Netflix asks FCC to declare data caps “unreasonable”

FCC should use broadband deployment power to discourage data caps, Netflix says.
Netflix has asked the US Federal Communications Commission to declare that home Internet data caps are unreasonable and that they limit customers’ ability to watch online video.

Netflix submitted a filing last week for the FCC’s annual investigation of broadband deployment, a review that is mandated by Congress in Section 706 of the Telecommunications Act. Specifically, Congress requires the FCC to determine whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion and “take immediate action” to accelerate deployment if it’s not happening to the commission’s satisfaction.

The commission’s assessment generally focuses on availability and speed, but Netflix wants the commission to add data caps to the mix. "Data caps (especially low data caps) and usage-based pricing ('UBP') discourage a consumer’s consumption of broadband, and may impede the ability of some households to watch Internet television in a manner and amount that they would like," Netflix wrote. "For this reason, the Commission should hold that data caps on fixed-line networks and low data caps on mobile networks may unreasonably limit Internet television viewing and are inconsistent with Section 706."

Such a declaration wouldn't require ISPs to eliminate data caps, but it could pressure ISPs to eliminate the caps or at least offer more data before charging overage fees. In previous years, the FCC has raised the minimum speed requirement in an effort to promote faster speeds.

Just how much authority Section 706 provides the FCC is up for debate, especially after a recent court ruling on municipal broadband that went against the commission. But Section 706 seems to provide at least some authority and specifically states that the FCC may use "price cap regulation" to promote broadband deployment.

Netflix argued that a 300GB-per-month allotment "is required just to meet the Internet television needs of an average American," without accounting for other things consumers want to do on the Internet, like Web browsing and downloading games and applications. "The Commission should recognize that data caps and UBP on fixed line networks are an unnecessary constraint on advanced telecommunications capability," Netflix said.

Comcast, the nation's largest home Internet provider, recently raised its caps from 300GB to 1TB, making it easier for customers to watch online video instead of Comcast's own cable TV service. But consumers' data needs are increasing quickly enough that "today’s 'above-average' Internet consumer is tomorrow’s average Internet consumer," Netflix said.

Data caps also aren't necessary for network management, Netflix argued. The online video provider pointed to a government survey from 2014 in which ISPs said that congestion wasn't a problem on their networks. ISPs have alternatively described data caps "as a way to align consumers' use of the network with what they pay," Netflix said.

But ISPs already offer different speed tiers, with consumers paying more per month for faster service. Netflix said that data caps "are redundant to the speed tiers that consumers are used to" and pointed out that mobile Internet providers generally offer plans with different data caps but don't charge more for higher speeds. Wireless carriers "use data caps in similar ways to the speed tiers common on fixed networks: consumers pay more for faster speeds or pay more for higher data caps," Netflix wrote.

Netflix did not say exactly how big it thinks data caps on mobile networks should be but argued that customers are less likely to watch online video on mobile connections when "data caps are too low" and they have to pay lots of overage charges. Netflix pointed to one of the FCC's own statements, in which the commission said it "cost an average Netflix subscriber... many hundreds of dollars each month to view that same Netflix programming over a wireless provider."

Data cap discrimination

Netflix went on to criticize ISPs for imposing data caps in a discriminatory manner. ISPs can make some video services more expensive than others by counting them against data caps while exempting favored services from the customers' monthly limits, Netflix said.

"Because of a low data cap, an online service may need to pay an ISP to zero-rate its traffic to enable that ISP's customers to access the online service," Netflix wrote. "Such arrangements create an incentive for ISPs to maintain artificially low caps. The Commission should clarify that discriminatory application of data caps skew consumer choices and work against consumer-driven incentives to deploy advanced telecommunications capability."

Cable companies don't want the commission's broadband inquiry to examine data caps. "The Section 706 inquiry is not the appropriate context for the Commission to examine factors that go beyond deployment into other areas, such as broadband subscription, performance consistency, and usage allowances," the National Cable & Telecommunications Association wrote. Such factors "are only tangentially relevant to broadband deployment or availability," the cable lobby argued.

The NCTA said the commission could still explore data caps in another context, such as the FCC's Measuring Broadband America reports. But while the Measuring Broadband America reports offer useful information for consumers, they don't carry the same regulatory weight as the Section 706 assessment.