Stacey Higginbotham at GigaOm yesterday received a lot of attention for a post she wrote arguing that that metered broadband suffers a “Twilight Problem” based on a series of calculations based around downloading the movie Twilight. Our own Steven Hodson said that it highlights that “metered broadband will kill online video.”

As I’m lying here typing this, with my son and friend in another room streaming a movie, and my wife lying next to me in bed streaming a TV program, all on one of these “evil” metered plans, I though I might take a look at these “online video” ending statistics.

Higginbotham uses as her example the HD version of Twilight that she clocks in at 3.8gb. I doubt very much if Apple is the most efficient at file delivery (and I’ve argued before that scarcity drives innovation, in this case more efficient delivery) but lets use the 3.8gb as our starting figure.

Higginbotham says that a user on Time Warner’s cheapest plan of $15/ month for 1gb, with $2 for each additional gb will pay a headline grabbing $20.60 in download costs.

Sounds scary doesn’t it. Only two tiny little problems: first, she presumes people who download movies would be retarded enough to sign up to a 1gb plan to begin with; it doesn’t take Sherlock Holmes to work out that if you’re renting movies online, that you’d be better off on a higher plan. But here’s the even better part she didn’t mention.

That 1gb/ $15 plan only comes with speeds on 768 KB/128kbps. Even presuming that you got precisely the maximum 768kbps on your download (and I’ve never seen an internet connection yet that delivers the maximum it promises), this poor person paying $20.60 for their download would also have to wait 11 Hours 48 Minutes 22.28 Seconds (calculated here) for the file to download. Even allowing for a stream starting while the file was still downloading, you’d still have to buffer it for 9 hours to watch it in one sitting.

This is not to say that there are some severely mentally challenged people out there who would find this acceptable, but for the 99.9999% of the population who rents movies online, this is not going to happen because they wouldn’t sign up for it. Nice headline figure, complete BS in real world application.

Hidden Costs

Higginbotham then goes through and allocates the costs of downloading Twilight based on other plans, simply by allocating the percentage of the cap used by the download against the total cap cost.

There’s a problem with that: it presumes that the cap will be used in full. Example:

we’ll use AT&T’s U-verse rate of $55 per month divided by the 150 GB cap it’s said it will implement. That nets out to AT&T charging 36 cents per GB, which means the bandwidth for “Twilight” will cost $1.37. Adding in that $3.99 rental fee means my vampire fixation will cost me $5.36 to watch without leaving my couch.

The problem is that caps rarely are used in full, particularly at this level. Comcast claim that only 0.1% of their users use more than 250gb per month. One figure quoted regularly (example here) says that the average user uses only 2-3GB per month; obviously that won’t be a person who regularly downloads HD movies, but it’s an important point.

Pinning down average downloads of movies is a statistical challenge; in Australia for example, one major online DVD distributor says its “up to” 5 videos a month. If that applied to downloaded movies in the AT&T example, that’s 19gb per month. If it’s 10 movies, that’s 38gb per month. 20 goes to 72gb, 40 goes to 144gb, so you’d be watching 1.3 HD movies every day downloaded from the net to get up to your cap. Given that for a select few 40 movies a month is unlikely, the real cost of each download is actually higher, because the cost of the download would be the percentage of data used for the month, not the cap.

But the same economics apply for unlimited plans.

The equivalent 10mbps unlimited plan on Verizon costs nearly the same as AT&T’s 150gb capped plan (AT&T is $59.90, Verizon $59.90 without phone, $57.90 with phone without a one year contract.)

The only way you would save with the uncapped plan is to watch more than 40 HD Twilights, or to consume enough bandwidth doing other things (online gaming is surprisingly efficient despite claims otherwise) to use MORE than 150gb.

And yet this is what Higginbotham writes:

Verizon: Since Verizon doesn’t meter or cap its service (or plan to), the cost to watch Twilight only reflects the $3.99 rental fee. A user still pays for broadband (as they do even without a metered plan), but without a limit on data downloads, its impossible to calculate a per-GB cost for downloading content.

You can calculate the cost if you make a presumption about how many movies will be watched and draw a figure for non-movie consumption, not exactly challenging stuff, particularly given the other presumptions. But here’s where it gets better. Lets say you only want to watch your five movies (presumably all in HD), do some regular surfing, maybe some VOIP. Will you still save money with a uncapped plan?

Time Warner offers its Road Runner Standard package for $31.95/ month unbundled, or less in a bundle. It comes with 40gb per month. If you downloaded 5 HD movies, played some games, did some surfing, watched some videos on YouTube, you might just get to 40gb if you were trying really hard. You instantly save $28 over the “uncapped” plan with Verizon.

But is 40gb a month enough? As I’ve written previously, despite living in a house with 3x more internet connected devices than people, waking up to streaming radio on my Chumby, working from home online, including uploads of videos (note in Australia they count uploads to a cap), my son comes home from school and watches YouTube videos and plays online games, and then nearly exclusively we only consume online media of an evening, on a busy month we might hit 50-60gb. On average we do 30-40gb per month. But we’re not average: very few households would have anywhere near the non-stop internet usage we have across as many devices.

The world is not ending, and statistics can always be what you want them to be if you ignore certain facts that get in the way of the picture you are trying to paint, as is the case of the Twilight problem stats.

In an ideal world, there would be no caps; however in a free market where the cost of wholesale access is not unlimited, retail providers are free to pick their models. If people really feel so strongly about the rates being charged, don’t pay for them; if you’re in a large city, you’ll usually have a choice. But note this one thing: a one size fits all isn’t necessarily the superior model for all consumers. Uncapped plans can actually end up costing significantly more, and I’m yet to see a decent argument stating why users who consume the most should be subsidized by those who use little.

Related posts:

1. This is happening: Twilight MMO announced
2. Forget Twilight Reviews: Stewart to Play Man in ‘K-11′!
3. Daughter’s texting cost family $4,756.25 – Damn!

The International Data Corporation on behalf of Zeugma Systems survey of a very small sample size of 787 people found that 81% of Americans do not like the idea of establishing a bandwidth cap and charging for use above the cap, and that 51% would try to change service providers if their ISP imposed bandwidth caps.

Fighting numbers, but the telling result was the next one: 83% say that do not know what a gigabyte [is] or have no idea how many gigabytes they use.

As I noted August 28, the Sky is Falling. The idea of internet usage caps has become the gun control of the internet; any limitations are bad and rob the average person. The staggering thing is that the anti-cap message has gained such wide acceptance, and if there’s a win here, it’s for the anti-cap crusaders.

But lets think about this rationally. Comcast says that the 250gb a month cap will affect exactly 0.01% of all their users. Not 10%, not 1%, not even 0.1%, but 0.01%. Lets crunch the numbers some more: 51% may switch based on the notion that an infinitely small number of them may face cap issues, but the survey also found that 95% of “those surveyed said that they would happily pay for more premium bandwidth services if they can get it for services such as video, VoIP, gaming and telecommuter VPNs” despite only 5% saying that “those who use more should pay more.” 54% “would switch service providers if a competitive service offered a premium tier,” although strangely only 26% “said they would pay their service provider an additional fee for premium bandwidth services.”

Let me say upfront that I’m not personally in favor of internet caps as a broader idea, and I’d love nothing more than to have the ability to sign up to an ISP that offered unlimited internet access. There’s a half reasonable argument around caps limiting innovation in online service delivery in the future, even if evidence would suggest that markets respond to caps by innovating to deliver content more efficiently, and as in the case of Australia, content providers do deals that see cap exemptions for their content. However, what we see here is a fear campaign based on ignorance as opposed to fact. 99.99% of people will never be affected by Comcast’s cap (there are different rates with different ISP’s, so the rate may vary), and there is absolutely no reasonable argument I’ve seen yet that justifies the notion that users who use 1TB or more a month should be subsidizing those who use 1gb. Bandwidth costs money based on throughput, so a high end user DOES cost more money to supply than a low end user, so I’m at a loss to understand any argument that suggests that both should pay the same for their internet access.

See also Everyone needs to calm down about Internet Caps for more on how internet caps work for most people.

Related posts:

1. ISPs Eye Bandwidth-Based Charges
2. AT&T May Charge For Bandwidth
3. Word of mouth tops online reviews as purchase influencer, survey finds

There is a case in terms of limiting future growth in online content delivery; as we switch away from heritage media, the more content we consume online, the more data we use. But that time isn’t now, at least for the vast majority of users, because even with streaming content, most will never hit the 250gb cap. There are some exceptions, but we’ll get to that in a moment.

Living with a cap

The above shot is from my iiNet toolbox showing my volume usage from August 28, the starting day for the monthly calculation of my use cap, which is currently 65GB peak (noon-2am) and 65GB off-peak (2am-noon). 11 full days into the month, I’ve used 10gb peak, just over 2gb off peak, and 3gb in the free zone.

Now perhaps I haven’t downloaded a lot this month, so these figures may not be completely typical, but they are close enough, and my biggest month so far totaled 50gb. Consider the usage scenario: we rarely watch broadcast television, and on a typical night will stream one to two television programs. Other times we might rent a movie or stream some podcasts via our Apple TV, and if you note the freezone figure for the 6th, we purchased 300 on iTunes (it wasn’t available for rent) and watched it, resulting in a 1.5gb figure for that day. I’m also in front of a computer at home all day, and I regularly download content, and at least three times a week I’m playing online Poker as well, so there is a gaming component. Notably these figures include uploads as well, although it’s not clear whether the Comcast cap counts uploads. Our house has more internet enabled devices than people: three computers in regular use, Apple TV, two iPhones, and a Chumby used day in, day out.

Lets presume the average Roku box user watches one video every night. At 30 days in a month x 1.5gb per video, total use will be 45gb for the month. Lets presume that Netflix isn’t as efficient as iTunes in movie delivery, and each movie is 3gb. Lets presume you’re an addict, and you watch two movies every day. Still only 180gb in a heavy use, high bandwidth scenario, with 70gb to spare.

Comcast states that only 0.1% of their users use in excess of 250gb a month, so 99.9% of users will never have an issue, and that includes many early adopters and those working in the tech/ web space. I could try harder to use more bandwidth, but never being offline is all I can manage, at least for now.

Market Forces

Lets presume that with the rise of digital content delivery, usage rates increase, and more people get closer to the cap, or exceed it. Demand usually results in supply, and presuming that 250gb is the end of the matter ignores alternative ISP’s or distribution deals.

In Australia, as you’ll note in the image above, ISP’s do deals with content providers so that downloads aren’t counted towards a cap. In my case, the iiNet Freezone includes content from iTunes, and a number of other services. iiNet even offers a variety of internet radio stations for free, so when I wake up to the sound of 977 The 80’s Channel on my Chumby of a morning, it’s via a local iiNet stream of the station that doesn’t count towards my cap.

Providers such as Apple, Netflix and others will cut deals in the United States in the same way they have in Australia, both as a marketing tool and as a way to overcome any cap fears that may slow usage rates and consumer uptake. ISP’s like these deals as well, as offering unmetered content from large players is a selling point.

The Exceptions

There are of course some that will lose out under these caps: extreme high end users, large families or group homes, heavy BitTorrent users, and addicted online game players. Some have a reasonable case to complain, but others, for example those who use a residential connection to run a business where many people use that connection every day, or even use the connection as a web server (remarkably some people still do) need to accept up to the fact that if they want unlimited bandwidth, they should pay for it. Comcast business plans are not currently capped, so there are alternatives, even if they do cost more.

Conclusion

I don’t like caps, and having been on the wrong end of usage before and having my connection shaped, I’d consider switching to an unlimited plan tomorrow if I had the choice. Caps do have the potential of constraining growth in digital media delivery in the future, replacing a free market with one of deals and artificial supply constraints. And yet, for the negatives, the sky isn’t falling, it’s not the end of the world, and most Comcast users will never notice the introduction of a cap. It’s not unreasonable that people pay more relative to the amount of data they consume, and that heavy users should not be subsidized by light users. The market will respond, the drive towards more efficient delivery of digital content will increase, and we’ll still be streaming and downloading content tomorrow and into the future.

Related posts:

1. The Sky is Falling: Comcastic Caps
2. Comcast’s sneaky way to get you to use up your caps – data backup
3. Survey finds that 83% of Americans don’t understand the concept of bandwidth

Let me say upfront on a less serious note: You’ve got caps! Welcome to my world, one where I pay a small fortune for my 130GB a month on one of the largest cap plans available in Australia. Most people suffer on less than 15GB.

From a user viewpoint, I understand where Om and MG are coming from. Caps may limit online innovation by restricting the free market for unlimited content, particularly as we move to HD video that is seriously bandwidth intensive, and that’s not a positive thing.

And yet, bandwidth does cost money. We accept when we sign up for hosting that most providers cap the data our sites can use, and charge us more as we consume more, because they themselves are paying for data on a measured basis, not an unlimited one. The economics for an ISP are the same: they have to pay for data throughput, so the more you use, the more the wholesale cost of providing that data increases. It is not unreasonable to suggest economically that those who use more data pay more for it. Why should the person using 2GB a month subsidize the person using 2TB a month when we know that the higher use costs more to provide.

How many individual users would really use 250GB a month? It’s not 100% clear, but it would appear that (unlike with my account in Australia) uploads won’t be counted towards the 250GB a month, so even BitTorrent users who tend to leach a lot in terms of uploads, or even people live streaming 24/7 won’t be affected.

I looked at my usage figures for July 2007, a month I was home the entire time, and I just scrapped over 40GB for the month, although I have had some months closer to 50GB. This in a house with three times more internet connected devices than people, where I download a fair bit, I stream HD on my Apple TV, and even my alarm clock streams internet radio when it wakes me up in the morning. Of course this figure is creeping up, and will continue to do so, but as someone who is in front of a computer every day at home, I’m yet to go close to 100GB, let alone 250GB a month.

There’s also the presumption that capped plans will stifle areas like HD streaming, but it ignores the fact that these limits will simply create innovation in compression, so that the bandwidth required to deliver a HD movie is less tomorrow as watching a video online is significantly more efficient today compared to 4 years ago or further. You’ll also likely see distribution deals in place between content providers and ISPs that will create exemptions to the cap, for example anything I download now from iTunes isn’t counted in my iiNet cap. It’s not great level playing field innovation, but now caps are in, on Comcast at least, providers will be thinking about these very things today.

Comcast’s decision to impose caps is the end of the free honeymoon for internet users artificially brought about by an excess in bandwidth following the first internet crash. As we use more and more bandwidth, more pipes are required to meet demand, and somebody has to pay for it.

Related posts:

1. Everyone needs to calm down about Internet Caps
2. Survey finds that 83% of Americans don’t understand the concept of bandwidth
3. Lies, Damn Lies, and Twilight Download Statistics