Not all Internet service providers use monthly data caps to control bandwidth usage, but default unlimited plans appear to be rapidly going the way of the dodo.
WideOpenWest Holdings LLC (WOW) COO Cash Hagen says when it comes to broadband providers and usage caps, "it's not a matter of if we all do it at some point, but when, how and how the customers adapt to that."
Speaking on the Light Reading webinar "Making OTT Video Pay Off Now" on Thursday, Hagan explained that for his company, roughly 50% of data traffic comes from unicast IP video and, of that total, 75% comes from Netflix. More specifically, Netflix Inc. (Nasdaq: NFLX) generates approximately 260 Gbit/s of traffic each month. YouTube Inc. drives just under half that amount, or around 120 Gbit/s.
While early efforts to impose usage caps met with strong consumer resistance, the market has changed significantly since then. And as much as Netflix still dominates the landscape, new online services and new features for existing over-the-top offerings are introduced on a regular basis. In the past week alone, there were three major announcements concerning OTT video: AT&T Inc. (NYSE: T) launched its long-awaited DirecTV Now video service; Sling TV announced that it's testing a cloud DVR feature; and Netflix introduced a download-to-go option for watching content offline. (See AT&T Debuts DirecTV Now on New Video Platform and Netflix Queues Up Video Downloads.)
As the OTT market continues to grow and diversify, wireline operators can point to the increasing load on their networks and make the case that they should be able to share in the profits from online video's success.
The argument for wireline data caps is also helped by the fact that wireless carriers have already shifted away from unlimited data plans. Mobile operators have spent the last few years conditioning customers to think about broadband service in buckets of data. Consumers know they can buy data by the gigabyte for their mobile devices, which makes it easier for wireline ISPs to enact a similar model, especially when broadband providers for the home are more likely to set thresholds at the terabyte level rather than at a handful of gigabytes.
There are huge potential regulatory implications for the use of data caps. In particular, there remains the question of whether operators should be allowed to exempt their own video services from monthly usage allowances. The Federal Communications Commission (FCC) has already expressed concern over AT&T's decision to "zero rate" its mobile video offerings, and Comcast Corp. (Nasdaq: CMCSA, CMCSK) has had to defend itself in public commentary multiple times over the fact that its narrowly distributed IP video service, Stream, doesn't count toward users' monthly data caps. AT&T's argument is that it also offers other video providers the option to subsidize data usage, while Comcast's contention is that because Stream is delivered over a managed IP network, the service shouldn't be treated like an OTT product. (See AT&T & Trump Tangle Net Neutrality's Web and Comcast Plays Down New OTT Service.)
The counter-argument to both AT&T and Comcast is that the practice of exempting their services from caps gives these incumbent operators an inherent advantage over new market entrants, which aren't likely to have the scale or resources to subsidize data usage.
More broadly than the issue of whether service exemptions should be allowed is what the reasonable cap threshold should be if and when caps are implemented. (See Layer3 TV: 1TB Data Caps Are Too Low.)
Asked that very question, Hagen responded that figuring out caps is "more art than science," and he added that, "It's really what happens if I exceed whatever that cap may be. Is it a cost per megabit, cost per gigabit over that? Really don't know, and I think it's a function of different areas of the world, different areas of the United States, and how much data gets used and what's that data being used for."
For Hagen, and likely for the rest of the industry, the right answer isn't clear. "For us," noted Hagen, "it's too early to tell."
— Mari Silbey, Senior Editor, Cable/Video, Light Reading