ACA Agrees With Hassett, Shapiro That Consumption-Based Billing Promotes Universal Broadband

PITTSBURGH, September 8, 2009 –  The American Cable Association praised a new study by noted economists Kevin Hassett and Robert Shapiro that quantified the advantages of broadband access providers’ being able to offer flexible-pricing models to their customers as the best way of keeping thecountry on track toward achieving the goal of universal broadband access.

“ACA agrees with Hassett and Shapiro’s key conclusion that flexible-pricing models willspeed broadband adoption because network providers won’t need to raise priceson everyone in order to recover the cost of network investments largelyundertaken to satisfy those who consume the most bandwidth,” ACA Presidentand CEO Matthew M. Polka said.

Steve Friedman, ACAChairman and COO of Wave Broadband in Kirkland, Wash., provided copies of theHassett-Shapiro study in meetings Tuesday at the Federal CommunicationsCommission with senior officials in the Wireline Competition Bureau and in theoffice of Commissioner Meredith Attwell Baker.

Hassett and Shapiro,who released their paper last month in association with GeorgetownUniversity’s Center for Business and Public Policy, looked at how fast thecountry could achieve universal broadband access under conditions whereproviders had the choice of using either flat-rate billing plans with unlimitedusage or plans that charged high-bandwidth consumers more than occasionalusers.

The Hassett-Shapiro paper found that when flat-rate plans were in use, broadband access providers were forced to recover their network upgrade costs from all users equally,which drove up the cost of broadband for everyone and made it harder for themost price-sensitive consumers to buy a broadband subscription.

Reliance on flat-rate plans, Hassett and Shapiro concluded, will delay broadband adoption at the lower end of the income scale and fail to close the digital divide.

“Those whocondemn consumption-based billing as a nefarious plot to corrupt the opennessof the Internet should study the Hassett-Shapiro paper with great care,”Polka said. “Flat-rate billing shouldn’t be mandated because the costs faroutweigh the benefits.”

Polka also notedthat the Hassett-Shapiro paper lent implicit support to ACA’s position that the closed Internet business model being pursued by the Walt Disney Co.’s ESPN360.com forces cable operators into paying for the service for all of theirbroadband subscribers just to be able offer it to a handful of customers whoare dedicated sports fans.

“ESPN360’s business model drives up the cost of broadband for everyone, particularly lower-income Americans who may have no interest in watching live polo matches from theUnited Kingdom at 6:00 a.m. It’s another type of cost-sharing model that theHassett-Shapiro study has shown to be unfair to users living on a tighthousehold budget, and it will delay the arrival of universal broadband,” saidPolka. “Media conglomerates and Web giants must be prohibited from mandating unreasonable penetration requirementsfor their Web-based content and services in their deals with operators, and must make their content available on the Web for consumers to subscribe todirectly.”

Shapiro was U.S.Under Secretary of Commerce for Economic Affairs during President BillClinton’s second term. Hassett, the author or co-author of six books andnumerous articles, was chief economic adviser to Senator John McCain (R-Ariz.) inhis 2000 presidential campaign.

# # #

About the AmericanCable Association

Based in Pittsburgh, the American Cable Association isa trade organization representing more than 900 smaller and medium-sized,independent cable companies who provide broadband services for more than 7million cable subscribers primarily located in rural and smaller suburbanmarkets across America.  Through active participation in the regulatoryand legislative process in Washington, D.C., ACA’s members work together toadvance the interests of their customers and ensure the future competitivenessand viability of their business.  For more information, visit https://acaconnects.org/