Usage Caps Will Now Apply To 56% Of Broadband Users

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With AT&T set to implement usage caps and overage charges for all high-speed Internet customers next Monday, May 2, more than 42 million broadband subscribers in the U.S. will be subject to explicit pre-set limits on how much bandwidth they can use on a monthly basis.

All told, approximately 56% of the country's 75 million broadband subscribers will have some form of caps, according to a Multichannel News analysis based on Leichtman Research Group's subscriber estimates for the fourth quarter of 2010.

Other major U.S. broadband providers that already have usage ceilings in place include Comcast, Cox Communications and Charter Communications, although they currently warn users who exceed the limits rather than charge them for the extra usage. Internet service providers that do not have specific usage limits including Time Warner Cable, Verizon Communications and Cablevision Systems -- although every ISP reserves the right to disconnect a user who violates their terms of service.

AT&T will be the largest U.S. broadband provider that will not just impose specific usage limits on subscribers but also tack on fees if those caps are exceeded. The telco will limit U-verse Internet subscribers to 250 Gigabytes of total usage (downloads and uploads) and 150 GB on traditional DSL subscribers. For every 50 GB beyond those, customers will be charged $10 (equivalent to 20 cents per GB).

According to AT&T, less than 2% of its entire base of digital subscriber line customers will hit the caps, but the change has been criticized by public-interest groups as anti-consumer measure that will inhibit online video services. The response to AT&T's announcement has been more muted, though, than when Time Warner Cable said it would test usage-based pricing in four markets in 2009 -- and the resulting backlash prompted the MSO to table the plans.

Some analysts argue that AT&T is showing leadership on this issue and paving the way for cable operators and other Internet service providers to put into place the necessary pricing mechanisms to sustain network investment.

"This isn't about protecting against the data network being swamped with excess usage," Sanford Bernstein senior analyst Craig Moffett said. "This is about putting the business model on a stable, long-term economic model."

Ultimately, according to Moffett, cable operators and telephone companies are "simply infrastructure providers and they have to earn a return regardless of whether the service they provide is called ‘cable TV' or ‘broadband.' As viewing shifts from cable TV as we know to Internet video, they have to be in an acceptable place to earn a return on the investment in their infrastructure."

As of the end of March, AT&T had 16.49 million consumer wireline broadband connections, after adding 175,000 net new U-verse Internet and DSL subscribers in the first three months of 2011.

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