The coming Internet video crash

First, it was data caps on cellular, and now caps on wired broadband -- welcome to the end of the rich Internet

People are still getting used to the notion that unlimited data plans are dead and gone for their smartphones. The option wasn't even offered for tablets. Now, we're beginning to see the eradication of the unlimited data plan in our broadband lines, such as cable and DSL connections. It's a dangerous trend that will threaten the budding Internet-based video business -- whether from Netflix, Hulu, iTunes, Windows Store, or Google Play -- then jeopardize Internet services of all sorts.

It's a complex issue, and though the villains are obvious -- the telecom carriers and cable providers -- the solutions are not. The result will be a metered Internet that discourages use of the services so valuable for work and play.

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When AT&T broke from the pack and said it would end unlimited data plans for smartphone users, I understood and even supported the rationale: Bandwidth is limited, so giving everyone unfettered access would sap the capacity and let the most aggressive data hogs crowd out everyone else, destroying the value of cellular data.

I also knew that, for the carriers, bandwidth scarcity was an excuse to meter services and, in essence, raise the price of cellular connectivity, as well as favor their own services over those of other providers. However, it makes sense to not take limited resources like water or spectrum and open them up to unlimited use and, thus, waste.

How we got into this mess
Bear with me on the roots of the issue before I get to the coming Internet video crash -- the background will explain why there's no easy solution.

The wireless spectrum belongs to the people, not the carriers, and the federal government rents out the spectrum in exclusive bands in return for accepting regulations on how it's used. But the Federal Communications Commission has done a poor job of overseeing the carriers, which constantly lobby a Congress to which they donate much money. Their goal is to have the rules relaxed so that they can gouge customers at their pleasure. Like the financial service industry, the carriers have learned how to exploit a corrupt relationship with the government.

Still, a basic principle is enshrined in the law, no matter how weakly enforced, that restrains the highly profitable cellular carriers' worst instincts. Under President Barack Obama, the FCC finally started to do its job and block some egregious practices the carriers wanted to introduce, such as ending Net neutrality so that they could discriminate against competitors and steer us to services of their choosing. The FCC is now publicly musing about revisiting the issue of cellular data caps, which it supported a few years ago, as it sees what carriers have done with them.

That government counterweight is less available in the world of wired broadband, where there is no limited spectrum that justifies ownership by the government to ensure fair use. The broadband industry builds its own "spectrum" by adding more and more capacity in its cables and networks. Much of that infrastructure runs through public property, such as streets, but broadband carriers can add capacity theoretically forever. That's why the government has less power to stop egregious practices, even if wanted to. It doesn't, again thanks to carriers' lobbying power.

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