Saul Hansell has an article on NYTime’s Bits blog that goes into the “cost of downloading.” Unfortunately, we have to wait until the last four paragraphs for the “meat” of the article, and even then the point isn’t clear:
All these costs, by the way, apply whether or not anyone on the system is actually surfing or downloading anything. I asked Mr. King to help me figure out what a cable company pays per gigabyte used by its customers because Time Warner wanted to charge customers $1 for every gigabyte they used over a certain monthly allotment.
He told me that telecommunications providers will not sell bandwidth by the gigabyte to businesses, even though many customers want to buy it that way. For example, some movie studios that send large files to DVD manufacturing plants, don’t want to pay for connections they only use from time to time.
“The network providers almost always say ‘No,’” Mr. King said. “As long as the bandwidth is open for business, it will cost you the same whether there is data running or not.”
In other words, the cable and phone companies want to charge consumers per gigabyte even though they refuse to sell it to business customers on the same basis.
Let’s be clear: cost to an ISP is based on peak usage, not GB/month. That means, essentially, that if Time Warner wants to add “bandwidth caps” and charge users who go beyond that, it is not actually reducing costs.
Now, Time Warner may (legitimately) argue that bandwidth caps discourage certain types of bandwidth-intensive usage – for instance, watching YouTube videos. A 5-minute HD YouTube video might be 100 MB. It also, logically, discourages P2P traffic. This may reduce peak bandwidth at certain times, which would improve service for all nodes.
However, the pricing structure remains arbitrary – and operates solely as a way of changing user behavior without changing Time Warner’s cost structure. In other words, Time Warner is “nickel and diming” people to get them to use less of their internet connection.
Time Warner – and other companies – also remain vulnerable to the charge that they’re attempting to prevent the internet from delivering some content – namely video. If Time Warner sells TV service, and also sells TV (and uses separate networks for each), then by imposing a cap that makes watching videos online prohibitively expensive, Time Warner can prop up TV use. This is a particularly important point since companies have been putting shows up on demand (Hulu, etc).
Bandwidth caps may make business sense, at least in the short term. A generous interpretation would be that bandwidth caps will give ISPs time to increase peak bandwidth capacity on their end. A less generous interpretation is that Time Warner is looking both for additional revenue, and is trying to prevent other businesses from being undermined. And, on the plus side, the RIAA & MPAA is happy since people will download less.
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