Study: Data caps bilk users and stifle competition

New America Foundation says broadband limits don't address network congestion or cover higher operating costs

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The study also pointed to a 2011 presentation from Credit Suisse, which outlined the ways in which consumption-based billing could help ISPs prevent their users from using competitors' online video services. "[O]ver the longer term, consumption-based billing could reduce the attractiveness of over the top video options (e.g., Netflix and Hulu), as the economic attractiveness of such over-the-top options could be partially offset by a [broadband] bill that is higher, due to [broadband] overage charges that would be driven by large amounts of data being streamed via a customer's [broadband] connection," the presentation read.

Beyond stifling competition, the study notes that carriers are making big money through tiered data plans. "Verizon Wireless and AT&T Wireless have turned to tiered data plans for revenue generation, earning growing profits from data overage charges in recent years," according to the OTI.

Since 2009, AT&T has seen average revenue per user from retail postpaid data increase by 53 percent and Verizon has enjoyed at 59 percent jump.

According to OTI, "AT&T told investors in a presentation in March 2011 that acquiring T-Mobile would be an opportunity to implement 'attractive tiered data plans' and enable 'data growth to be monetized' since at the time T-Mobile did not charge overage fees for excess data use."

Time for regulation and transparency
The foundation makes several proposals to facilitate fair competition in the mobile and broadband marketplaces. First, the group suggested that "wireless spectrum auctions should be structured to foster competition and new market entrants, and that spectrum licenses should contain wholesale reselling provisions and 'use-it-or-share-it' conditions to ensure that newly purchased spectrum does not simply sit idle."

Second, the group recommended regulation of critical inputs for mobile broadband, such as special access lines that provide mobile networks with backhaul connections to the Internet, "to prevent anti-competitive pricing by Verizon and AT&T."

Third, the group said that policymakers must topple barriers that limit consumers' ability to switch among mobile services.

Fourth, policymakers need to promote policies that enable new competitors to enter the wired broadband market and to encourage competition from both the private and public sectors. "Rather than trying to curb consumer use and protect high profit margins on services over existing networks, it is critical that ISPs build for a future where the U.S. can provide competitive speeds and pricing in comparison to its international peers," according to the study.

Finally, the group calls on ISPs to be transparent and accountable for their network management and data caps practices. "Without fair mechanisms for consumers to track their data usage, it is impossible for consumers to make informed decisions," the study concludes.

This story, "Study: Data caps bilk users and stifle competition," was originally published at Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow on Twitter.

Copyright © 2012 IDG Communications, Inc.

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