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The day web innovation will die


In the US and Canada we have been pretty lucky. Before much of the rest of the connected world we have had the luxury of unlimited access to the Internet albeit expensive access in some cases. Even today there are large portions of the globe that still have heavy handed caps and other limits placed on individual Internet access. Unfortunately that is about to change as Internet providers in the US are implementing tiered Internet access and as the US goes so will Canada – always has and probably always will be the case.

This is a move which I truly believe will dramatically slow if not downright stall any future web innovation from the US; and to a lesser degree Canada. I’m not trying to be contrary here just stating what I see as inevitable facts given the realities of what happens when people are faced with having to pay more for less. In this case of caps and limits people; with the exception of a small minority, will always go for the lowest amount they can pay to get what they think they will need. In this case there will be a drift to the cheaper rates being offered with the mistaken belief that they would never use the speeds or download rates that come with that package.

Unfortunately many of them will meet up with some nasty surprises on their bills as it is also inevitable that they will go over their allotments. I have seen this happen in the past in the early days of online activity when Internet providers had these types of tiered systems and we were all using dial up modems. Even today I know people through the WinExtra Community forums who live in parts of the world where these types of caps and limits still exists and it is nothing to here stories of their access being cut back half way through the month. Theirs is a world of having to plan their downloads and other usage and forget about watching video on the web the way we do here in the US and Canada.

It is interesting that this talk of returning to tiered systems in our two countries is coming right at the time when things like Netflix, Apple TV, Boxee, cloud computing and other such big usage Internet services are starting to gain steam. The thing is all these services require two things to even think about becoming profitable business – big pipes at a reasonable price to the consumer and boatloads of people using those pipes to use those services.

It means people being able to download or stream – which is basically the same thing as downloading – megabyte size files. It means people uploading and sharing all those photos. It means people constantly backing up their data to cloud services. Upload or download it doesn’t matter they will all add up to megabytes upon megabytes of data being transferred which will all go against whatever the limits placed on your Internet access. Mike Masnick over at Techdirt uses the recent experience of Larry Lessig in his post about this

For example, look at Larry Lessig’s recent experience while traveling in New Zealand. He’s apparently “subscribed” to the TV show House via iTunes. So, at the hotel in New Zealand, he paid for expensive broadband service that mentioned, in the fine print, that his access was limited to a grand total of 1 gig. He logged in and started checking email. In the background, iTunes started downloading the latest (high def) episode of House which itself ran 1.5 gigs. So half an hour later, not only is his broadband cut off, but a message pops up telling him he’s being fined for “violating ethical rules.” It’s troubling enough that the provider somehow thinks it’s an ethical violation — but this shows how bandwidth caps can easily stifle perfectly legitimate activities and aren’t (as many have implied) about “stopping pirates.”

This is what we here in the US and Canada can look forward to once the providers start putting their caps and limits in place. Then we have to consider that as we start cutting back on the things we do on the Internet what effect will this reduced usage have on all these companies that are creating and providing web based services. For them they it will be a two fold problem – not only is their customer base going to decrease as people shrink from doing things on the Internet but they will also have the added costs of the pipe traffic to their services. You can be certain that as the Internet providers start placing restriction on the consumer based on the access package they buy into they will also be screwing with the rates they charge to people like the hosting companies that all these web services have to use.

In the end as these types of caps and limits are put into effect you will find people will do less of the very things that are being proclaimed as the future of the Internet. Video and cloud based computing will become to expensive and the consumer will pull back to doing only the minimum of what they would like to because of the fear of going over their allotments and the penalties they will have to pay as a result. As the consumer pulls back then so will development of any new services and existing services will have to re-evaluate what they are doing as well.

However this isn’t the only effect that these tiers will have. As Stacey Higginbotham at GigaOM points out this will have as detrimental effect on the the carrier technology that provides the pipes in the first place

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 thing is when any service isn’t being used to its fullest – when it isn’t being pushed to its limits there is no incentive to innovate with new ideas and technology. Once broadband goes metered the assumption is that some supposed strain on the infrastructure will be removed except this assumption has been proved wrong on more than one occasion. Instead what we get are companies that can sit back – do nothing to innovate and lead while making even more money. Rather than, as Stacey suggests, prices actually being able to go down as the infrastructure in constantly improved and added to we get to splash around in what has become a stagnant pond.

And while we splash around we will once more watch as global technology leaves us behind to play with our little rubber duckies.

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4 Responses to “The day web innovation will die”

  1. Duncan Riley

    Let me be the first to humbly disagree.

    Yes, I'd prefer a world without caps, but there is a real economic cost in delivering bandwidth, and it's not unreasonable that those who use more pay more for it, particularly when ISP's are buying that bandwidth metered themselves. See this post

    What I would say though is that scarcity is the mother of invention. Capping use will force innovation in streaming so that the data becomes more efficient than it is today. Second, you will see cap exemptions through tie ups between ISP's and content providers. For example, I have unmetered (Australian) ABC iView access, so I can watch their shows online without it counting to my cap. My ISP also gives me unmetered access to a range of online radio stations, so when I wake up to 977 the 80s channel on my Chumby in the morning, it doesn't touch my cap.

    We do however live in a house where we are very heavy internet users, and I'm on a 130gb plan (65gb peak, 65gb off peak). We don't watch broadcast TV (we also don't watch cable) and we nearly exclusively stream everything we watch, and that includes movies from iTunes. For the 10 days of our current cycle, we've done 20gb, and in that every night included streamed video for 1-3 hours. The reality is that unless you're doing a lot of bittorrent, most people won't go near a decent cap, least not today. We did however upgrade our cap a while back, and a paying top dollar for our access, but even then, we still don't go close.

    Caps aren't ideal,and no one wants them, but they aren't the end of the world either.

  2. StevenHodson

    I would humbly submit that without the US having the type of internet access that it does that things like Social Media (and all the potential it holds) would never have happened. I could be wrong in that but I don't think so. Neither would the idea of cloud computing – which has been broached by other names in the past – be moving towards practical uses.

    I don't suggest that they are the end of the world (as some might suggest that we would be better off without things like social media) but I don't don't see innovation continuing at the speed it has if they are put in place.

  3. Duncan Riley

    to a point yes, but not all the caps I'm reading about are created equal either. One for example (comcast maybe??) is 250gb…that's a hell of a lot of bandwidth on a residential connection (and it's important to note, these are primarily for residential connections). What is concerning is that some of these lower caps simply cut people off as opposed to giving them options. I think given how new it is in the US, that the choice aspect is very immature. In Australia, you see a lot of different cap plans at different rates, so in that regard if you use more, you can get more. Also, if I go other, I get a speed cap (shaped) down to 64kbps, not cut off, where as I see these plans in the US are primarily pay per gb extra, or cut off.

    The market will sort itself out, and you'll find that someone will try to offer better deals in a competitive market place.

  4. tom

    with countries like Korea hooking up Gigabit connections country wide by 2012, this cap system may exist, but its got to make the major shifts that are happening in the world. If they don't do it, some one will, and make a bunch of money while at it. I'm only concerned that my spam level remains the same, (love that rolex)…

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