13,000 Complaints Submitted By Consumers About Comcast's Usage Based Internet Pricing

Nobody wants to pay more than they have to. Earlier this week, Cut Cable Today reported that consumers have filed 13,000 complaints with the U.S. Federal Trade Commission (FTC) about Internet charges by Comcast. Many consumers have objected because the pricing change resulted in higher monthly Internet bills.

First, some background. Comcast announced in 2012 its plan to move from data caps to usage based pricing. Usage based pricing means if you use or download more, you pay more. CNN Money reported in 2012:

"Comcast on Thursday decided to get rid of its controversial 250 gigabyte-per-month cap for its broadband customers, replacing it with a usage-based billing system. The company put its current cap in place in 2008. The decision was aimed at a small number of Internet users who Comcast felt were abusing their all-you-can-eat privileges by downloading a steady stream of HD movies... Video drove the majority of consumer Internet traffic for the first time in 2010, making up 53% of all uploads and downloads... Comcast said it would lift its cap and instead put in place a tiered system like the ones Verizon and AT&T use for their wireless data services..."

Comcast Internet customers would get 300 Gigabytes (GB) per month and pay $10.00 for every 50 GB of additional data. The broadband provider ran regional tests in several locations: Savannah and Atlanta, Georgia; Jackson, Mississippi; Charleston, South Carolina; Huntsville and Mobile, Alabama; and central Kentucky. Comcast's plan is to roll out the new pricing wherever possible nationwide after trials are completed.

It its report, Cut Cable Today said:

"We were told that more than 13,000 complaints had already been filed with the Federal Communications Commission that fit our search criteria about Comcast’s unethical practice of imposing data caps. Due to the time it would take to process all 13,000+ of these complaints, we weren’t able to get our hands on all of these complaints, but we did obtain just under 2,000 complaints filed since Comcast started rolling out the caps."

Some of the complaints are about Comcast's data usage meter:

"... they offer a ‘data usage meter’ online that simply tells you how much data you have used every month with no detailed statement as to the accuracy of it with no way to view where the data every month is being allocated, an example would be how much data is being used on Netflix or other streaming services. At the moment it simply says you’ve gone over without any real feedback to tell you exactly where the data was used and could potentially be used to fraud people into paying more for services as there is no way to dispute the data usage."

Not good. Feedback is useful only when it is relevant. Another similar complaint highlights both the problem and the need for independent verification:

"... For every 50GB we consume over the 300GB allotment we pay a fee of $10. However, every month they grossly overestimate the usage on our account... they currently place us at 271GB of 300GB (according to their online meter) used for the month of September. However, our FreeBSD router tracks the total data used (outgoing or incoming) on WAN and only reports a total of ~147.054GB consumed in the same time period. There appears to be a huge discrepancy between what Comcast reports and what is actually being consumed... the difference is too large to be considered normal and it has been consistently overestimated in the past year..."

Not good. Feedback is useful only when it is accurate. One complaint from Nashville, Tennessee indicated how much higher monthly overage charges could be:

"Comcast just surprised me with a bill that shows that I owed $180 for over cap surcharges. I called the same day I got the bill, and they also let me know that I owe another $220 for over cap surcharges. (That’s right, a surprise $400)."

Unreliable or inaccurate usage meters place the burden on consumers to independently track their broadband usage, and then apply for credits. See Lifehacker, C/Net, and PC Magazine for suggestions about how to monitor your usage. The situation is intensified by websites that automatically display multiple video advertisements which consumers often can't stop. Maybe usage-based internet pricing will push more consumers to install ad blocking software on their computers.

The Internet has continued to evolve since 2012. The internet has become indispensable for entertainment, shopping, telecommuting, small business start-ups, education, online classes, and a lot more.  Add in video advertisements, and today's Internet can easily increase consumers' usage. A consumer from Georgia concluded:

"There is no way that [Comcast] can justify this as being fair or right: it’s price gouging, pure and simple."

I've been around business long enough to know that any skilled executive can hide a price increase with a usage-based pricing plan. It's all about where the triggers are inserted.

A complaint by a consumer in Loganville, Georgia highlighted two key problems: the inherent conflict of interest and lack of competition:

"This practice is anti-competitive because Comcast is a content provider. There is no reduction of your data limit if you have one of their TV packages and watch OnDemand content. However, OnDemand programming provided by other providers like DirecTv or internet services like Netflix will result in a reduction in your allotted data limit. This practice steers consumers into Comcast TV packages. Modern internet content is show in [high definition] or even 4K and the allotted data mandated by Comcast is not sufficient to enjoy the content from the provider of my choice. This practice is also deceptive. I have all data usage alerts provided by Comcast turned on. This month, September 2015, I received my first notice that I had reached my data allotment by phone call. The phone call stated that I was reaching my data limit. When I logged into my account I was already 64GB over my 300GB allotment. There was no notice that I had reached my included data allotment. I believe Comcast practices price gauging because they know that there is not a competitive broadband provider in my market. AT&T does service this market but only offer DSL at 6Mbps [download] maximum. The only significant provider of broadband is Comcast. This leaves me with no option but to pay whatever Comcast wants to charge for service..."

That DSL download speed mentioned is below the minimum benchmark of 25 megabits download and 3 megabits upload set by the FTC. This worldwide study found that municipal or community broadband networks provide consumers with the best value (e.g., highest speeds at the lowest prices via wired lines). Regular readers of this blog are aware that there are 19 states with laws that prevent local towns and cities from forming their own municipal broadband networks. These laws contribute to the lack of competition, and keep your monthly Internet prices higher than otherwise.

Several politicians and Presidential candidates support these states' laws that limit competition, under the guise of "states rights" freedoms. This subterfuge helps their corporate donors, and limits (and ignores) both the freedoms and rights of people in local cities and towns to get and develop their own faster, more affordable high-speed Internet services.

What are your opinions of Comcast's usage-based pricing? If you are a Comcast Internet customer, has your monthly Internet bill gone up? Did you file a complaint with the FTC?

Comments

[Chanson de Roland]

The report, supra, describes a classic problem: Firms, here cable companies, in non-competitive regional markets for cable services, provide that service to consumers at excessive prices, what economists call excessive rents, which they can do because the markets for broadband cable services are not competitive. But the foregoing is just one insult to competition. The other, which a complainant, supra, from Georgia described, is that Comcast and its ilk who provide broadband service and content, whether it is licensed or originally produced content, can use their pricing power in ways that prevent those who offer competing content from having a fair opportunity to compete by increasing the price or availability of that competing content. Taken together these are great evils that allow those providing broadband services to unfairly diminish consumers’ welfare by charging excessive prices and to hinder, if not halt, competition from other providers of competing content.

But no economists or lawyer, who is familiar with antitrust law would despair, because they know that there are classic remedies to the forgoing evils that arise from lack of competition. First, the government and the courts can use their powers to restructure the market so that it is competitive. One way of doing that, which would also do much to restore the finances of the U.S. Post Office, would be to charter the U.S. Post Office to become a broadband ISP, with a charter to provide broadband services throughout the nation. Congress would provide the initial capital investment and subsidies for sparsely populated areas, where profitable broadband isn't possible, but then the Post Office would fairly compete as profit-making firms with existing private broadband services, but its profits would be capped at some level or return on investment and/or profit margin net of costs, with the requirement that, after capital expenditures, its prices reflect the cap on its profits.

If for some reason that solution to create a competitive market for broadband would not work or would not work in certain areas, government, here the FCC, could and should use its authority to regulate the price and other features of broadband service, wherever fully competitive markets don't exist to protect consumers and providers of competing content.

And there is a third solution: Local government can provide community broadband service to its citizens. As the Editor notes here and as he has done in the past, community broadband, i.e., when a local government builds and provides broadband service, has been quite successful here, bringing excellent broadband service at lower prices, when well executed. As for the laws of the 19 States that prohibit their local governments from providing community broadband, which are, I believe, all Republican controlled red states--with Republicans supposedly being for competition and against government regulation that hinders competition--those laws appear to be invalid as illegal interference with an FCC ruling to the contrary. So for any community in those 19 states that wants to provide community broadband, I would say take your state to the FCC and, if necessary, federal court to strike down those laws and then build your community broadband service.

The foregoing are not radical, leftist ideas but are standard remedies to correct the evils of non-competitive markets that have existed in the economic literature and the law since the days of President Theodore Roosevelt in late 19th Century, and have been authorized especially where, as here, broadband service is necessary for commerce and to live a modern life. The forgoing solutions are regular features of all regulated utilities and are routine both here and abroad.

So why aren't we implementing these solutions here to prevent price gouging and other anti-competitive behavior in the markets for broadband service here? Well, the answer to that is easy: Or corrupt political system, where lobbyists legally, though immorally and perniciously, pay for the laws and government actions that they want, won't permit it.

So I am content, because I am happy once I know the rules of the game and who owns who and who works for who. However, those of you, who are not so easily contented with greed and corruption that affects and diminishes your use of broadband Internet service for all that we use it for, may well want to hold your legislators, state and federal; the Department of Justice; the President; and the FCC responsible for failing in their duty to provide the benefits of competition to America by either restructuring markets to provide vigorous competition or regulating markets, which can't be made competitive, to protect consumers and other business from the evils of monopoly or oligopoly control of the markets for broadband service.

We are certainly getting mugged on this one.