“When you have 10 percent of the customers consuming 50 percent of the network bandwidth, it’s only fair that those consumers should pay more,” Comcast spokesman Charlie Douglas said Wednesday.
Leaked documents underwrite the “fairness” argument that Comcast is trying to push with this latest change. According to the company’s internal “Dos and Don’ts” page, representatives are told not to mention data caps, unlimited plans, or congestion management, with Comcast pointedly acknowledging that congestion management hasnothing to do with this policy. Instead, it’s all about fairness. The only problem with thatargument is that Comcast’s pricing isn’t remotely fair.
The problem with Comcast’s “It’s only fair that people who use more should pay more,” argument is that it’s entirely one-sided. There’s nothing intrinsically unfair about metered billing — it’s the basis for how we purchase goods like electricity, water, and heat. These systems vary from state to state, and companies may require initial deposits and monthly service fees, but the concept is the same — you pay for your power, heat, or water on a usage basis. If you use less electricity, you pay less that month. Comcast offers nothing of the sort. While the company does technically have a 5GB “light usage” Internet plan that knocks $5 off the base price of $40, but that plan charges you $1 per GB in overage fees if you exceed the cap.
Comcast, in other words, doesn’t actually want to move to a fair, “pay for what you use” model. According to the company, the average Xfinity subscriber uses 40GB of data per month. It’s difficult to know exactly what the marginal cost per GB of bandwidth is, but a 2011 study found that it cost just $0.03 (three cents) for a telco to transmit 1GB of data after all costs were accounted for. At the time, that rate was dropping precipitously, from 12 cents in 2007 to 3 cents in 2011. If the costs continued to decline, per-GB transmission costs to Comcast could be $0.02 or lower by now.
In other words, even if we assign Comcast a very healthy profit margin and assume a flat-rate billing fee of $0.20 cents per GB, the average customer would be paying just $8 a month for Xfinity broadband. Meanwhile, users who consume 300GB of bandwidth would likely pay around $60, significantly less than they pay now. It’s not clear if such a model could pay for infrastructure expansion or not, but it certainly wouldn’t be palatable to Comcast, which adores charging consumers $40 for basic Internet service and pocketing the profits.
This suggests that the only users actually getting a fair deal from Comcast in terms of the marginal cost of bandwidth are the estimated 8% of users who reach or exceed 300GB of bandwidth per month. Since 80-90% of the cost of providing service are fixed, the company simply doesn’t incur much overhead from the users who actually use the service.
As for that 300GB limit, it’ll soon be strained by the advent of H.265 streaming and 4K TV. While H.265 slashes bandwidth requirements compared to H.264, it can’t prevent them from going up entirely. An H.265 stream is typically 40-50% smaller than an H.264 video of equivalent quality. Since a 4K video packs 4x the pixels of a 1080p video, however, a 4K stream is still going to be at least twice the size of the equivalent H.264 stream, unless other tweaks and compression methods can be used to shrink the gap further.
Netflix notes that its HD streams consume roughly 3GB per hour at 1080p and 7GB per hour at Ultra HD. Binge-watch a 4K TV series when it hits the service, and you’re looking at between 91GB and 161GB of usage depending on the number of episodes. If you’re a gamer, modern games are often weighing in between 30-50GB per install. Pull a few new titles over Steam, and boom — you’re sitting perilously close to a 300GB limit. Windows 10’s new patching and distribution mechanisms could also add a meaningful amount to total network congestion, since the base W10 install is 6GB and the company now uses your Internet connection to distribute its own patches by default. In a situation like this, every few GB matter.
As consumers adopt higher resolution displays and content to watch on them, Comcast’s 300GB limit is going to pinch. The company’s decision to charge high-users more money while refusing to extend meaningful discounts to consumers make a mockery of any “fairness” argument — but it’ll certainly help push Comcast’s already-high margins even higher.