Will Broadband Internet Metering Hurt SMBs?

As some major ISPs test usage-based Internet service plans, startups and other smaller companies worry that "metering" could adversely affect how they do business.

Kevin Casey

July 25, 2012

7 Min Read
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Could the broadband Internet boon enjoyed by so many small businesses soon become a burden?

The scenario sounds farfetched in an age when high-speed Internet access is commonly considered a given, right up there with indoor plumbing and electricity. But that assumption is linked with another one: Unlimited bandwidth for a fixed price. While that's readily available in much of the U.S. today, major Internet service providers (ISPs) are testing new ways of charging customers based on their actual consumption instead of a fixed-rate model--not unlike how power utilities bill electricity by the kilowatt hour. Perhaps a better comparison is the overage charges that wireless providers levy on customers who exceed their plan's allotted voice minutes or data in a given billing cycle.

Time Warner Cable is currently piloting a metered plan called Essentials Internet Plans in parts of Texas. It offers customers a $5 monthly discount in exchange for opting into a 5 GB monthly bandwidth limit; each additional GB costs $1, up to $25 extra per month. Those data allotments and price points are obviously aimed at light home users, not businesses, but some feel that the program is a precursor for a wider industry change: The end of the all-you-can-eat bandwidth buffet.

"Metered broadband business service is coming and it'll be sooner than anyone expects," said Michael Bremmer, CEO of Telecomquotes.com, via email. "It drives [ISPs] crazy that they can't bill by the byte yet."

[ Are you prepared to keep up with the constantly changing rules of SEO? Read more at What's Next In SEO For SMBs: 6 Predictions. ]

Comcast will begin testing usage-based broadband service in Nashville, Tenn. on August 1, with plans for a similar trial in another unannounced market to follow. "We’re introducing a data usage management approach in Nashville that is pro-consumer and pro-innovation and provides customers with more choice and flexibility," said a Comcast spokesperson via email.

The Comcast program will actually increase to 300 GB the current 250-GB monthly cap the company enforces among its broadband customers. After an initial grace period, Comcast will charge $10 for each additional 50 GB a customer uses beyond that allotment.

Gartner analyst Robert Mason notes that midsize companies and large enterprises that provision their own dedicated connectivity and networks aren't likely to be losing sleep over the concept of broadband metering. The reason: They usually buy in bulk. "They're going to be able to have a lot of leverage over the provider in terms of what they get," Mason said in a phone interview. "They're going to be OK."

Small businesses that acquire broadband at retail, on the other hand, are on edge. "This is a huge concern for us," said Jeanne Achille, CEO of the Devon Group, via email. "The always-on, unlimited bandwidth model of the Internet is [how] we've built our ability to serve a global client base."Achille pointed out that her 14-person public relations and marketing agency is a service business; if a client decides to send over 25 massive media files at a moment's notice, it's not like she can say no. Nor can Achille necessarily project when massive exchanges of data will occur: "[We have] no means of forecasting what our Internet usage requirements will be."

Large file types are a common bandwidth hog among small businesses--and a common concern in the context of metered broadband. Heavy use of voice-over- Internet Protocol (VoIP) platforms is another, as is rapidly increasing reliance on cloud computing of all shapes and sizes--video conferencing, collaboration, productivity, project management, accounting, email, and the list goes on and on. That's not to mention the proliferation of iPads and smartphones on the corporate network, including employee-owned devices whose owners might be trying to avoid data charges on their own personal wireless bills.

Some small companies say they're so reliant on the Web that usage-based billing would force them to revamp how they do business. Joshua Gross of Coalition Technologies, a 26-person Web design and development agency, said metered Internet access would land a direct hit on his company's bottom line because its business is the Internet. Coalition's operations depend heavily on videoconferencing, screen-sharing, VoIP, and other online activities. "We would have to restructure the entire manner in which we conduct our business, and that would correlate to our clients losing flexibility in dealing with us," Gross said via email. AchieveIT, a 14-person software startup based in Atlanta, has a similar story. Most of its sales come from online product demos conducted via Cisco's WebEx and a VoIP phone system.

"Our lifeline is the Internet," said AchieveIT CEO Scott Regan via email. AchieveIT is a Comcast customer. "A cap or overage charge on our [Internet usage] could be disastrous, requiring us to rethink our sales model and purchase and deploy all new telephony equipment."

The vast ranks of the self-employed--freelancers, consultants, "solopreneurs," contractors, and so on--are another group that stands to be impacted, since they typically purchase technology through similar channels as consumers. Likewise, virtual SMBs and companies with remote employees often rely on the same broadband networks used by consumers--and sometimes even their own customers.

That's the case at Accountechs, an accounting firm based in Phoenix. The company is virtual: Each of the firm's six employees works out of a home office on cloud-based systems. They're all Cox Communications broadband customers, as are many of the firm's clients. Cox's usage policies vary by market. Accountech partner Andy Gutierrez said usage limits have never been an issue in the past, but he noted that Cox recently added its data usage meter to his available user tools. "It's a rather ominous sign," Gutierrez said via email.

If metered usage became reality, Gutierrez said Accountechs would be forced to increase its prices and decrease service levels. It could also mean fewer new hires if the company begins provisioning dedicated Internet access for its employees. Most of the small businesses I spoke to predicted similar consequences of metered broadband; all of them said that increased Internet costs would either directly reduce their profit margins or require cuts elsewhere in the budget.Gartner's Mason said that as long there is competition in the marketplace, someone will likely offer an unlimited data plan, even if metered options become more common. He added that most businesses view Internet service as a commodity; if another provider better suits their needs and budget, they'll simply switch. True enough: Judy Schmitz, who runs a bandwidth-intensive knitting retailer, said her four-person business would not stomach usage-based billing. "If a provider starts metering us and charging overage [fees], we will simply have to find a new provider," Schmitz said via email. "The market will have to be the determinant of this one."

The problem for some SMBs: That market doesn't always exist. CaliforniaContractorBonds.com struggled to find high-speed Internet that met its requirements after moving into new office space in El Dorado Hills, Calif., about 40 miles east of Sacramento. Those needs were based on the company's recent investment in a VoIP system as well as its frequent handling of large electronic documents. It picked the only provider in the area that offered what it needed and ended up in a rather unique situation, according to owner Jeremy Schaedler: A handshake deal for bandwidth that was negotiated based on the company's current headcount of three people--and on the assumption that the firm won't suddenly start gobbling up data. As a result, online services like YouTube and Pandora aren't allowed in the CaliforniaContractorBonds.com office. Several other SMBs I spoke to, such as Coalition Technologies, have instituted similar rules governing employee Internet usage or plan to in the future. They cite bandwidth--not productivity--as the primary reason. Still, Schaedler's concerned about Internet costs growing in concert with his company.

"What can happen to our Internet costs if our business doubles or triples in size at our current location is troubling, given our long-term lease and a lack of Internet provider competition in the area," he said via email.

Even SMBs unaffected by ISPs moving to usage-based pricing might face a related challenge: The prospect of their customers adjusting their online habits because they're paying by the gigabyte. That idea has already generated grumblings from data-intensive consumer services like Netflix.

Ernie Dempsey of The Part Time Entrepreneur described the consumer side of metered broadband equation in this way, which is likely to resonate with small online retailers of all stripes: "It would be like cutting off road traffic in front of shops in the city and telling the store owners that they have had their quota of visitors for the day."

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