Data Caps – Bad, Ugly or Evil?

That’s right, there is no way in the world the data caps imposed by ISPs are in any way good. They are either bad, ugly or evil – or, most likely, all of the above. Here’s why.

By limiting (in any way) our consumption of internet as a resource, ISPs are essentially setting up a mental model that “your internets may run out“. Imagine the next iteration of home routers that, in addition to bandwidth metering will have an off-switch, once you hit 99.9% of your monthly allowance it will switch your connection off to prevent an outage. Your car has ran out of gas. With astronomically high overage fees it’s obvious no one would want to pay for it. Households will – consciously or subconsciously – limit their use of internet. Which means – a lot less online video, online games, in fact – a lot less of our usual online activity as a whole. Your Facebook updates don’t take much, but any video streaming (YouTube/Hulu/Netflix), Skype/Oovoo video chat or games downloading goes out the window. Those cute baby videos you’ve uploaded for your grandma in Michigan – bye bye. If you’re just checking e-mail or working on some documents – you may still fit into your limit, but if your job requires some massive data movement or exchanging large files (think – video editing or backups or database dumps to your local development environment) – goodbye working from home.

Who is going to win? In a short term – ISPs, of course, that will keep profiting until their customers will adjust to new usage patterns. After that (I’ll give it a few months, two – three quarters tops) their cash inflow will significantly drop. In addition to that – they’ll keep spending a fortune on army of lawyers battling class action suits where they will have to explain our computer-illiterate judges why 100kb picture takes 120kb of bandwidth (HTTP headers overhead? Good luck with that mumbo-jumbo). That is – instead of investing money in upgrading the infrastructure.

Who is going to loose? Everyone else. Consumers will suffer the most, since there is no real way we can vote against that, thanks to government supported monopolies (try finding an alternative to a high-speed ISP in your area). We may actually go back to REAL human interaction, exchanging movies and TV programs via removable flash drives and hard drives (Arrgh, those damn pirates would never stop, would they!). Content providers will see a decrease in demand which, in turn, will result in a lot less money available to be invested in the whole online content business model. They will have to spend another fortune on lobbying laws and regulations in their favor – instead of spending that money on acquiring better content or improving their own infrastructure (CDNs and such).

Most likely in a few years we’ll see giants like Google, Apple and, maybe even some movie studios, if they hire CEOs that can see a bit further their noses and expensive suits, will lobby for some kind of solution that will neutralize the negative effects of caps, at least to a satisfactory level. However, the time we will lose will inevitably put us so far behind our main technology competitors that we may never be able to catch up. It’ll be like cell phone market – we’re still paying around $5 for 200 SMS (while they are totally free to phone company) and are capped to measly 2GB of cell data plans while in some other “not-so great” countries people already using their cell phones for video streaming and full blown video conferencing. Try that on your 2GB plan of “fastest some-G network” that drops regular voice calls like crazy in the middle of the largest US cities.