Market Solutions to Internet Congestion Available

Published October 10, 2008

There is no evidence of Internet-bandwidth congestion in the United States, and therefore no need to adopt “tiered” strategies for data delivery, according to a new policy brief from the Free Press organization.

The report, “Blocking or Metering: A False Choice,” cites a nine-month Federal Communications Commission study that found “no actual congestion has surfaced,” Free Press Research Director S. Derek Turner said.

The Free Press identifies itself as a Washington, DC-based, “national, nonpartisan organization working to reform the media.”

‘Tiered’ Offerings Unneeded

The report, released August 7, specifically rejects arguments in favor of provider-induced data blocking, capping, or slowing. A major recent example was Comcast’s blocking of BitTorrent peer-to-peer technology, which the Internet service provider (ISP) claimed was taking up excessive bandwidth.

Turner says neither application blocking nor limitation pricing (in which a carrier charges fees after users exceed a certain bandwidth cap) is desirable, because the measures would “reduce the innovative power of the Internet. Such an outcome would do great damage to the major driving force behind much of the social and economic change that has occurred in the last 20 years, not to mention all the benefits the Internet promises for the foreseeable future.

“To believe [the shift to limitation pricing] is a move right around the corner, we must accept the argument that there is congestion in the network,” Turner writes. “The congestion could be in the last mile, in the transport segment (from the ISP to the backbone), or in some combination of these.”

Arguments Over Facts

Some industry analysts question Turner’s claim that congestion is not a real problem.

“Cable has enormous capacity, but it is a shared resource,” said Mitchell Lazarus, a partner with the law firm of Fletcher, Heald and Hidreth in Arlington, Virginia, which specializes in telecommunications law.

The more people who use it, the more the cable connections slow down, and adding capacity is very expensive, Lazarus says. He notes tiered pricing provides network operators with a way to keep a small percentage of heavy users from slowing down connections for the majority.

That’s an exaggeration, another analyst says. “Internet traffic is continuing to grow,” said Steve Titch, telecom analyst for the Reason Foundation in Los Angeles. “Right now, the Internet can accommodate most of what is going over it. General congestion is not that much of an issue right now.”

But there is definitely congestion in certain regions of the world and at certain times, Titch said, pointing to the late afternoon when students getting home from school and workers finishing late-day materials together cause congestion problems in some areas.

Market Is Providing Answers

Even if there were congestion, Turner said, options other than limitation pricing would better resolve the issue.

One approach to consider, Turner says, is that of Washington Post subsidiary Cable One, which uses “limitation throttling.”

Under that approach, a user subscribing to Cable One’s 8 MB download/500KB upload second tier is allowed unlimited data transfers between midnight and noon. Between noon and midnight, those subscribers are given limits of 3.6 GB for downloads and 219 MB for uploads. If they exceed the limits, they are “throttled down” to the cable provider’s standard speeds.

Turner postulates ISPs may prefer limitation pricing because it makes better financial sense, by modifying the behavior of all users, not just the so-called “bandwidth hogs.”

Tiered Pricing Common

While not opposed to Cable One’s throttling approach, Titch says tiered pricing is a good way to manage network congestion.

“Tiered pricing exists in several different businesses. It’s a legitimate business model,” Titch pointed out. “In wireless communications, you pay a different price per minute, depending on how many minutes you buy.”

Differential or tiered pricing gives the networks a market-based way to manage traffic flow without the government stepping in, Titch said. “[The Internet] is designed for commerce and information. Once providers build in a commercial element, it will be a better experience for their customers.”

Lazarus agrees, noting if cable firms charge too much for certain connection speeds, consumers will go to other cable firms, DSL providers, or others who can provide Internet connections at lower costs.

Differential pricing models also provide a point of differentiation for different online provides, Titch adds.

Only Cable Firms Want It

Daniel Ballon, a technology policy fellow at the San Francisco-based Pacific Research Institute says buying additional total bandwidth on the Internet is not unlike buying additional gasoline or additional electricity. “It’s not a net neutrality issue,” he said.

Titch says any limitations on pricing could disrupt the business of the Internet. And Lazarus noted, “The FCC has been out of the pricing business for about 50 years.”

Lazarus added that only cable companies are talking about limitation pricing and metering. “To date, all of the major U.S. DSL and fiber incumbents have largely avoided the limitation pricing debate. AT&T did hint at acceptance of the practice earlier this year, but their stance was very noncommittal.”

Phil Britt ([email protected]) writes from South Holland, Illinois.

For more information …

“Blocking or Metering: A False Choice,” by S. Derek Turner, Free Press: