Welcome to Consumption-based Broadband

The all-you-can-eat broadband buffet appears to be at an end as ISPs implement caps and metered pricing for broadband services. The stated goal is network management, but the real reason is to cash in on the increasing value of the web despite being a dumb pipe. Today, Time Warner said it would expand its metered broadband trials, and on next Monday Charter will detail plans to force subscribers to pay for what they download, with plans starting at 100 GB per month caps at lower speeds and no cap for the fastest speeds.

Frontier Communications says it will start implementing service caps in about six months. It has gained notoriety for having, at 5 GB per month, the smallest cap proposed so far, but according to spokeswoman Stephanie Beasly, the ISP hasn’t been enforcing it yet. It’s trying to develop a broadband meter and figure out the right service packages to offer subscribers. “Our goal is education, so people can see what it really costs to download a movie or watch something on YouTube,” she told me.

This isn’t unreasonable on the face of it, but we have two issues with consumption-based pricing. The first is carriers need to upgrade their networks to remain competitive, and as they do the actual costs per bit drops, meaning it’s cheaper to send traffic over the network. The second is that such pricing schemes will slow innovation on the web by forcing consumers to pay for their data consumption — much in the way people once had to ration their cell-phone minutes. And that means services such as those offered by Slingbox or Hulu will end up costing consumers more. In order to give a sense of what your broadband future looks like, below we offer a chart to show that all caps are not created equal.

Comcast (s CMSCA) Time Warner Cable (s TWC) Charter (s CHTR) AT&T (s T) Frontier Communications (s FTR)
Cap Details (largest) 250 GB per month Currently 40 GB per month with plans for higher tiers no cap for 60 Mbps service 150 GB per month 5 GB per month (however, Frontier says it is not currently implementing caps, and will develop a range from based on average usage for the area)
Cap Details N/A Currently 20 GB per month 250 GB cap for 15 Mbps to 25 Mbps service undisclosed N/A
Cap Details (smallest) N/A Currently 5 GB per month with possible lower tier 150 GB cap for 15 Mbps and under service 20 GB per month N/A
Overage Fees service cuts off $1 per GB service cuts off $1 per GB Frontier has “made no decision about potential charges”
Where entire service area Beaumont, Texas and 4 new markets entire service area as of Feb. 9 Reno, Nev. and Beaumont, Texas entire service area in the next 6 months
Provides meter will provide will provide no will provide will provide