FCC Urged To Allow Charter To Impose Data Caps

In 2015, when Charter Communications first made its pitch to merge with two other companies, it promised to avoid imposing data caps or pay-per-byte for at least three years.

The Federal Communications Commission ultimately approved Charter's merger with Time Warner Cable and Bright House Networks, but with a seven-year ban on data caps and metered billing. Current FCC Chairman Ajit Pai dissented, arguing that the agency should not stop broadband carriers from charging people based on the amount they consumed.

"When the government forbids usage-based pricing, it is requiring Americans who use less data to subsidize those who use more data," Pai wrote. "The elderly woman on a fixed income who uses the Internet to exchange e-mail messages with her grandchildren must pay more so that an affluent family watching online HD video for many hours each day can pay less. This isn’t fair, and it certainly isn’t progressive."



Now, the free-market advocacy group Competitive Enterprise Institute is urging Pai to nix that condition and allow Charter to move to metered billing.

"Hopefully, the FCC’s new leadership will seize this opportunity to take a stand against harmful merger conditions that have nothing to do with the transaction at hand," the organization wrote earlier this month in a blog post. (The blog Stop the Cap, which opposes usage-based billing, this week called attention to the Competitive Enterprise Institute's blog.)

Despite the Competitive Enterprise Institute's assertion, Charter's agreement to refrain from imposing data caps was critical to mitigating potential harms of the merger.

That's because the deal was projected to leave Charter in control of around 22% of the high-speed broadband market -- a proportion high enough that Charter's decisions about billing could have a significant impact on competing online video distributors. After all, if Charter began charging subscribers based on the amount of data consumed, they would have powerful incentives to eschew over-the-top services like Netflix or Hulu.

It's also worth noting that observers as well as consumer advocates disagree with Pai's suggestion that usage-based billing is somehow more fair to consumers than offering unlimited data. They point out that broadband -- unlike, say electricity or gasoline -- isn't a consumable resource. Instead, the carriers' major expense comes from installing the networks, not from transferring data to and from consumers.

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