The Federal Communication Commission recently announced that it had officially launched an investigation into how broadband data caps affect consumers and competition. Specifically, the commission stated the investigation, or Notice of Inquiry, would explore limits on data usage and seek public comment on whether such limits warrant government intervention to ensure consumers have reliable access to broadband internet.
While there is nothing wrong with an agency seeking more information, the commission’s framing of the issue shows that it is considering rate regulation by another name. Such an outcome would be disastrous not only for the broadband market but also for the very people the commission aims to protect — consumers.
The debate over data caps is not new. For years, commentators have debated the merits of usage limits — commonly known as usage-based pricing — where internet service providers control how much data or bandwidth is available to consumers. This is typically done through the different service plans that ISPs sell to consumers. Different plans cost different amounts and offer different limits on data usage. For instance, unlimited data plans tend to be more expensive than those with data limits, which charge users when they exceed those limits.
The way critics portray it, consumers have a seemingly unsatisfiable demand for data that is propelled by a growing reliance on smartphones and connected devices for social media, streaming services and other data-heavy applications. That high demand has made broadband no longer a nice-to-have service but a must-have service that is essential for everyday life. As such, they think it is unfair for ISPs to restrict data usage, which they fear will lead to artificial scarcity, worse service and higher prices. Consequently, they seek federal intervention to halt such practices to ensure broadband access remains equitably available to everyone.
It appears the commission agrees with at least some of these arguments. For instance, in explaining its reasoning for the Notice of Inquiry, the commission implies that any restrictions on capacity are bad by default since they “persist despite the increased broadband needs of consumers.” In other words, the commission seems open to new rules — but only under what it views as the right circumstances.
Unfortunately, regulating data caps would be a huge policy mistake regardless of its legality. Those regulations would undermine the role that price differentiation plays in honoring consumer choice, and it would complicate the distribution of an increasingly scarce resource.
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Nate Scherer is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.