Yesterday I noticed a pointer in Michael Geist’s blog to an intriguing post at Fiberevolution: Do data caps punish the wrong users? The post piles on the evidence that data caps are a lousy way to discipline what the author calls “disruptive users”…
“Data caps, therefore, are a very crude and unfair tool when it comes to targeting potentially disruptive users. The correlation between real-time bandwidth usage and data downloaded over time is weak and the net cast by data caps captures users that cannot possibly be responsible for congestion. Furthermore, many users who are “as guilty” as the ones who are over cap (again, if there is such a thing as a disruptive user) are not captured by that same net.”
Upside-down policy goals
Through most of 2011, we’ve heard lots of criticism about the use of data caps in Canada, concerning both their inherent unfairness to customers and their inadequacy as a way of managing congestion.
But there’s more to it. It’s also important to look at the cap swindle as a component of the CRTC’s failed ITMP framework. Logic dictates that subs who are heavy users should be hit with disproportionately high pricing as a disincentive to overuse, that is, “high” compared to prices set for light users.
In a post I wrote a year ago, however, I explained that Rogers then rate card stood this logic on its head. How so? By making both the flat price and monetary penalties for over-use much more punitive on its slower tiers than on its faster tiers. I appreciate that using the advertised tiers as a proxy for light vs heavy consumption is imperfect. Nevertheless, that doesn’t change the fact that, at least in Rogers’ case, consumption on the higher tiers is being effectively cross-subsidized, since the unit costs for both bandwidth and (over)usage are much cheaper than on the lower tiers. That’s right. I’m saying the policy outcome is exactly the opposite of what von Finckenstein kept insisting was the key goal: to stop forcing light users to subsidize the bandwidth hogs.
Here’s how I explained it in the October 2010 post (slightly edited, with figures that are probably a little out of date):
Rogers’ rate card is punishing light not heavy users
In the figure below, I’ve graphed a bird’s eye view of all of Rogers’ six access tiers from Ultimate on the left to Ultra Lite on the right, against two variables: the cost (Cdn $) of each tier in Mbps per month (purple line); and the maximum monthly fee payable on each tier when usage hits the highest penalty point, which is $50 a month for all tiers (blue line).
This chart reveals something unusual. Far from even a modest surcharge for the privilege of fast connectivity, the four highest (i.e. fastest) tiers cost far less per megabit per second than the two entry-level tiers. In fact, UL subs are paying 28 times more per unit of bandwidth than Ultimate subs ($56 vs $2); 20 times more than Extreme Plus; 14 times more than Extreme; and 12 times more than Express. The question is: why? UL is a 500 Kbps service with a cap of 2 GB. Yet it’s priced at $27.99 – and comes with cruel penalties. At $5, UL has the highest penalty per GB of over-usage. The penalties per GB actually drop as speed goes up.
Rogers’ rate card seriously undermines any rationale that might exist for the economic ITMP approach to fighting off congestion. The first flaw is the system punishes the wrong end-users. The second flaw is the cozy assumption that whoever is hogging the bandwidth, they ought to pay because bandwidth costs money and light users shouldn’t have to subsidize the hogs. […]
Who is getting priced out of the market on these entry level tiers? My guess is a lot of Canadians with little or no disposable income. They’re either staying away entirely or paying far more than they would under a system designed to encourage adoption among the under-privileged… a system the CRTC is scheduled to promote when Hell freezes over.