Where the government does have a role is in granting licenses to carriers to offer cable and DSL service, a power that municipalities gained for two historic reasons:
- Cable started as a competitor to TV, which was distributed through the public airwaves. Government wanted a level playing field so that local TV would be available to all citizens, no matter whether through antennas or cable jacks.
- Carriers wanted to ensure a large enough customer base to justify the massive capital investments, so they were willing to trade exclusive service for the "must carry" rules for local TV and some regulation over rates. In the 1980s, Congress took away local officials' rights over most cable providers, leaving that to a federal government unwilling to confront industry.
All this explains why the cable and DSL providers, having seen cellular carriers impose data caps as part of pricey data plans this summer, are confident they can do the same. But unlike cellular carriers, they can't claim scarcity, which exposes the caps as moneymaking schemes, both through higher rates via tiered plans and by steering customers to their services rather than those of competitors. The risk of the latter is much greater in the world of cable connections than in cellular ones.
Internet video will be the first victim
Cable and DSL carriers say their caps will be very high: several hundred gigabytes per month, though some are testing lower caps. Almost no one will be affected because, they claim, most people use a couple dozen gigabytes or less.
That's the same argument the cellular carriers made, and we'll see a similar result. There's a big shift under way as users get more video over the Internet rather than though standard TV channels. Premium channels such as Showtime and HBO have limited their shows' availability in the rental market (physical and streamed) to stem the loss of subscribers, but that's the tip of the iceberg.
Within a decade, people might get most of their video content from the Internet rather than watch traditional TV. When that happens, the cable and DSL carriers stand to lose billions of cable TV fees as households drop their "triple play" services to Internet-only. The phone portion of the triplet is also migrating fast to cellphones, and calling in general is shrinking as people send texts and email instead.
That's why Verizon Wireless and AT&T now charge a "network access" fee instead of a calling fee -- they know call volume is going down, and people have been dropping their minutes. The solution: End the notion of minutes and charge a flat fee whether you call or not. You can easily predict the same pattern in the cable and DSL industry (the main DSL providers offer TV services).