Dear Comcast: broadband isn't gasoline

Comcast's CEO Brian Roberts has been doing a lot of spinning lately to explain his company's plan to increase its prices (already some of the highest in the developed world) by turning on usage caps and charging up the wazoo for people who exceed them.

Mr Roberts says that this is no different from paying for more gas when you drive longer distances: "Just as with every other thing in your life, if you drive 100,000 miles or 1,000 miles, you buy more gasoline. If you turn on the air conditioning to 60 vs. 72, you consume more electricity. The same is true for usage, so I think the same for a wireless device. The more bits you use, the more you pay."

On Techdirt, Karl Bode lays down some Econ 101 for Roberts, explaining the difference between fixed and variable costs, and showing this argument for the bullshit it is:

The problem with that narrative? Broadband is absolutely nothing like gasoline or electricity, because for major ISPs' like Comcast — the price it pays for bandwidth remains relatively fixed despite usage, so whether an individual user consumes 300 GB or 400 GB doesn't impact Comcast's bottom line in the slightest. Meanwhile, with Comcast customers paying some of the highest prices in any developed nation, any Comcast earnings report will show you that Comcast's broadband margins remain plump; more than capable of paying for necessary infrastructure upgrades several times over.

That there's no financial or technical justifications for fixed-line usage caps is a point made time and time again, and really can't be repeated often enough. As the CCG Consulting POTs and PANs blog recently noted, Comcast really faces two primary costs when it comes to providing you bandwidth: transit and raw bandwidth. And in both instances, these costs are not only immensely manageable thanks to Comcast's huge size, but by and large remain static:

At Comcast's size they either have a direct physical presence at each major Internet POP or they have an arrangement with some carrier who does. Due to their sheer size, I have to imagine that Comcast's cost for transport on a per-megabit basis is lower than anybody else in the industry other than maybe AT&T, who is one of the owners of the Internet structure.

Transport can be a major cost for an ISP that operates a long distance from a major POP. I have small ISP clients that spend between $10,000 and $20,000 per month on transport, which is a lot if you only have a few thousand customers. But for Comcast this cost has to be minuscule on a per customer basis. And the cost is fixed. Once you buy transport to a market it doesn't matter how much bandwidth you shove through the pipe. So this cost doesn't increase due to customer usage.

With Fixed Costs And Fat Margins, Comcast's Broadband Cap Justifications Are Total Bullshit
[Karl Bode/Techdirt]