Data Caps May Result in Higher Prices for Internet Customers

The U.S. Government Accountability Office warns that data caps may drive the prices of Internet service up for everyone, instead of keeping costs low for the people who only use a small amount of data. Internet service providers do not have enough competition in some places, which would make it easier for ISPs to abuse a usage-based pricing system. The GAO recommends that the Federal Communications Commission develop a voluntary code of conduct for ISPs.

streamingCurrently, there is not a wide range of Internet users of a usage-based pricing. However, according to the GAO report, if that number were to grow, ISPs could raise prices on consumers, particularly in areas with little competition where ISPs could make take-it-or-leave-it deals. ISPs argue that they would use this pricing model to lower prices for people who use less data.

In addition, consumer welfare would be at risk. Customers may have to start limiting their Internet usage by cutting back their own access to content and applications. Consumers may decide to take the risk of a cyberattack, because they don’t want to use the data to download a security update.

The GAO urged the FCC to create a voluntary code of conduct for ISPs, similar to a code that is already used by the wireless industry. This code would require that ISPs are transparent about the data use and pricing.

The FCC, however, doesn’t believe that’s necessary until data caps become more common, reports Ars Technica. They do not currently have a lot of consumer complaints about the issue. However, the FCC will continue to monitor the industry.