Broadband's One-Percenters

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The top 1% heaviest broadband users consume about 20% of total bandwidth on wireline networks, a usage pattern that’s held true for the last several years, according to Cisco’s Visual Networking Index (VNI) study.

Meanwhile, the total amount of IP traffic is projected to keep growing like kudzu — mushrooming 300% from 2011 to 2016, Cisco predicts.

If you’re an Internet service provider, how do you prepare for this dramatic growth curve? AT&T had already picked its path, aimed at the one-percenters: The telco’s broadband subscribers get a set amount of data usage per month, then pay for whatever they use beyond that (although some AT&T customers have complained that they don’t have access to usage meters yet). Comcast is going down this road, too.

Use more, pay more: It’s pretty straightforward. The 1% of users who eat up most of the bandwidth should pay more than the 99%, or be given an economic incentive to adjust their usage. Right?

Wrong, says Netflix. The Internet-streaming service and others want the U.S. government to ensure the all-you-can-eat party continues.

Last month Netflix’s top lawyer, David Hyman, complained to lawmakers that ISPs’ usage limits are an effort to inhibit online video viewing because it’s competitive with their pay-TV services. That kind of argument has gotten the ear of the Department of Justice, which is investigating the potential antitrust implications of broadband caps.

Sure, it’s nice to not have to worry about usage. But is it fair to force everyone to pay the same flat fee?

To me, some dude who watches hundreds of movies over the Internet should be paying more than the average broadband customer. Comedian Mark Malkoff allegedly streamed 252 movies from Netflix in one month — and was feted at Netflix HQ, where he shared his eye-glazing binge-watching experience. My back-of-the-envelope math would put his viewing marathon easily at more than 400 GB. “My ISP hates me!” Malkoff joked to Netflix CEO Reed Hastings.

Generally, I think, ISPs don’t hate their customers. What they really want is a sustainable way to manage unprecedented Internet demand in the years ahead, while maintaining the flexibility to charge based on usage when it makes sense. Note that Time Warner Cable — stung by its stumble in usage-based pricing three years ago — is currently offering optional cap-and-surcharge plans in Texas as a carrot (with a $5-per-month discount) rather than as a stick.

What do you think? Add your comments below.

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Programming Note: Find out how operators and media companies are tapping into cloud-based technologies at TV’s Cloud Power, Thursday, July 19, at New York’s Roosevelt Hotel. Scheduled speakers include TiVo CEO Tom Rogers; IBM Global Business Services’ Bob Fox; PwC’s Gordon Castle; Verizon FiOS’s Maitreyi Krishnaswamy; and Current Analysis’ Ron Westfall.

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