For years, home Internet providers have offered an all-you-can-eat approach to data. Users pay one price per month, based on how fast they want their Internet to be, and then use as much data as they want.
But recently, Comcast Corporation (NASDAQ:CMCSA), AT&T (NYSE:T), and others have begun testing data caps for home Internet. They won't call them caps, but essentially if a user goes over a preset amount of data, then they have to purchase more.
Specifically, Comcast is testing out 300 GB-per-month data limits in several places across the U.S. If users in those areas want unlimited data, they can pony up an additional $30 to $35 on top of their bill to get it. And if they go over the initial 300 GB, they pay an additional $10 per 50 GB of data.
To put this amount of data in perspective, ArsTechnica recently mentioned a Sling TV report that said if users streamed about 4.8 hours of TV per day they would hit 300 GB of video streaming each month. Data from Nielsen shows that adults in the U.S. spend an average of more than 5 hours watching TV each day. So it would appear Comcast's data limits are already coming very close Americans' TV viewing habits. As more viewers start streaming their content (as opposed to watching it through cable or satellite) it's easy to see how users could start reaching their data limits quickly.
Recently, Comcast CEO Brian Roberts shared his thoughts on why his company is testing out data caps: "Just as with every other thing in your life, if you drive 100,000 miles or 1,000 miles, you buy more gasoline. If you turn on the air conditioning to 60 vs. 72, you consume more electricity," he said. Roberts compared the new caps to the same style of data billing that cellular companies implement. "The more bits you use, the more you pay," he added.
While part of that logic holds up, ArsTechnica notes that comparing Internet usage charges (which are unregulated) to energy usage fees (which are regulated by the government) isn't exactly an apples-to-apples comparison.
And it's not as if Comcast needs to limit how much data users consume in order make Internet connections work better (as cellular carriers do). The company said it isn't implementing the data caps to relieve congestion, but rather as a "business policy" (read: to make more money).
AT&T implements data caps, too
Similarly, AT&T's fixed-line Internet services can come with varying levels of data caps. For DSL customers, Internet data is limited to 150 GB, while U-Verse customers receive 250 GB, and GigaPower fiber customers receive either 500 GB or 1 TB of data each month.
Just as with Comcast, AT&T's Internet customers can spend an additional $10 to receive 50 GB of data. According to AT&T's website, just 4% of its customers currently use more than 150 GB per month.
So why all the fuss if just 4% of AT&T Internet users and 8% of Comcast users go over their data limits? Because Internet users are constantly chewing through more data each year, and we're likely to catch up to those preset data ceilings very soon.
Roughly 21% of Americans are "almost constantly" online, and an additional 42% go online several times a day, according to a new study by the Pew Research Center. And not only is the amount of time we spend online increasing, but Americans are streaming more video, which quickly burns through data.
As The Consumerist noted earlier this year, streaming video already accounts for half of all primetime data traffic, and that's likely to go up. As more users look to video streaming for their at-home content needs, all of those data caps will be reached faster.
The rise of data caps
The problem for consumers is that these new data caps are all but inevitable in the coming years. With major players like Comcast and AT&T already implementing some sort of caps now, and with more data usage coming in the future, it's hard to imagine Internet providers walking away from the revenue these data cap overages will provide.
As more Internet providers see an opportunity to tap data usage as a new "business policy," as Comcast has, it appears we're all in for higher Internet bills or at least curbed usage to stay under our data caps.
Chris Neiger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.