December 10, 2020

When the pandemic arrived in March, consumers faced shortages of everything from hand sanitizer and Lysol wipes to toilet paper and flour.  Hospitals faced critical shortages of PPE and ventilators.  Supply chains optimized for “normal” conditions weren’t immediately prepared for the unprecedented surge in demand brought on by COVID-19, and it took time for the market to catch up.

But while so many sectors of our economy wilted under this sudden surge of demand, broadband networks proved an exception to this rule.  Internet traffic nationwide increased by 20-35% in the first few days of school closures and stay-at-home orders back in March, yet broadband networks didn’t miss a beat.

This broadband success story wasn’t pre-ordained.  Our remarkably resilient broadband infrastructure is the result of nearly $2 trillion in private investment over the past generation, driven by consumers’ ever-growing demand for faster speeds and more bandwidth.

Of course, some broadband users demand a lot more speed and bandwidth than others.  As broadband providers invest to keep the capacity of their networks ahead of projected usage, they need to account not just for the needs of average users, but also for the smaller number of super-users whose bandwidth consumption is most taxing to the network.

For years, many broadband providers have addressed these super-users by offering them a tiered service – similar to the way they offer small business plans.   The very small segment of residential broadband customers who use the most data pay marginally higher monthly prices than the rest of these providers’ customers, reflecting the fact that these customers’ traffic makes up a disproportionately large share of the network’s capacity.

This kind of tiered plan is sometimes referred to as usage-based pricing, and it prevents super-users from transferring the costs they impose on the network onto the rest of us.  it’s a pretty familiar model in our economy.   A commuter who drives 50 miles a day spends more on gas than one who drives 2 miles a day.  A week’s groceries for a family of ten will, more often than not, cost more than a week’s groceries for a family of two.

But as ubiquitous this model is in our economy, some Far Left activists seem outraged to find the idea applied to the broadband marketplace.  Comcast’s recent announcement of a usage-based pricing plan for its customers in the Northeast – to go into effect in May when we are likely out of the COVID crisis – drew criticism from a predictable chorus of professional industry critics.

Comcast’s new data plan includes a 1.2 Terabyte monthly data threshold – enough data to watch about 500 hours of streaming video in high-definition, or participate in 3,500 hours of Zoom meetings.  The company reports that only 5% of its most data-intensive customers exceed that threshold in a given month – but these 5% of super-users represent more than 20% of all residential traffic on Comcast’s network.

Broadband providers are continually investing – to the tune of roughly $75 billion a year – to give us some of the best internet networks in the world.  The Far Left appears to argue that it’s a moral imperative that these investment costs should be shifted to all broadband users nationwide, rather than asking the most data-intensive, tech-heavy super-users to bear a slightly higher share of the costs.

It’s a bizarre argument – and almost certainly a regressive one – but it’s what passes for consumer advocacy on the Left these days.

It’s an undeniable fact that the broadband marketplace is growing more competitive by the year:  From 2016 through 2019, the percentage of Americans with multiple options for fixed broadband service increased from 55% to 73%.  The emergence of 5G fixed wireless providers like Starry, and the anticipated arrival of low-earth orbit satellite broadband services like StarLink and Project Kuiper, will only accelerate this trend.

To the extent consumers think a providers’ usage-based pricing plans are unfair, competition gives them the option to vote with their feet.  They don’t need activists or government to save them from a well-functioning market.