If you’re surprised by a high cable bill this month, it could be because you spent too much time on the internet.
A growing number of cable companies are once again beginning to impose so-called “data caps” on their home internet service. As of this month, that list includes Comcast, the largest cable provider in the country.
Beginning on Jan. 1, Comcast (NAS:CMCSA) reintroduced a data cap on its internet service, limiting households to 1.2 terabytes of data per month. (A terabyte is equal to 1,000 gigabytes). The cap is currently enforced in 27 states across the country — Comcast operates in 39 states — though the company told Consumer Reports that it won’t begin charging customers who go over their allowance until March.
When the charges do come into play, they could add up quickly. People who exceed the cap will be charged $10 for every 50 gigabytes of excess data, up to $100 per month. The company does not pro-rate this amount in cases where a household doesn’t up the full 50 gigabytes of extra data they were charged. (Comcast did not immediately respond to a request for comment.)
Many companies signed onto a pledge at the start of the pandemic to waive their data caps and boost internet speeds as households were doing more work from home, but as the pandemic has worn on many have returned to their typical operations.
“Data caps have been around for years now, and for many consumers, they aren’t much of an issue,” said Tyler Cooper, editor-in-chief of BroadbandNow, an internet provider comparison site. “That said, for those that frequently stream, or rely on two-way communication apps like Zoom, these caps can often be prohibitive.”
In most cases, exceeding the limits will result in charges like Comcast’s. But that’s not always the case. “In most cases, if you exceed your monthly allotment of data you will either be charged more, or find that your speeds have become slower until the next billing cycle,” said James Willcox, senior electronics editor at Consumer Reports. “Overage fees can vary, but being charged an extra $10 for each extra 50GBs of data is common.”
Here’s how the data caps break down across different cable providers around the country:
(Mediacom offers a low-cost plan without a data cap for low-income families who have children participating in the free or reduced school lunch program. AT&T (NYS:T) will continue providing unlimited data for Access from AT&T customers through June, a company spokesman said.)
How easy is it to hit the caps?
Not all people are going to need to worry about these data caps and the accompanying extra charges. The caps are generally so high that they only apply to around 5% of households, said Roger Enter, founder and analyst at telecom research firm Recon Analytics.
These caps may seem high now, but with people utilizing the Internet more and more, in time that won’t be the case. Let’s say your cable company has a cap of 1 terabyte. When streaming video from a site like Netflix (NAS:NFLX) , you’ll use around 3 gigabytes of data per hour, according to internet comparison service InMyArea.com.
To hit the monthly cap, you’d need to watch roughly 333 hours of content on Netflix overall, equating to around 11 hours per day. That may seem excessive, but if you’ve got a family of four all streaming content from separate devices hitting that cap begins to feel more feasible.
Then factor in online learning, video conferences on Zoom (NAS:ZM) for work and internet-connected devices, and it’s easy to see how these caps could be reached. Households that already had plans with data caps before the pandemic may only begin to notice those limits now that the pandemic has changed their daily lives.
“All evidence points to U.S. consumers using more broadband data every year,” Willcox said. “What seems like a huge amount of data now could feel restrictive a few years down the line.”
Why cable companies impose these caps
“Additional bandwidth is extremely cheap — we’re talking about cents,” Entner said. In that way, cable companies that institute caps are not so much offsetting the additional costs associated with providing more coverage to households. Rather, they’re just making money.
Internet-service providers can get away with this because of the lack of competition in most markets, meaning that customers can’t simply switch providers if they’re unhappy about the fees.
<STRONG>Learn to master your money: </STRONG>Sign up for MarketWatch’s free live series to boost your financial IQ
“For most people, cable companies have a monopoly on high-speed internet service,” said Steve Blum, president of Tellus Venture Associates, a consulting firm focused on developing community broadband systems. “What they’re seeing is the consequences of only having one choice for high speed internet service. The company that provides that can run the price up to the point where they are maximizing their profits.”
The caps could also serve as a scare tactic, Willcox said, to encourage households to upgrade their internet service to a pricier package rather than run the risk of overage charges.
Some cable companies have opted against instituting caps on the data customers use. Spokespeople for Frontier Communications (OTC:FTRCQ) and Verizon (NYS:VZ) confirmed that they do not cap data on any of their plans.
Notably, Charter Spectrum (NAS:CHTR) , the country’s second-largest cable operator, doesn’t have caps, as this was a condition of the company’s purchase of Time Warner. That limitation is set to run out in May 2023. A company spokesperson noted that the Spectrum has no plan to implement caps. However, last year, the company requested that the Federal Communications Commission waive the stipulation from the merger, though it has since dropped the request as President Joe Biden took office.
But the choice not to cap data isn’t necessarily a goodwill gesture on the part of smaller cable companies and internet-service providers. All else being equal, these companies generally follow the lead of the larger players like Comcast, Blum said.
“The limits on what the regional and local companies do are really a matter of their capabilities,” he said.
“Imposing data caps and billing by consumption requires a certain level of back-office technology, and I don’t assume all cable companies have that,” he added. “The more sophisticated ones do, and Comcast is the most sophisticated cable company we have in this country at least at scale.”