New media industry unlikely to be affected by bit caps, say entrepreneurs & observers

New media executives are greeting news of restricted bandwidth usage at Canada’s largest high-speed Internet service provider with trepidation. They’re concerned that while the limits are sufficient for today’s applications, consumers might be frightened off using new services for fear of incurring steep charges. Last month, Bell Canada, which has about 900,000 high-speed Internet subscribers, announced new pricing plans for its Sympatico high-speed DSL service that include a "bit cap" of five Gigabytes for both upstream and downstream traffic at a price point of $44.95/month at a speed of one Megabit per second. Prior to the change, usage was unlimited. Additional use now costs $0.70 per 100 Mb. Heavy users are being offered a new Ultra service for $69.95/month with speeds of up to 3 Mbps and 10 Gb of data up and down. Rogers Cable Inc., which has more than 500,000 high-speed Internet subscribers, is expected to follow suit with similar caps and prices later this summer. The moves are intended to make high-bandwidth users pay for the provision of additional network capacity to overcome bottlenecks created by their heavy use. The Residential Broadband Users Association (RBUA), a Toronto-based high-speed customers’ rights group, was quick to condemn the new pricing structures, arguing that the cap on use could dissuade consumers from using new advanced applications. A June 1 RBUA media release states: "Another victim of bit-capping will be Canada’s cutting-edge new media sector. Canada prides itself as a world leader in the broadband field for spawning a number of innovative ventures that benefit directly from the growth of unregulated high-bandwidth applications. " Chris Weisdorf, president and technical director of the RBUA, tells Canadian NEW MEDIA the caps are unnecessary in the face of rising operating profits at the biggest providers of high-speed access, and punish non-abusing users unfairly. "When it’s such a small number of users affecting the service it’s easy to track these people," he says. "They can get rid of them fairly easily. But, no, instead they choose to punish the 99 per cent of the subscriber base which is using the service fairly." Sympatico spokesperson Andrew Cole doesn’t agree, saying the vast majority of users won’t exceed the cap. "The bottom line is that over 90 per cent of our users currently use on average about 1.5 Gb each month. So, the notion of bandwidth usage charges – although it is a new one – by and large won’t affect most users," he tells CNM. "We’re evolving as an ISP, and we’re also part of a larger family that has online content…We encourage people to use the Internet and to enjoy all its benefits. This is the early stages. Bear in mind that this is a business that’s four years old. People are still trying to figure out what’s a profitable business model and so on, and this is one step that we’ve taken to try to ensure that we provide our customers with reliable Internet access well into the future." Weisdorf says more users will be affected than Sympatico anticipates. A chart on the RBUA’s web site indicates that a user would break their cap listening to a little over an hour of high quality Shoutcast.com music per day, watching 45 minutes of movie trailers per day, or watching a little over two hours per day of ctvnewsnet.com. (A full list of bandwidth use is available at http://www.rbua.org/bitcap/bandwidthlimits.htm.) None of the new media executives and observers contacted by CNM, however, agree with the RBUA’s assessment. Most express some sympathy for the plight in which high-speed providers find themselves as they try to provide service, and say Sympatico’s 5 Gb up and 5 Gb down cap is sufficient for all but the most hardcore applications such as downloading full-length feature films. Ted Boyd, president of Iceberg Media.com Inc., says the bit caps could eventually affect his company’s business plan for providing Internet radio, but that the capacity should be enough. "From our perspective, I can understand why the various providers are moving toward this model. It’s not ideal given that we are in the business of providing streaming, real-time content – primarily of an audio nature – into the home. Having said that, however, based on the amount of bandwidth that would be used streaming our service 24 hours a day into the home for 30 days in a row, you’d be hard-pressed to use up that capacity." Still, Boyd doesn’t welcome the end of unlimited usage plans. "Generally, it’s worrisome in the sense that we’re trying to drive usage, trying to drive consumption ... Anything that discourages that, from our perspective, is not ideal. The reality is, though…that the economics of the Internet are fundamentally changing, and I don’t think it’s entirely unfair that a pay-as-you-play model is evolving. Perhaps it does make sense that those who use extreme amounts of bandwidth should pay for it. The issue is, what is the right price? " Stephen Comeau, president of Halifax-based ITV and web shop Collideascope Entertainment Inc., also emphasizes the bind in which high-speed providers find themselves, but says caps on usage could wind up hurting the industry. "The big problem with the new media industry is the lack of a revenue model," he says. "People conjecture that the lack of a revenue model is based on poor consumer uptake of either set-top boxes or broadband or these other delivery systems into the home. You need a base level of penetration into the home market for your product in order to have a viable business. Capping the upload and download is going to do nothing to encourage the penetration into the home market to the natural evolution of a business model coming up." Comeau says bandwidth is still a hurdle to offering advanced content, and that current offerings must take limited capacity into account. "We want to deliver as rich an entertainment experience as possible, hoping that that will drive continued subscription and a desire for that kind of product…If decent broadband were more widely deployed than it is now, then we would certainly be increasing the bandwidth that we would use for that product. That would mean a greater experience for the consumer, as well as increased revenues for the broadband providers." He notes that as more applications are brought online that use higher bandwidth, more and more users will find themselves exceeding the cap. Raja Khanna, new media entrepreneur and president of Snap Media Inc., echoes the belief of both Comeau and Boyd that the caps likely won’t have much affect in the near-term. "It’s a concern," Khanna says, "but it’s not a huge one. It’s temporary. It’s a really technical thing. People have to learn that five Gigabytes is a lot. When people hear there’s a cap and say, ‘oh my God! I can’t download stuff anymore!’ – in reality you can do pretty much anything you want, except steal every Hollywood movie, and still be within that cap. Eventually people will understand that and there won’t be any worry at all…Unless you’re a professional movie scammer, it’s not going to be a big deal." Snap is noted particularly for its current web site accompanying the popular Degrassi Kids TV series. Asked whether users, mostly tweeners, who interact with the site and each other would be affected, Khanna laughs. "You could use Degrassi 24 hours a day every day of the month with you and your 40 relatives, and you wouldn’t go over ." Though some executives aren’t worried about bit caps immediately affecting demand for their services, observers note that innovation in one important area – gaming – could seriously suffer. Geoff Martin, editorial director of Total Gamer tells CNM that while current multi-player games don’t consume a great deal of bandwidth – and can, in fact be played using dial-up – a new trend is toward games where users download the necessary software in real-time such as on GamesMania.com. But, he says, gamers shouldn’t be immediately affected. "As far as I can see, the only people who are going to get hurt by this are those downloading movies – pirated movies – or downloading MP3s, and you’d have a hard time going through five gigs of MP3s." Though industry experts say the effect of bit caps won’t likely be felt in the short-term, Weisdorf maintains that capping usage remains unfair. "I’ll agree with Rogers and Bell and everyone else that a lot of people simply won’t notice it, but that doesn’t mean that it’s right. A lot of people won’t notice right now, but it’s limiting a lot of potential later on when they do want to take advantage of this service that they’re just now learning about."

New media industry unlikely to be affected by bit caps, say entrepreneurs & observers

Broadcast | June 14, 2002

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