Report: Data Caps Raise ISPs Profit Margins

  
Verizon's CFO already said, in public, that shared (and limited) data plans are "an optimal way for us to monetize increasing data usage" (here). A new report by New America Foundation’s Open Technology Institute [OTI] agrees.

The report, by Hibah Hussain (pictured), Danielle Kehl, Benjamin Lennett and Patrick Lucey finds that ".. increasingly costly and restrictive data caps are serving little purpose other than to raise the already high profit margins of broadband providers .. Internet service providers argue data caps are necessary to manage growing traffic and maintain quality of service on their networks .. instead, they are the product of an uncompetitive broadband marketplace where providers use data restrictions to increase revenues and protect legacy services such as cable television from online competition".

"The technical rational for imposing monthly limits on all subscribers makes little sense when network congestion tends to occur at limited times of the day and in certain locations. In addition, maintaining quality of service does not require Internet service providers to charge users exorbitant overage fees rather than pursuing less costly and punitive measures, particularly as the costs for operating broadband networks continues to decline"

"In July 2011, Verizon Wireless announced that it would be introducing a tiered pricing system for mobile users that included data caps .. Since then, both Verizon and AT&T have reconfigured their data plans, simultaneously raising prices and data caps so that while users may be paying less per MB today than a year ago, they have to choose between a more expensive basic plan and incrementally higher tiers as well .. Both companies have also introduced family share plans for data—similar to plans that allow families to share minutes and text messages—in which users share a single data cap,but pay a fee for each mobile device connected to the plan. The results of this policy shift have been clear—the average revenue per user (ARPU) from monthly subscription wireless data plans has steadily increased since 2009, climbing at a higher rate than the ARPU for other metrics such as retail service and other postpaid fees. And the trend is likely to only increase as AT&T and Verizon push their new shared data plans, which offer additional opportunities to boost data ARPU".

 

See "NEW REPORT: Capping the Nation's Broadband Future" - here.