Why Monthly Internet Usage Caps are a Lie

If you ask an Internet service provider why they cap your usage at 50 or 100 GB per month, they will say something like:
"The cap is necessary to prevent heavy users from hogging all the bandwidth and degrading service for everyone else".
This is a flat-out lie. Here's why.

Network links, routers, switches, orbiting satellites and other hardware are sized - and priced - by their rated maximum speed (Mbit/s or Gbit/s). The cost of deploying and maintaining a network is almost entirely determined by its maximum speed and by the length and difficulty of the cable runs.

The cost of connecting that network to higher-tier networks, thus making it part of the global Internet, is determined mainly by the speed of each interconnection. A 10 Gbit/s backbone link, a set of Ka-band spot beams on a satellite, or a long-distance fibre cable will have very nearly the same operating cost whether sitting idle or or pumping data at 90% of capacity, 24/7.

The only component of an ISP's costs that depends on "gigabytes per month" is the small (on the order of a penny or two per gigabyte) differential that they pay to higher-tier providers when a link carries much more downstream than upstream traffic. A customer with a 15/1 connection who uses 1000 GB in a month only costs the ISP about \$10 to \$15 more to serve than a customer with a 15/1 connection who uses 4 GB in a month.

What about that "traffic management" excuse? Surely, the heavier user is putting more load on the network and slowing things down for everyone else?

Nope! Networking hardware doesn't care what happened three seconds ago, let alone what happened three weeks ago. The equipment only cares about what data packets are in the network at this exact moment. If there's more demand than the network can handle, the available capacity is naturally shared according to the number of data packets involved at any given instant- the routers will automatically balance everything out to give all users a fair share of what's available.

If you want a bigger share of the pie, pay for more speed. A 50 Mbit/s connection should - and does - cost more than a 10 Mbit/s connection. But that's the only parameter you need; limits quoted "per month" have no basis in the reality of network operations.

Why, then, do some ISPs have these monthly caps, and why do all companies that have them lie about them?

One word: Television.

Many, if not most, major ISPs in North America also provide pay TV services. The biggest threat to pay TV is Internet-based services such as Netflix and Vimeo. Artifical monthly caps don't do anything for network congestion, reliability or fairness. But they do ensure that if you drop your cable TV package in favour of Netflix, then Comcast, Bell, Cogeco, Rogers or whomever else is providing your Internet connection will reap a hefty overage charge when you go over the cap. Conversely, paying through the nose for that separate TV subscription ensures you can watch all you want without risking Internet overage charges.

Need more proof? Independent ISPs such as TekSavvy lease their physical infrastructure from incumbents like Bell. But where Bell's 15/1 Mbps residential plan is capped at 80 GB/month with hefty overage fees, TekSavvy offeres uncapped service, over the same wire at the same speed, for less money. And Bell's business-class internet plans, similarly priced and also on the same infrastructure, do not have monthly caps.

Monthly caps are a lie whose only real purpose is to enable the abuse of a near-monopoly in one field to prop up a failing business model in another. They are allowed to persist only because the inherent economic realities of the Internet - which are completely different from those of other utilities and services - are counter-intuitive to regulators and customers who are familiar with more traditional economics, so the lie seems plausible enough to be believed.





Matthew's picture

Cogeco - one of the biggest communications companies in Ontario and Quebec - used to be a major offender when it came to usage caps, with plans that would burn through the monthly cap in twelve hours or so at the rated maximum speed.
They've since changed their ways. A Cogeco rep advised me today that, in all areas where their network hardware is reasonably up to date, they're offering true unlimited plans for about $10 per month more than the same-speed capped plan. And, similar to Bell, their business-class plans are always uncapped.
Now that's more like it!

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