Michael Powell used to be the head of the FCC. Now he's the cable operators' chief lobbyist. In a recent speech, he admitted that the cable operators' long-running push for caps on data-usage had nothing to do with congestion, which isn't really a problem for them. Instead, they pursued data-caps as a way of making more money from their customers.
Powell dressed this "making more money" stuff as fairness, as in "it's only fair that people who use more should pay more." But the cable operators have a curious relationship with "fairness" — it's fair to charge you through the nose for being a "heavy" Internet user, but the people who only need the net to download an email or two a day aren't being offered the "fair" data-rate of a couple bucks a month.
National Cable and Telecommunications Association president Michael Powell told a Minority Media and Telecommunications Association audience that cable's interest in usage-based pricing was not principally about network congestion, but instead about pricing fairness…Asked by MMTC president David Honig to weigh in on data caps, Powell said that while a lot of people had tried to label the cable industry's interest in the issue as about congestion management. "That's wrong," he said. "Our principal purpose is how to fairly monetize a high fixed cost."
Except the argument that usaged pricing is about fairness has been just as repeatedly debunked. If usage caps were about "fairness," carriers would offer the nation's grandmothers a $5-$15 a month tier that accurately reflected her twice weekly, several megabyte browsing of the Weather Channel website. Instead, what we most often see are low caps and high overages layered on top of already high existing flat rate pricing, raising rates for all users. Does raising rates on a product that already sees 90% profit margins sound like "fairness" to you?
Another favorite industry argument is that providing broadband is so expensive for a carrier, the flat rate pricing model simply isn't sustainable, but that's also debunked if you eyeball quarterly earnings from any of the major broadband players. Yet another argument is that carriers are just "being creative" with pricing, but so far consumer wallets aren't feeling the creativity. What the industry's really doing is using the benefit of uncompetitive markets to price gouge customers, though Mike Powell obviously isn't paid to acknowledge that kind of reality at a press event.
Cable Industry Finally Admits Caps Not About Congestion [Karl Bode/DSL Report]