Why Data Caps Are Bad

In New Zealand, we have monthly data caps on the broadband connections available to consumers. The data caps are as low as 3 gigabytes per month, and the current maximum data cap available is 500 gigabytes per month (though it’s quite expensive). A monthly data cap is where there is a limit on how much information you can transfer, both upload and download, in a month. This limits the amount of time that the end user can spend on the internet, which could be used for other things. 

Some ISPs in New Zealand, such as Vodafone, also offer cellphone services. I suspect that the ISPs impose data caps in the hope that the time the end users could have spent on the internet will instead be spent using their cellphone, which may or may not be going through the same company. As there are only 3 telcos that offer cellphone services in New Zealand (Vodafone, Telecom and 2 degrees), chances are that the ISPs will be able to get consumers money through them paying for a broadband connection as well as paying for their cellphone service.

In this video, it spends a little bit of time explaining how data caps can stifle innovation, as well as explaining how data caps are bad for internet users, and I agree with it. I can also say that data caps are terrible based on my own personal experience with them.

This video makes the argument that data caps can stifle innovation by limiting the amount of data that can be transferred in a given time period, and thus the amount of time that can be spent on the internet. The converse of that is that not having data caps allows innovation to occur without any restrictions imposed by inadequate internet access.

As has been argued by Techdirt, data caps impose extra questions on the end user that they wouldn’t otherwise face, such as ‘how much data will this thing I’m about to do use?’, and ‘will my friend or colleague have enough data left to watch this video I made?’ When data caps aren’t in place, the user doesn’t have to worry about any of that, as it isn’t an issue. This means that they can do anything (within the law) on the internet as long as they have a connection.

What can happen when data caps are not in place?

In short, internet use, and innovation to an extent, is not restrained so much when data caps aren’t in place, as consumers and companies aren’t faced with a limit on their internet access.

(Note: this video is quite long, coming in at just under an hour in length, so you don’t need to watch the whole thing if you don’t want to. Even just watching the first 10 or 15 minutes is very informative.)

In Estonia, the amount of technological innovation happening is significant. For example, the video calling service Skype was created in Estonia. What the above video shows is that people in Estonia are able to do so much online, from checking their children’s grades at school to getting and filling prescriptions to doing their taxes to buying bus tickets, all with a computer or smart-phone, an ID card and the internet.

If data caps were in place, then the usefulness of such systems would be significantly constrained. This is because once a data cap is exceeded, then a user will either continue to have high-speed internet access that is usually subject to very high overage charges, or they will face slow internet speeds until their data cap is renewed.


Not having data caps can mean that innovation, and internet use in general, will be significantly less restricted than when data caps are in place. I believe that for innovation and all that is possible on and through the internet to flourish, data caps need to be removed or not implemented in the first place. The ISPs and other companies may not like this, but I believe that long term gain for many from unrestricted innovation and internet use in general is far more valuable than short term profits for a few.

Chances are that the ISPs and other large companies will try their hardest to impose data caps however, as they can gain significantly from their implementation.


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