Comcast’s new rules are as follows: You can go over the 1TB mark twice before you incur additional charges, but you’ll be charged $10 for each 50GB block of data you use after that. If you need more data, you can pay Comcast an additional $50 for truly unlimited data — but you have to commit to that fee in advance, not retroactively.
Given that Comcast executives have openly admitted their data caps are nothing but an attempt to wring more money out of customers, it might seem odd they’re still trying to make the case that these caps are fair and represent some sort of equitable billing practice. Nevertheless, that’s what they’re doing. In April, when it debuted the plans, Comcast wrote:
In our trials, we have experimented with different offers, listened to feedback, and learned a lot. That is what we said we would do when we launched our trials four years ago – analyze and assess our customers’ reaction to the data plans, including being open to increasing them over time. We have learned that our customers want the peace of mind to stream, surf, game, download, or do whatever they want online. So, we have created a new data plan that is so high that most of our customers will never have to think about how much data they use. (Emphasis added)
The problem with this argument is that it treats data like a finite resource. Consider a physical product like oil, for example. When a shallow oil well runs dry, you have to either dig a deeper well or find a different site for a new shallow well. The marginal cost of pumping more oil rises because it costs more money to deliver the additional oil the customer wants.
Data isn’t like that. The marginal cost of delivering the 500th gigabyte of information to my home over a 30-day period is exactly the same as the marginal cost of delivering the first gigabyte of data. Much of the data on how much it costs to provide data across the actual internet is kept under NDA, but transit pricing information is available. Transit, as defined on StreamingMedia, is “where one network agrees to carry traffic that flows between another network and all other networks connected to it… Transit providers’ routers lets other networks carry traffic to the network that has bought the transit and get a fee for that service. It sounds complicated, but really all the transit provider is doing is allowing multiple networks to exchange traffic with one another.”
Here’s how transit costs have changed since the late 1990s according to DrPeering.net, which has been aggregating and documenting these costs for nearly 20 years.
In 2010, average transit cost was $5 per Mbps of bandwidth. In 2015, it was $0.63. That’s 63 cents. Anybody seen any of that savings passed on to their cable bill? I haven’t. While transit costs are just one aspect of total network cost, the marginal cost of additional data is tiny. What matters is how fast you want that data and when you want it — but that’s not how Comcast bills its customers.
If Comcast wanted to actually create a fair payment structure, it would either bill people based on when they wanted high speed Internet (5-8pm might be more expensive for high-speed services) or it would bill them based on total network congestion. If I want to stream 4K video at 8 PM, that might cost more than streaming the same video at 4 AM, because the total network load is higher and I’m consuming a fairly large percentage of a fixed resource (network bandwidth). It doesn’t do this, partly because the complexity wouldn’t play well with customers, and partly because it can make far more money charging for data.
These caps aren’t about paying a fair market rate. They’re just another way the cable industry wants to line its pockets. We should also point out that the accuracy of Comcast’s data meters has been disputed in multiple cases, and the company typically refuses to reconsider its data meter readings until the person being screwed starts talking to the media. Then, and only then, the company is willing to investigate the problem.
In other news, the FCC just fined Comcast $2.3 million for what’s known as “negative option” billing. Negative option billing (it’s called cramming in the telephone market) refers to the practice of putting goods and services on a customer’s bill that the customer never signed up for. It is then the responsibility of the customer to call the company and dispute charges that should never have been on the bill to begin with.
“It is basic that a cable bill should include charges only for services and equipment ordered by the customer—nothing more and nothing less,” said Travis LeBlanc, Chief of the Enforcement Bureau. “We expect all cable and phone companies to take responsibility for the accuracy of their bills and to ensure their customers have authorized any charges.”
The FCC notes that it received numerous complaints regarding Comcast’s behavior, including unordered services or products, DVR rental charges, and premium channel sign-ups that were never authorized. The FCC notes that in some cases, customers were signed up for these products despite specifically and repeatedly telling Comcast that they did not want either the products or services in question.
Here’s the FCC again:
Under the terms of today’s settlement, Comcast will pay the largest civil penalty assessed from a cable operator by the FCC and implement a five-year compliance plan. Specifically, Comcast will adopt processes and procedures designed to obtain affirmative informed consent from customers prior to charging them for any new services or equipment. Comcast will also send customers an order confirmation separate from any other bill, clearly and conspicuously describing newly added products and their associated charges. Further, Comcast will offer to customers, at no cost, the ability to block the addition of new services or equipment to their accounts. In addition, the settlement requires Comcast to implement a detailed program for redressing disputed charges in a standardized and expedient fashion, and limits adverse action (such as referring an account to collections or suspending service) while a disputed charge is being investigated.
The terms of the agreement would have more teeth if they didn’t involve such a piddling amount of money. The ugly truth is this: $2.3 million may be the largest fine the FCC has ever levied in this kind of case, but it’s chump change to Comcast. If the company managed to sign up a few thousand people for services they don’t want through these tactics, the long-term earnings from the customers who didn’t notice the difference and investigate the problem is almost certainly much larger than the $2.3 million fine.
Regulations only work if the company being regulated believes the penalty of doing wrong is larger than the perceived benefit of breaking the rules. If that’s not the case, breaking the law is merely the cost of doing (highly profitable) business. And if the penalty of breaking the FCC’s five-year compliance agreement is just another $2.3 million three to five years down the line, Comcast will have little reason to actually change its practices.