Former FCC Chairman Admits Data Caps Aren’t About Preventing Network Congestion

In a report conducted by the Open Technology Institute last year, it detailed a lot of information regarding how the cable companies set their data caps on users taking into consideration profit, not network congestion. Now it appears that former head of the Federal Communications Commission, Michael Powell told a Minority Media and Telecommunications Association audience that this is in fact true, that network congestion was not a factor when it came to deciding the data caps for ISPs. “That’s wrong, [...] Our principal purpose is how to fairly monetize a high fixed cost” he reportedly said.

He pointed out that the cable industry are able to charge “enormously high” fixed costs because it includes not just the money required to lay down the cable, but also operational costs as well. “It is a completely rational and acceptable process to figure out how to fairly allocate those costs among your consumers who are choosing the service and will pay you to recover those costs.”

He also went on to say that consumers are used to this type of usage-based pricing. “If you buy a hot tub and string it up with a whole bunch of inefficient lighting and run it all night long, you are going to pay more than your neighbor who puts his thermostat at 68% and tries to conserve energy.”

Another reason to have usage-based pricing is to encourage web app designers to be more bandwidth efficient

Powell also said that another reason to have usage-based pricing is to encourage web app designers to be more bandwidth efficient “If you have an unlimited pricing model, you can basically say: ‘I can build an app or a service and I don’t really concern myself with how much bandwidth consumption it will take [...] There is no disciplining element.”

A lot of people on the panel reportedly agreed with Powell’s remarks about the business model, but Democrat Michael Copps said data caps should have been something approached with a ”questioning” attitude and that the conversation should have been conducted after broadband infrastructure has reached the home of every resident of the US.

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