19 Comments

Summary:

Mobile operators are overwhelmed by data usage on their networks, but rightly fear that implementing restrictions could lead to widespread public dissent. Instead of beating bandwidth hogs with a stick, perhaps they can offer a carrot to get them to take it easy on the network.

Mobile operators are overwhelmed by data usage on their networks, but rightly fear that implementing restrictions could lead to widespread public dissent, or even worse, force users to suddenly stop using the oh-so-profitable mobile data services. Instead of beating bandwidth hogs with a stick, perhaps they can offer a carrot to get them to take it easy on the network.

I spent this week at the TM Forum conference being held in Orlando, Fla. The conference attracts mostly suit-wearing members of the service provider and back-end software community.  The two main themes I found interesting at the event were the emphasis on telecommunications firms making their way into the cloud and the myriad ways that service providers could use to get folks to limit their mobile broadband consumption, an issue that AT&T’s Ralph de la Vega highlighted yesterday.

We may hate the fact that we have 5GB limits on our data plans (although those are for laptop plans rather than for smartphones) in the U.S., but there are physics constraints in terms of the spectrum available and the backhaul networks that demand the use of some kind of limits (and network investment). But carriers have more tools now than ever to train users to think of mobile broadband as a scarce resource rather than a fat pipe for everything.

So instead of forbidding video across the network or applying caps, carriers like AT&T could implement tiers of data usage that offer fast service for VoIP, video and web surfing for up to a certain number of gigabytes. The high-end plan could offer 5GB per month, and after that point users could pay more to keep their traffic flowing along quickly or they could surf at best-effort rates.

People are ready for this, said Akil Chumoko, a product marketing manager with Volubill, which makes equipment that enables carriers to offer these types of packages. He said a European carrier will implement its system to offer the tiered plan described above soon. Other carrots are different forms of congestion pricing, where folks can pay less for their mobile broadband access at certain times of the day, or get more if they download content when the network is empty. For example, buy one song, get one free between the hours of 10 p.m. and 6 a.m.

However, two key elements in implementing these plans are back-end systems that can make all of this dynamic pricing possible, and a way to inform the customer clearly about the limitations and opportunities. Companies such as Volubill, HP and others are trying to build software that allows carriers to implement these types of plans, and representatives at these companies say carriers are slowly beginning to figure out how to use them.

For example, Nigel Upton, a general manager at HP, offered up the example of a user who wants to watch a live sporting event on his mobile. That subscriber doesn’t have a video component to his mobile plan, but when he tries to get to the game, instead of an error message, the subscriber gets taken to a page offering him the chance to buy a day pass for video.

However, depending on how net neutrality regulation shakes out, many of these carrots might be a bit of a fantasy since it’s unclear that mobile providers could prioritize certain types of traffic. And frankly, if the government believes that mobile broadband is a substitute for wired broadband, then many of these things won’t work because rural customers would get a bastardized version of service compared with those who have wired broadband.

However, under the assumption that mobile broadband is limited by spectrum constraints and reasonable network investment, I’ve no problems with carriers finding ways to get people to use it wisely, even if it means the end of streaming music to my hotel room over my Verizon Mi-Fi when I travel.

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  1. Stacey,

    I am sometime amazed that you have been reporting on these issues for years, yet every now and then you appear to lack a basic understanding of the policy debate. You wrote,

    “However, depending on how net neutrality regulation shakes out, many of these carrots might be a bit of a fantasy since it’s unclear that mobile providers could prioritize certain types of traffic.”

    But this post all you write about is pricing practices, not “prioritizing traffic.” They are not the same thing.

    Net neutrality regulations will have absolutely nothing to do with charging end users based on how much data they use. Nothing at all in the pending rules will impact congestion pricing, metering, etc…

    Do you get that, or was this another example of the problems with rapid-pace online journalism?

    1. At first glance, it looks like you have a point. But with a second look, not quite. Let me explain.

      Imagine a world of non-neutral ISPs. Do these ISPs arbitrarily prioritize certain traffic or is there an ECONOMIC rationale behind what they will prioritize? One option is that they will prioritize traffic from their own content-generation sources or other sources which pay them. Another option is that they will prioritize certain types of traffic for consumers who are willing to pay for it. There are revenue opportunities for them in BOTH options. So, you can bet your fine economist’s… uh… MIND, that they will exercise both options. Ergo, traffic prioritization is a pricing strategy for ISPs. As an economist, you should know that it is all about the money. Thanks for playing, HONEY!

      A lot depends on how the government will eventually define net neutrality. If net neutrality is defined as equal priority for all traffic, at all times, on all devices, for everyone, then Stacey’s point is totally valid.

    2. Jane, it is indeed the one-two punch of prioritization and pricing that net neutrality could affect. However, I also did talk about congestion pricing based simply on time of day rather than traffic prioritization, which confuses the point. We can chalk that up to rapid-pace journalism or a need for clearer writing on my part.

  2. @Jane – You don’t think that mandated neutrality would accelerate pricing modifications on the part of the carriers? Pricing practices -positive or negative – are de facto traffic prioritizing. Simple economics. Take as long as you like to old school journalistic fact-check “supply and demand.”

  3. I think that if you market the service you provide as “Internet” service, then you must operate under neutral principles. I feel the Net Neutrality principle DEFINE the Internet. Now if a wireless company wants to provide video, audio, texting, etc. over their network with preferential treatment, then fine, but don’t dare market it as “Internet” because it’s not. If a wireless provider offers this type of proprietary data service in lieu of actual un-biased Internet service, then that service should not be considered as Internet access when assessing broadband coverage.

  4. @Tim B

    I’m an economist, so don’t go there honey.

    Stacy’s exact sentence, subsequent to talking about congestion-based pricing schemes was, “… many of these carrots might be a bit of a fantasy since it’s unclear that mobile providers could prioritize certain types of traffic.”

    It doesn’t matter if neutrality rules accelerate different pricing models. Stacy said that neutrality would perhaps preclude such models!

    You say pricing practices are de facto prioritizing, and that is just silly. Pricing practices signal which traffic, or more accurately, which volumes of traffic, users attach priority to. But that has nothing at all to do with an ISP setting a flag to throttle all video (or speed it up), or accepting payment from Google to prioritize YouTube data above HTML data.

    I suggest you go read the FCC’s NPRM first.

    1. “Do you get that, or was this another example of the problems with rapid-pace online journalism?”
      “I’m an economist, so don’t go there honey.”

      Apparently, an angry one too. It’s hard to imagine anyone who writes or reads this blog being against net neutrality, myself included. However, demand for mobile bandwidth has been accelerating much faster than additional supply. How do you see that working out?

  5. Mobile operators are selling access to the net. They must abide by two basic laws that will sustain them — the laws of physics and the law of supply & demand. Flat rate pricing runs against these laws. Rules-based software can now be applied to do more than throttle back speed — enabling carriers to market applications like web browsing or email @ price points lower than video downloads.

  6. @Jane: You write, “Net neutrality regulations will have absolutely nothing to do with charging end users based on how much data they use.” Absolutely wrong. I am an ISP, and I currently set implicit limits on use by contractually restricting behavior: no operation of servers (which means no P2P), for instance. If I cannot do that (and the FCC seems poise to prohibit my most popular rate plans), I will have no choice but to look very seriously at metering.

    1. “Absolutely wrong.” Wow, this isn’t that hard folks.

      You and others are saying: net neutrality will lead to congestion pricing, metering, etc… That may or may not be the case, but the original point I was raising was that net neutrality will not ban congestion pricing. Go back and read Stacey’s post. She outlines several types of congestion pricing schemes. Then she says they might not be allowed because of net neutrality rules. I pointed out that the proposed rules do not preclude congestion pricing. You saying that these rules will lead to congestion pricing is not the opposite of me saying the rules will not ban congestion pricing.

      And Brett, blocking ALL P2P is wrong. You are selling access to a two-way communications system. If a user chooses to communicate, you should not care what protocol they use. If that users behavior impacts others using the free government spectrum you repackage and profit from, then you can implement user-specific throttling. But to outright block a protocol breaks the Internet.

      Sounds like you’ve just admitted to something that is a violation of existing FCC rules. Remember Brett, you are selling access to a resource you don’t own or add any value to (the Internet), using the public airwaves for free, and profiting from that. You don’t get that you are a part of a social commons, and your breaking of basic protocols is akin to pissing in the well?

      1. Again, Jane, you’re displaying your ignorance. The FCC has not made ANY rule that prohibits what we do. And it does not have the statutory authority to do so. (The one ruling it attempted to make without that statutory authority is now being challenged in court, where it is expected to be voided.)

        What’s more, if the FCC could ban our residential rate plans, it would be very anti-consumer. Our customers love the fact that they can buy a less expensive connection if they simply agree not to run servers (which most of them do not want to run anyway). On these connections, we prohibit P2P because it hogs bandwidth, because it attempts to seize priority over other traffic, and because it sets up a server for a third party’s content on our network without permission or compensation. This does not mean that our network is not a “two way” communication system; it simply means that certain behaviors which consume large amounts of resources are not allowed. We could not offer the attractive rates we charge for these plans if we were forced to allow bandwidth-hogging, abusive P2P traffic. We do offer business-class service, at higher rates, to people who do not want these restrictions. However, since bandwidth costs us $100 per Mbps per month at wholesale, customers who choose those rate plans pay us about $120 per Mbps per month. Residential customers pay much less. You pay your money and take your choice. That’s fair.

        I built my network with my own hands. My customers love the service I provide and are very pleased with the terms under which I provide it. The government has no right to appropriate my network or meddle in my business relationships.

        As for your specious argument that we must be regulated out of business because we use the public airwaves: Do you use a car and drive on public roads to get to work? Well, I guess that justifies intrusive, onerous government regulation of your business that would make it unprofitable and harm your customers.

  7. Actually, the only “physics constraint” regarding backhaul is that the mobile networks failed to forecast how backhaul capacity would need to grow to meet demand. Further, mobile operators frequently are addressing this demand with such creaky solutions as adding more T-1s or leasing fiber. Mobile operators increasingly need to look at cost-effective, next-generation solutions that already are available, such as tapping cable’s fiber-rich local networks for additional backhaul bandwidth. Much of cable’s optical network footprint is in easily usable proximity to existing and planned cell towers; cable optical networking vendors already are deploying Ethernet standards-based gear to the cable operators whose wireless service provider customers have the foresight to use them. It’s a solution that’s here right now and effectively can complement the willingness (or unwillingness, as we may see) of consumers to adopt tiered usage pricing after years of having mobile operators tell them that all-you-can-eat data was the way to go.

    1. Bill, you’re dreaming. The cable companies compete with the telephone companies and are not going to allow them access to their fiber. And fiber is hugely expensive to run — typically as much as $25 per foot in urban and suburban areas. Do you, as a customer, want to pay for that?

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