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Today, most Internet service providers (ISPs) have implemented some form of a data cap.(1) These caps limit the amount of access a consumer has to data before they are charged surplus fees or cut off from the network. Although there is little clarity as to why such caps are necessary, their unintended consequences could be disastrous for vulnerable populations.
There are many well-documented economic and competitive concerns about data caps. Caps are not popular with consumers, nor are they an effective means of managing network congestion. In fact, when one Comcast engineer was asked why the company’s caps had been set at current levels he responded that he had “no idea,” as he was involved only in the technological aspects of the company, not “business policy.”(2) This open admission that there is no technological necessity for data caps goes to show that ISPs’ decisions to implement caps is primarily driven by profit.
How Do Data Caps Affect Low-Income Consumers?
Data caps are particularly problematic for low-income individuals who rely on their connectivity for healthcare, job and education opportunities. They may find themselves facing unexpectedly large fees at the end of the month as a result of surpassing a data cap.
A 2012 study of data caps by Microsoft Research and the Georgia Institute of Technology(3) suggests that the uncertainty associated with invisible balances, mysterious processes, multiple users, and the ways in which these factors affect bandwidth usage can add a layer of confusion to service. This confusion can lead to huge costs to consumers, and have particularly large impacts on low-income consumers, who may already have stretched their budgets to afford broadband service and cannot afford overage fees.
The opaqueness of data caps can further lead consumers to make poor purchasing decisions as they may be unclear as to which data plan to buy, causing them to buy too much or too little data. A Government Accountability Office (GAO) report states, “if consumers do not understand their data usage, they may choose plans that include allowances that are too large — and cost more — than needed. Alternatively, they may purchase too little data and potentially face overage charges...This can lead to difficult and unnecessary budgeting tradeoffs, especially among lower income and minority households.”(4)
According to Sandvine, in 2014 bandwidth consumption for a North American household averaged 54GB per month. However, a report by Open Technology Institute (OTI) reveals,
A household that signed up for Time Warner Cable’s “Essentials Internet” discount on a standard broadband package and limited its total usage to 5GB would save $8 a month on its bill. But the price discount is hardly proportional to the bandwidth reduction. For a 23 percent discount on the monthly bill, an average household would have to reduce its data consumption by 91 percent, and if an Essentials Internet user consumed the average amount of bandwidth one month, he or she would face $25 in overage fees.(5)
A recent report by the Pew Research Center found that nearly thirteen percent of low-income American adults are smartphone dependent, meaning their phones are their primary means of accessing the Internet. These individuals are negatively affected by data caps at a much higher rate than non-dependent individuals. With no other means of accessing health care, education and career information online, nearly fifty-one percent of smartphone dependent users frequently or occasionally reach their cap, as opposed to thirty-five percent of non-dependent users.(6) These caps can have a much larger impact on low-income consumers, and the fees associated with surpassing a cap are unacceptable for low income families trying to access essential services offered online.
Conversations with employees and managers at local chain store branches suggest that this preference for electronic application is increasingly the norm, with comments ranging from ‘it’s all electronic based’ to ‘everything is online’ and ‘standardized.’ This was especially true at stores such as Family Dollar, Home Depot, Target, Walgreens, and Walmart, which only accept online applications.(7)
Low-income individuals must use precious data to research a company online, find an application and fill it out. If they exceed their cap, they may not be able to finish job applications due to suspended service, may have to pay exorbitant overage fees or spend additional time on the applications if service is throttled.
These extra fees can cause a “free” online course to become surprisingly expensive.