(Source: Viacom/Time Warner)
Capped conditions could offer between 300-500 GB per month, or about 130 hours of HD video

Comcast Corp. (CMCSA), America's largest cable internet service provider, has been experimenting with data caps in the American South in an effort to crack down on individuals it feels are using the internet too much.

I. Big Family?  Prepare to Pay Fines for "Overusing" Comcast's Pipes

In April it announced:

This information applies only to XFINITY Internet customers in Huntsville and Mobile, AL; Atlanta, Augusta and Savannah, GA; Central Kentucky; Maine; Jackson, MS; Knoxville and Memphis, TN; and Charleston, SC.

In these markets, the data amount included with all XFINITY Internet tiers will be 300 GB per month. We will offer additional gigabytes in increments/blocks of 50 GB for $10 each.

Comcastic day
Comcast claims its customers don't mind being capped and metered.
[Image Source: cmorran123/Flickr]

And there's no opting out, unless you're on an Economy Plus plan (one of the cheapest plans):

Unless you are an Economy Plus customer, you cannot opt out of this new usage plan.

300 GB would cover roughly 130 hours worth of gigabytes of HD videos a month.  Or to put it slightly differently, that would be the equivalent of each family member in a four-person family watching about 16 different movies or 30 TV episodes a month (64 movies total for the family).  Of course that's assuming the family members don't do anything on the internet; if they do, that would mean less videos.

This is all music to Comcast's ears at it means bigger profits.  Comcast made "only" $6.8B USD in net profit in 2013, according to its 10-K filing.  A blockade on the traffic of its most active users, such as large families watching "too much" HD video on Google Inc.'s (GOOG) YouTube and on Netflix, Inc. (NFLX) could pad those profits, both by cutting maintenance costs due to less network usage and could allow Comcast to pay less money in developing more bandwidth in various regions.

Even with Netflix paying it fees, Comcast refuses to allow its customers to freely use their connections, without paying it yet more fees for "internet overuse" if they watch a lot of video. [Image Source: Mashable]

Of course Comcast is also trying to squeeze on the other end.  It recently began throttling users with Netflix, forcing Netflix to pay it extra fees.  Now Netflix users may face not only the extra costs of Netflix's payout to Comcast -- which Netflix, of course passes on to the consumer -- but also extra fees if they run over their data cap.

YouTube is rumored to be under similar pressure.  Google may have to pay Comcast a toll of its own or be throttled.

Currently, Comcast is charging $10 USD for each additional 50 GB you use over your cap (so $10 USD to watch an additional ~22 hr. of HD video).

II. Plan Will Go Nationwide in 2-5 Years

In a conversation with investors this week, as noted by Ars Technica, Comcast Executive VP David Cohen revealed the plan is to extend these caps to all customers nationwide.  

[Image Source:]

Comments Mr. Cohen:

I would predict that in five years Comcast at least would have a usage-based billing model rolled out across its footprint.  

I would also predict that the vast majority of our customers would never be caught in the buying the additional buckets of usage, that we will always want to say the basic level of usage at a sufficiently high level that the vast majority of our customers are not implicated by the usage-based billing plan.  And that number may be 350—that may be 350 gig a month today, it might be 500 gig a month in five years.

We don't want to chase our customers away, so we are rolling out different models, different approaches.  We are surveying our customers.

In an interview with Ars Technica from Nov. 2013, a Comcast spokesperson remarked:

We surveyed our heavy data users and 80% thought this approach was fairer than our past approach, which was a 250 GB/month static cap with an extremely rarely used last resort option of account termination for users who went far beyond that amount and who did not voluntarily curb usage when we asked them repeatedly to do so.

The approach we’re trialing in Atlanta, and elsewhere, is fairer because it eliminates that prior policy and creates a flexible mechanism for heavy data users to pay more to use more and for light data users to save money for using less.

98% of our customers nationally don’t use 300GB/month so, for those that want to use more they now can and we’re seeing customers in our trial markets taking advantage of the option to use more if they want to—a clear indication that this approach is working.

To put 300GB in context, our median customer’s data use is about 16 to 18GB per month.

The comment is slightly misleading, though, as Comcast only recently started experimenting with terminating its "overactive" users -- including large families with multiple users -- who "overuse" their connections.  Comcast is likely right in a way; customers might be happier with it charging them a penalty with a slightly higher cap (300 GB) rather than sending threats and eventually terminating them for going over a smaller cap (250 GB).  But customers likely would be a bit irritated at both schemes, particularly given Comcast's record profits.

Comcast originally tried to cast active users as a pack of filesharing pirates, but it's moved away from that message, given that many of the most active users are actually families who view a lot of HD internet video from services such as YouTube and Netflix.  Hence Comcast is largely hitting legitimate, law-abiding customers in the pocket books, not content thieves.

III. Monopoly: No Opt Out Capping Could Soon Extend to Time Warner Customers

What makes the plan even scarier to some users is Comcast's pending acquisition of Time Warner Cable, Inc. (TWC), the second place provider of cable internet, for $45.2B USD.

Comcast has roughly a 25 percent share of the broadband market; TWC controls around 12 percent of the market [source].  Comcast currently controls roughly 19 percent of subscription cable TV market; TWC controls around 9 percent of it.  Together the pair would control roughly a third (37 percent of broadband; 28 percent of cable TV) of two vital U.S. communications markets.  Or to put it in another way Comcast may soon control 2 out of every 5 U.S. internet connections.
Time Warner Cable
[Image Source: Reuters]

And what makes the situation even more severe is that in many regions, Comcast or Time Warner are the only service provider(s), so the deal will give it many local monopolies or duopolies with another large service provider.

For that reason many expected the deal to be scuttled by U.S. antitrust regulators, but Comcast is playing smart and greasing the cogs, paying out millions to members of Congress.  Now the acquisition is generally expected to be approved, with some restrictions.

But Comcast appears to be hoping that regulators won't limit its plans to throttle and cap the internet.  Mr. Cohen comments:

I doubt it [will be a factor] in the merger review because it really has nothing to do with our transaction. It's a generic industry-related issue.  But we wouldn't be stunned [if the FCC tries to ban data caps with net neutrality rules] because people have tried to make this an open Internet issue.

In other words if you regional provider is Time Warner Cable or Comcast, expect to soon have a capped connection and/or be moved to metered pricing schemes.

That's good news for Comcast and its institutional investors, who are reaping the rewards of the monopoly they worked so hard to set up via aggressive acquisitions and political payoffs.  For the average consumer living in a household with 2-4 people it's probably not a huge disaster.  But the real pain will be felt by small businesses and large families, both of which may face major fees on a monthly basis under Comcast's new rules.

Internet cables
After paying off politicians, Comcast expects little resistance to its plan.
[Image Source: Flickr/frankieleon]

Comcast was recently voted the worst company in the U.S. by a consumer survey.  It is the second time that Comcast won that award.

Sources: Comcast [speech to investors; PDF], [2], [3], Ars Technica

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