Skip to main content

Netflix Is Right About Usage Caps

Earlier in 2016, a report revealed that a staggering 37 percent of all internet traffic in 2015 was for movies and TV shows streamed via Netflix.

That doesn't mean 37 percent of all internet users were using Netflix, or even that Netflix was the most popular site last year (it wasn't). It was because video files are several orders of magnitude larger than text, static images and other pieces of data transmitted across networks -- at about 5 gigabytes per movie. So this figure means 37 percent of all the internet's bandwidth was consumed by Netflix users.

Overall, 70 percent of internet bandwidth is consumed by users streaming video and audio, according to the tracking firm Sandvine. That includes Netflix, YouTube, Amazon Instant, Hulu, iTunes and other services.

That's not surprising when you consider the internet serves a public with an insatiable appetite for content, with high-speed connections allowing uninterrupted high-definition streams of just about every movie and TV show in existence.

That shouldn't be a problem though -- customers pay internet service providers a monthly fee to use their networks, and the providers can't dictate how their customers use those connections.

Or can they?

Most of the big internet service providers are also cable companies, and it hasn't been a good decade for cable. Monopolies have been broken. Cord cutters have abandoned cable in droves, choosing streaming services instead. The cable companies' video on demand services face intense competition from a whole range of services offering the same movies and TV shows, often cheaper and with a more convenient way to access them.

And in a major victory for consumers, cable companies have realized they can't force customers to pay for $150 cable packages stuffed with channels they don't want. A la carte is in, something that would have been unthinkable a few years ago.

So from the cable companies' perspective, they're getting killed by streaming services -- the same streaming services that use the networks the cable companies own.

If you own the delivery platform and you're losing the content war, what's the best way to make up the lost revenue? For most industries, the answer would be to adapt and offer customers something they can't get anywhere else.

But for cable companies, the answer is to charge more for something customers are already paying for.

So, data caps, data throttling, putting competitors in the data "slow lane," and offering customers new, more expensive data plans to recover the bandwidth the cable companies just took away.

Instead of allowing a free and open internet, the cable companies are now imposing artificial limits on how much data individual users can use each month. Hit that arbitrary cap, and you either get throttled down -- in other words, your internet speed slows to a crawl -- or you can reach for your wallet and buy a higher tier of broadband service.

Companies like Netflix are understandably crying foul. They correctly point out that cable companies aren't throttling connections or putting caps on customers because of network congestion -- there's no evidence to suggest those practices were brought on because ISPs couldn't handle the traffic.

What the cable companies are really doing is trying to force customers to pay again for something they've already paid for.

"Data caps on fixed ­line networks do not appear to serve a legitimate purpose: they are an ineffective network management tool," Netflix wrote in a statement on Sept. 12, according to industry website DSLReports.

The company also points out that data caps, while restrictive now, will become crippling in the years ahead as consumers begin to stream content in 4K resolution, requiring more bandwidth to stream movies and TV shows.

It goes back to a warning Netflix issued all the way back in 2013, when Netflix CFO David Wells pointed out that data caps are "not a successful business model." ISPs aren't offering users faster or more convenient service, they're simply artificially limiting how customers can use their service in an effort to squeeze more cash out of them.

Those practices can also have the effect of discouraging broadband use in the U.S., which already lags behind much of the developed world in internet infrastructure.

But ultimately, it's about the future of the internet. The nature of the internet, the reason why it's become so pervasive and central to daily life, is that it's egalitarian and largely free from meddling by the government or corporations.

Allowing ISPs to take certain types of traffic and slow it down -- or charge more for that traffic to flow at normal speeds -- has serious implications for the way the internet operates and will remove the even footing that allows innovation and creativity. No one wants a future internet where a powerful company like Viacom gets its content delivered faster, while some random YouTuber or small company's content sits there buffering.

Unfortunately, as DSLReports notes, the FCC doesn't seem inclined to step in and prevent cable companies from abusing their last effective monopoly. That has to change, and the only way to do it is to make the case that the internet isn't a luxury anymore -- it's a public utility as essential as water and heat.

Click here for the opposing view on this topic.

Sources: DSLReports (2), Make Use Of, Electronic Frontier Foundation / Photo credit: The Opte Project via Wikimedia Commons

Popular Video