February 4, 2009  ·  Lessig

In the world of debates about network neutrality, consumption caps have an ambiguous status. Some see it as a kind of discrimination. Others, not. I’ve not been convinced they tend to support strategic behavior. But a recent experience in New Zealand did wonders to convince me of the harm they will do to the development of the Internet that could be.

I subscribe to TV series through iTunes. House is one of those series. When a new episode is released, my iTunes was configured to download it automatically, at least if iTunes was opened. The downloading happens the background.

In November, I was in New Zealand. After I arrived, I went to the hotel, signed up for (insanely expensive) Internet service, synced my iPhone, and turned to the task of answering the one billion emails that had filled my inbox in the time it takes to fly from SFO to New Zealand. About 30 minutes into my work, a message flashed on my screen that I had “violated the ethical rules” of the network to which I had just paid $50 for 1 days access. And because I had violated ethical rules, I was to be “fined” NZ $100 (about another $50).

Seems the service I had paid $50 to purchase had a 1GB download cap attached to it. My House episode was 1.5GB (stupidly, iTunes pushes you buy HD). So midway through the download, the service cut off my connection and charge my room the fine for unethical behavior.

No doubt, Internet in New Zealand is expensive (though more competition may help). And of course, 1GB is ordinarily quite sufficient for normal use (though when I prepare a talk, it is quite easy for me to consume much more than that as I find stuff (including videos) to include in my talk). And obviously, I had agreed to the contract, and whether intentionally or not, I had violated the limits of the conflict.

But the point is this: When companies like Time Warner suggest bandwidth caps are just about stopping “piracy,” that’s not quite true. They’re also about stopping lots of other business models that try to leverage the real potential of fast, cheap Internet access (assuming of course we can get fast, cheap Internet, or keep it where we’ve got it).

  • http://laboratorium.net James Grimmelmann

    And obviously, I had agreed to the contract

    Not obviously, and no you hadn’t. You didn’t “agree” to the NZ$100 fine in any real-world meaningful sense of the word, and even in the strained logic of lawyers, you didn’t. The “fine” is a penalty, plain and simple, and a penalty clause in a clickwrap contract just screams out, “I’M UNCONSCIONABLE! STRIKE ME DOWN!”

  • thomas

    That sounds like a lousy service! It would be trivial to make it just block all transfers when the 1GB limit is reached. Or warn at 1GB and block at 1.1 GB. Since they haven’t done what must be trivial I get the feeling that they count on a number of customers getting the unethics-fine as a part of their internet access business plan.

    Something completely different: when browsing lessig.org/blog with IE the list to the right pops into the middle of the screen, covering the text. Pretty annoying.
    http://img265.imageshack.us/my.php?image=popuptt9.png

  • Richard

    On behalf of all NZers I apologize.

    Over here, we all have to live with caps on our home accounts, so we are used to this sort of nonsense. My home cap is 10 G, after which it’s ~$US1.5/G, but this is just impossible with me and two teenagers. And we don’t do any file sharing at all!.

  • http://www.valman.blogspot.com Richard Ferrers

    A comedian once suggested Australia should be called ‘far’ as he described his long plane flight from UK. Such distances give local telcos great power in small markets like Australia and NZ to charge high excess rates, and have low download caps. Telcos build or pay for fibre optic lines across the Pacific and charge tolls for us to access US and European content across them. Good profits for the monopolists while the market is immature.

    Australia is trying to break the big two telcos hold with a National Broadband Network, from which the incumbent telco has been recently ejected for failing to comply with the tender rules. They were trying to bully their way into a guaranteed 25% after tax return in exchange for their expertise and cash to build the network. They were trying to lock in their high returns for the next generation infrastructure platform – broadband.

    So take pity on us poor Southern Antipodean cousins, for our broadband is a poor shadow of our northern brothers. On the plus side, it is summer and warm here, and the large distance makes our environment clean, clear and uncluttered. The lord giveth and the lord taketh away.

    ps our home broadband is 4Gb capped at 0.5Mbps, for $60AUD monthly with local and long distance calls included. After 4Gb our speed is capped at 0.1Mbps. We don’t download many House HD episodes here. That must be nice for you though….

  • JJ

    Actually, the situation in Australia isn’t so bad for the people able to sign up with the genuine competitors in the market (tpg, iinet, internode, westnet, adam etc.), all of whom have ADSL2+ plans that are pretty reflective of the real cost of providing international data transit. eg. my iinet naked DSL account (so no phone line rental) gives me 35gb/month for AU$70 which is pretty decent, and no excess usage charges.

    The download charges down here are simply a reflection of the cost of international transit – submarine cables that are literally thousand of kms long are not cheap to make. unlike the US, the majority of local traffic is from international sources so international transit costs are a fact of life and necessitate user data limits. There’s more competition coming online, slowly, but at the moment the fact that we have data caps isn’t some anti net-neutrality move by ISPs, it’s a perfectly understandable desire by ISPs not to have the vast mass of people who use less than, say, 2gb/month cross subsidise those who use excessive amounts.

  • http://sikosis.com Sikosis

    That just goes to show how good people in the US have Internet and how they’ve relied on fast, cheap and uncapped services — whereas, for Australians, NZers, etc … we’ve always been on caps — so it’s not killing any business models over here — just hurts the US ones. Online streaming of content will never take off with us — but why do we have caps in the first place ?

    Telcos tell us it’s because of the file sharing and the price that the carriers they buy Internet access off, which are US companies. So, if you want to be angry at anyone — I’d suggest that’s where to start pointing the fingers.

  • http://sikosis.com Sikosis

    That just goes to show how good people in the US have Internet and how they’ve relied on fast, cheap and uncapped services — whereas, for Australians, NZers, etc … we’ve always been on caps — so it’s not killing any business models over here — just hurts the US ones. Online streaming of content will never take off with us — but why do we have caps in the first place ?

    Telcos tell us it’s because of the file sharing and the price that the carriers they buy Internet access off, which are US companies. So, if you want to be angry at anyone — I’d suggest that’s where to start pointing the fingers.

  • http://everything-everywhere.com Gary Arndt

    I’ve been traveling around the world for 2 years now. I found NZ and Australia to be very disappointing in terms of internet connectivity. SE Asia was surprisingly good.

    I book rooms based around their internet connection. Places which charge for net access are usually higher end hotels and I avoid them. You can usually find better, cheaper connections at cheaper hotels or hostels.

    Hotels need to get with the program and realize that in the 21st century, charging for bandwidth is like charging for electricity or basic cable.

  • http://www.benedelman.org Ben Edelman

    I like James’ concerns about unconscionability and penalties. These would be good reasons to refuse to enforce the relevant provision of the agreement.

    How about the fact that the clause was (no doubt) hidden in a long boilerplate agreement? In other contexts, the FTC has held that hidden terms (including terms in long electronic agreements) are unenforceable, and that materialt erms must be prominently disclosed separate and apart from a EULA. Bandwidth caps and penalties go to quantity and price — the essence of materiality. At least if this were a US ISP, I see a good argument that this provision of the contract is not enforceable according to its terms.

  • Linda World

    How do I get rid of the Wigit — or whatever it is — that sits on top of the blog such that I can’t read it?

  • http://www.socialsecuritybullshit.com Steve Baba

    It seems to me to be more of a problem with vague, unclear/hidden terms in contract as two above have noted, than any business model argument about broadband.

    Thanks to near-loansharks claiming the mantle of deregulation, you would have to be nuts, as the Washington Post told all it readers, to accept any credit agreement – even the zero interest on purchases – because of one small mistake, you are screwed.

    This sounds like a job for lawyers, which Lessig and others above are qualified for.

  • http://example.com example

    Well, house sucks anyway.

  • http://nodebtworldtravel.com brian from nodebtworldtravel.com

    Caps on bandwidth make no sense. They will eventually be lifted when movie downloads become more prevalent. iTunes, Amazon and other services have not hit critical mass yet. But that doesn’t help you right now…

  • Jody Fanning

    It would seem that now you would also be breaking the terms of service of iTunes as well.

    If I understand correctly you are only allowed to use US iTunes inside the US. So accessing it from New Zealand would have broken the service agreement.

  • http://openquery.com.au/ Arjen Lentz

    Essentially, it comes down to whether taxing the exact thing you wish to encourage is such a bright idea…. ISPs and Time Warner want people to use the Internet more, for whatever purpose. But at the same time policies and actual taxes/charges are put in place that hinder exactly that.

    The solution? Although I’d prefer to have a fixed price for (truly) unlimited usage, I appreciate that this is not always feasible. So I’m happy to, in essence, pay for what I use. However, exorbitant excess charges still make no sense.

  • Jardinero1

    You have to admit it’s pretty stupid to call for greater regulation and encroachment of the state just because one wants to be able to download a TV show.

  • http://corvolucre.livejournal.com Mark

    From Jardinero
    “You have to admit it’s pretty stupid to call for greater regulation and encroachment of the state just because one wants to be able to download a TV show.”

    If lacking access to Internet media isn’t cause for broadband regulation, pray tell what is? Audio & visual media is what consumes bandwidth. Internet distribution of audio & visual media could have huge economic and efficiency benefits. So 1) what are the “important uses” of the Internet that downloading a television show interferes with, and 2) what’s wrong with government regulation that preserves those “important uses” while also ensuring the Internet can develop as a stable platform for distribution?

    Mark

  • Sam I Am

    It’s just like electricity, water, potatoes by the kilo. Take all you want. Pay for all you take. Not complicated. Not unfair. Just post the prices upfront and let the market sort it out.

  • Jardinero1

    Pray tell, what is cause for broadband regulation? I would posit that nothing is. Recall, there was no broadband ten years ago. The world functioned quite nicely. Most of what broadband is good for is time wasting entertainment; like House or porn.

    I actually use the the internet a great deal in the insurance business. However a dial up connection is suitable for all my needs. A point of fact is that the lions share of revenue generated via the internet is not business to consumer, it is B2B. Most B2B commerce requires little more than a dial up connection.

  • Brett Glass

    Larry, you made a mistake. You signed up for 1 GB of data, and then ran a bandwidth hogging application run on your computer. What you did is equivalent to leaving the water or gas running, or the lights on, and then complaining because the consumption showed up on your bill. Had you streamed the same video, the charge would have been the same.

    In this case, thank your lucky stars that it wasn’t P2P (which is a much bigger bandwidth hog). Internet bandwidth is not cheap in rural areas and certain countries (such as NZ). It’s quite expensive. You can’t make it cheaper by passing laws that force ISPs to give it away below cost. The ISPs will fold and you’ll have no Internet at all.

  • http://www.socialsecuritybullshit.com Steve Baba

    Now that I think about it, wasting time here online, maybe they should post a warning every 15 minutes to get off the Internet and get a life. Somehow, using the Internet for more of the boob tube does not strike me as a good example. Maybe if you were watching Cspan…

  • John Thacker

    Cornell University adopted a policy of charging for bandwidth *to and from outside the campus network* past 3 GB per month while I was there. They also cut the charges for Ethernet access on campus from $45/month to $22/month, while charging about $3 per GB past 3 GB in a month.

    Given campus organization and technical skills, this caused extremely wide-ranging strategic behavior on the part of students. A student-run file sharing system immediately sprung up, where one student would download popular files and upload them to the service on the school network, allowing everyone else to download it for free. Credits and everything else associated with other file-sharing systems were adopted.

    It was, undoubtedly, more efficient from a bandwidth perspective, though certainly less so from the perspective of students’ time. (Except for the experience gained in using a network.)

    When companies like Time Warner suggest bandwidth caps are just about stopping “piracy,” that’s not quite true. They’re also about stopping lots of other business models that try to leverage the real potential of fast, cheap Internet access (assuming of course we can get fast, cheap Internet, or keep it where we’ve got it).

    They are about both of those things. But they’re also about that anything that isn’t priced by consumption will see overuse and congestion if congestion is possible at all. It is true that a small percentage of users use an enormous percentage of bandwidth at any point. The Internet isn’t actually like a highway, where congestion i the absence of tolls is inevitable in dense areas, but the point is not entirely without merit.

  • Brett Glass

    A local file sharing system? Why would a university want to host an illegal enterprise on campus?

  • http://www.desjardins.org/david/ David desJardins

    Your example seems to illustrate how bandwidth caps are good. If not for the cap, you would have blithely consumed disproportionate resources without even intending to. A cost for consumption has to be the first step in leading users to use resources in proportion to their value rather than without regard to their value. Otherwise we have the tragedy of the commons.

    That doesn’t mean that a bandwidth cap or limit or sliding cost scale has to be enforced in this punitive way. But you certainly aren’t making a good case for unlimited usage with your example.

  • http://www.socialsecuritybullshit.com Steve Baba

    A local file sharing system? Why would a university student boast about an illegal enterprise on campus? Reading too much Lessig?

  • buckydonegun

    People should remember that his experience (shabby as it was) was on a hotel connection. Some people seem to have missed that.

    While our broadband services are indeed crap compared to what US users enjoy, things aren’t quite that bad. :)

    And as someone else noted, we can’t even use the iTunes store without some trickery anyway.

  • grin

    Not wishing to stir the waters but since I worked for several ISPs which were pretty low on incoming bandwidth I do know that caps originate in two completely different sources.

    1)higher profit. you lure peopleto buy cheap bas price and pay more. but I guess this is the more rare reason.

    2) lack of bandwidth. If you have limited inbound you cannot just live with users using up 50% of your total incoming bandwidth onehandedly. This makes the other users experience terrible (say 3000 ms ping or 0.5 kB/sec), which is not acceptable. What can you do? You can prevent overbooking, and sell “100 kilobit” (that is appx. 10 kilobyte per second transfer rate) internet, run most of the time on 5% utilisation, good luck for this business model. Or you do overbook to try to keep utilisation good (70% is pretty fine) but then you do this for the _average_ users. But what do you do with those who have the right by contract to use 100% of their pipe for 100% of the time? THey use, say, 1000 times more bandwidth than average. So?

    You cap the users, and use a cap which covers 80% of the users, pretty much more than average. They pay nothing more than base fee. And the rest of 20% who notoriously over-use will either self-restrain or pay, and more income makes it possible to buy more incoming bandwidth.

    So caps are (or, in our present case, could be) the best tools for equalised use.

    Now,only if it’s priced and communicated right. First, it is a fee, not a fine, and should be priced as such. Second, it has to be clearly communicated, so people with extreme appetite can decide whether to avoid it at all or not. In our present case it was priced bad, communicated bad, and done in pretty bad taste. But I see the reason behind it, do the math. How much bandwidth do you need to cover 1000 times 5 Megabits? (Since Larry seem to have got that amount.) 5 gigabits? Hmm, anyone care to guess the price of 5Gbps line to NZ?

    Flame me. :-)

  • Don C

    As a House fan, I was going to ask if you got to see the episode (you say the connection cut off).

    But then I thought of something else… were you also, probably equally inadvertently, violating the Apple Terms of Use for iTunes by downloading outside the United States? (That seems to be what the very first paragraph says.) I don’t think Apple means to be pushing HD versions of U.S. shows to New Zealand net connections. I’m surprised they did. (But I suspect you were tunneling or doing something else to get a VPN for security purposes that had the effect of making your location appear domestic.)

    I’m against bandwidth caps — I’ll try to switch ISPs if my cable provider imposes one. But the particular problem you describe may have been at least partially caused by a mismatch between U.S. content expectations and New Zealand’s warped internet space.

  • anon

    This is why I hate software that does auto updates behind your back. Adobe, Microsoft… they all try to update your software in the background, but they don’t realise that they can use up your whole months quota in doing so!!

  • Dartigen

    If you think that is bad, try this – in Australia, many ISPs have excess uses charges.
    These range up to $1 per megabyte. I’m sure we all know the relative size of megabytes, right?

    Anyway, when you factor in Windows Update (for Windows users – of which I am one), anti-virus updates, iTunes updates, and usual web browsing (what with all the embedded videos and suchlike)…I am sad to say that I’m not the only person to end up with over $500 in excess usage charges.
    What’s worst is that there is no notification (from most ISPs) until you get the bill. You are relied upon to check a Usage Meter constantly, which doesn’t always work (sites have glitches, servers have glitches, and it doesn’t always come up with my ISP).

    Oh, and beware of ‘unlimited’ broadband in Australia – it’s not. The best I’ve seen for an ‘unlimited’ plan was 150GB. 150GB is not unlimited, it is 150GB. Granted, most home users won’t use that in a year, but it’s still not ‘unlimited’. ‘Unlimited’ implies that there is no limit to the amount of data exchanged.
    IANAL, but isn’t that technically false advertising?

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