If the cap fits... Charter is asking the FCC for the right to impose data caps
- Just when many operators are looking at lifting them completely
- Charter says it’s “hamstrung” by an agreement it willingly signed as a condition of its merger with Time Warner Cable
- Now it wants out
Charter Communications has asked the FCC to remove the conditions placed on it with its merger with Time Warner Cable and Bright House Networks. The 2016 settlement included a prohibition on data caps for users and another prohibition on paid interconnection deals with ‘upstream’ providers. The agreement has an initial five-year “sunset clause” with an option to extend for another two years. That means the deal comes up for re-examination in 2021.
So why is Charter getting fidgety now and calling for it to be let off the hook this year rather than next?
Observers, such as the US pressure group ‘Stop the Cap’, think it’s because the company wants to get the conditions out of the way now, before the presidential election with the probability that Trump and the current FCC will be swept away. The way the regulatory gears grind in the US it could be years before a new FCC gets around to crafting pro-competitive rules, so it might be worth trying to get a hearing now to get ahead of the curve.
The FCC at the time of the merger was focussed on preventing too much power going to big broadband outfits like Charter, fearing it would be able to use its choke position on the access network to disfavour the still up-and-not-yet-quite-coming players such as Hulu, HBO and, yes, Netflix. Growing but still fairly precarious.
At this time, too, the Obama FCC was wrestling with net neutrality rules and key to that discussion was interconnection agreements. US ISPs had been arguing that since users of Netflix, say, were streaming comparatively large amounts of data it seemed only fair that Netflix be charged for data volume, or at least that it share the cost of the extra ISP gateway technology required to accommodate it. Several big arguments broke out around this aspect of interconnect.
Content providers argued that users already paid for the access infrastructure up to and including the interconnect, the networks serving the content providers paid for the infrastructure delivering the content to the cable head-end (or telco equivalent). ISPs were therefore attempting to “double dip” and were essentially “rent-seeking” (chasing a bigger share of an existing revenue source rather than innovating to create a new one).
In Charter’s favour there’s no doubt that broadband market conditions have changed. Clearly the streaming market is very strong with Netflix secure and growing and joined by the likes of Apple, Disney and many more. Charter argues that because the streamers can now look after themselves there’s no reason to keep “hamstringing” Charter with artificial constraints on commercial behaviour (ie charging upstream and using data caps to control user behaviour and maximise revenue), especially when other broadband providers aren’t similarly hobbled.
Also on the matter of regulated peering, Charter points out that paid peering - the hole that the FCC worried the ISPs could ride a coach and horses through - has become pretty much the norm, with major ISPs signing up to voluntary paid peering deals where it presumably reduces the costs to both parties to do so.
Against the Charter argument, though, is the fact that broadband prices are still way too high in the US and really exacerbate its digital divide. Prohibitions on data caps may be one way of getting them down and getting usage up.
The fact that ISPs were able to pull off a public relations coup (no doubt heart-felt as well) by ending caps for the duration of the lock-down (as they also did in Europe, although only in mobile - fixed broadband caps no long exist in the big markets like the UK) has now become a slight hostage to fortune.
The cry goes up, “If you took them down for the lockdown with no ill effects, why are you putting them back on again?) to which there is no good reply, except, “because we can”.
Stop the Cap points out that a ‘truly’ competitive market post the pandemic would drop caps for good and immediately.
By asking for a chance to actually deploy them, Charter “shows how terrible broadband competition really is.”
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