🚫🧢 (“No Cap”): The Truth about Data Caps and Zero-Rating
🚫🧢 (“No Cap”): The Truth about Data Caps and Zero-Rating
🚫🧢 (“No Cap”): The Truth about Data Caps and Zero-Rating

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    Data Caps Explained

    An internet connection can offer consumers nearly unlimited access to perform their daily tasks: online classes, work meetings via Zoom, grocery shopping, news-gathering on social media, and required leisure of streaming video services. As classes and meetings get longer, and common websites and social media applications grow more data-intensive, consumers need higher data allotments to complete their tasks. But that work, school, leisure, and opportunity is capped by internet services providers.

    Since 2008, wired and wireless internet service providers have implemented nearly ubiquitous data caps that primarily seek to maximize profits by “limiting the amount of data consumers can use per month, charg[ing] consumers for using data beyond the predetermined amount, or combin[ing] the two.” (1) You ask, “Why do broadband providers cap the data their subscribers use every month?” Well, there are two reasons, but most of it just comes down to money.

    First, broadband providers contend that usage-based pricing practices like data caps prevent users running the most data-intensive programs from degrading service for the rest of us. Second, broadband providers contend that data caps somehow de-congest data consumption.

    Network congestion arguments in this debate operate on an unsubstantiated and uncontextualized assumption of scarcity — there is only so much bandwidth, and a few people are going to use it all. Yes, some network congestion arguments have prevailed with wireless broadband because of the atmospherical and technical limitations of the medium. However, congestion is not as consequential for fixed broadband. Broadband providers reason that instead of limiting these internet “super-users” (which would be discriminatory and litigated accordingly), they need to implement data caps for all consumers, which they claim is fair and unbiased. However, scarcity is not a reality for broadband providers, even with super-users. Internet functions by “statistical multiplexing” meaning that bandwidth is dynamically allocated and reused without a limit “[u]nlike other utilities such as water, electricity, gas or oil.”

    This means that no super-user is consuming bandwidth at the expense of other users; you’re not going to receive less internet because your neighbor runs a Twitch channel, for example. Rather, super-users are simply using more internet more often, and the “super-user discount” (the fact that broadband providers aren’t able to charge them, specifically, for this “above normal” usage) angers providers more than anything else. This brings us to the real reason broadband providers apply data caps to consumers: money. Applying data caps to all of us, therefore, enables broadband providers to pat themselves on the back for devising clever “overage” fees.

    Furthermore, scarcity does not exist on a systemic, network level. Cisco’s Visual Networking Index estimates that consumer ISP traffic will nearly double between 2018 and 2023. The Cisco report and other advocates preach “more infrastructure” as the collective and comprehensive solution — not slowing speeds for individual users far below what they actually use and what the network can reasonably handle.

    Zero-Rating in the Context of Data Caps

    Okay, we now understand that data caps are artificial limits to consumers’ internet usage. A variation on the data caps theme is zero-rating. Under zero-rating schemes, broadband providers do not include certain apps, programs, and services within the data caps they have set. Zero-rating incentivizes the usage of certain services over others, allowing the broadband provider to steer consumers to particular sites and programs — limiting consumer choice in the process. For instance, providers often zero-rate certain music and video streaming services, Facebook, Google, and Wikipedia — rendering unlimited usage of these services “free” for consumers, meaning their usage doesn’t “count” toward any data caps. But what about super-users who watch high-resolution movies and listen to high-definition music 24/7? Are they throttled at all? No, because as long as broadband subscribers are using the zero-rating-approved music and video streaming services and specific websites, their usage is on the house.

    The process for deciding which sites and apps receive zero-rating status is a murky, pay-to-play regime with dire consequences for consumer choice, democratic participation, and long-term internet innovation. First, companies often discount their own affiliated video streaming services in a profit-maximizing move to incentivize their consumers to use their adjacent services. In 2015, T-Mobile trailblazed zero-rating video and music applications that qualified for its “Binge On” program feature. Until recently, AT&T zero-rated its own video streaming service HBO Max, and cried foul when it had to cease the arrangement. So, zero-rating is ISP control couched in permissive language. Consumers should be free to watch any video they want “whether it’s [HBO Max,] Netflix, Twitch, or their local church’s Sunday service” without the broadband provider’s invisible hand.

    The Net Neutrality Wrinkle

    In 2015, the Federal Communications Commission issued its groundbreaking Open Internet Order inaugurating the short-lived regulatory net neutrality era. The Order prohibited broadband providers from blocking or degrading services or websites, from soliciting paid prioritization, and from penalizing or blocking users that attempt to add devices (so long as those attached devices don’t degrade or harm the network). The Order contained a catch-all general conduct rule to empower the agency to take action against unforeseen broadband provider practices to evade the net neutrality rules. Although the Order did not prohibit data caps outright, it contained a network of rules that disfavored them. Unless carefully tailored, data caps would probably run afoul of the catch-all general conduct rule, likely causing the FCC to investigate.

    However, in December 2017, the FCC repealed the Open Internet Order and halted all Obama-era investigations into wireless providers’ zero-rating practices. Now there’s nothing to discourage broadband providers from continuing to implement data caps and zero-rating carve-outs to work around net neutrality principles (e.g., no throttling). Broadband providers are free to throttle, fast-track sponsored data, and prioritize services and programs that fill their coffers regardless of consumer choice. In response, California has taken matters into its own hands by passing net neutrality laws in 2018 to protect their citizen-consumers (SB 822). Section 3101(a)(6) prohibits any broadband provider from “zero-rating some internet content, applications, services, or devices in a category of internet content, applications, services, or devices, but not the entire category” (emphasis added). Section 3101(a)(8)(B) says: “Zero-rating internet traffic in application-agnostic ways shall not be a violation of subparagraph (A) provided that no consideration, monetary or otherwise, is provided by any third party in exchange for the internet service provider’s decision whether to zero-rate traffic” (emphasis added).

    Neither the rescinded 2015 Open Internet Order nor the enacted SB 822 California law expressly prohibits zero-rating, and their omission may be best understood as “features, not bugs.” The drafters of both laws wanted to prohibit zero-rating, but created high legal hurdles to dissuade the data cap practice. Absent an outright ban, California’s net neutrality law creates narrow exceptions for when zero-rating would be appropriate and permitted. My colleague Harold Feld correctly points out that SB 822 does in fact permit broad category-wide exemptions (e.g., “all telehealth apps for veterans” instead of one designated VA Video Connect application since the latter would hinder VA-consumers’ choice of telehealth applications), and more broadly illuminates, ISPs’ “cynical ploy to use veterans as pawns while denying them [the] benefits California’s net neutrality law.” Advocates criticize broadband providers for offering the false dichotomy of “some service versus no service at all” instead of offering consumers the truly unlimited internet service they misleadingly advertise for a reasonable, competitive price. The fate of consumer choice in websites, web services, and applications should not rest in the hands of broadband providers. Consumer choice should actually rest in the hands of consumers.

    Zero-Rating Isn’t the Answer. Data Caps Are the Problem.

    Evidence (referenced above) shows that there is no basis on which companies need to impose data caps. Consumers and the FCC should no longer accept as given that data caps have a role in the broadband experience for American consumers. Moreover, zero-rating gives internet service providers gatekeeper control. Consumers and the FCC should no longer tolerate self-dealing zero-rating schemes masquerading as feigned benevolence. Disallowing all data caps would eliminate the incentive for zero-rating and liberate websites, web services, and web-based applications from the grips of invisible decision-makers — putting consumers back in control. To put consumers back in control, we need the FCC to reassert its jurisdiction over broadband and eliminate the practice of imposing data caps on consumers. By eliminating data caps, we eliminate the need for zero-rating schemes. That’s the honest truth — “no cap.”