Updated with comment from the FCC:The chairman of the Federal Communications Commission Wednesday opened the door to metered pricing plans on wireline broadband networks such as those attempted in 2008 by Time Warner Cable and AT&T. In a speech this morning outlining his network neutrality proposal, Julius Genachowski said, “Our work has also demonstrated the importance of business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing.” Yes, wireless networks already employ usage-based pricing (of a sort), but wireline has been all you can eat, or more recently capped. That could now change.
Ryan Kim already outlined some of the other elements of the proposal, such as its weaker provisions protecting traffic on wireless networks and it’s reliance on transparency as means for ensuring that consumers on both wireline and wireless broadband services understand how providers manage their networks and may affect the flow of traffic. The FCC also has decided not to attempt to push through any effort to reclassify broadband and gain a legal basis for making rules on broadband pipes, so any action it takes on network neutrality is still likely to face a legal challenge.
However, the decision to promote usage-based pricing on wireline and wired networks in the speech comes as somewhat of a surprise, especially given how pro-consumer Genachowski’s FCC is. While it had never taken a stand when broadband providers attempted to try usage-based tiers, it was an issue that was roundly criticized by consumer organizations and those in Silicon Valley (including GigaOM) as anti-consumer and anti-innovation. In a press conference after Genachowski’s speech, FCC officials replied to a question on usage-based pricing saying that it didn’t want to determine the right business models for the space. Officials said usage-based pricing, “can be consistent with a level playing field and consumer control,” while Genachowski expressed it as having a “level of comfort with usage-based pricing,” in the press conference.
Update:It looks like the FCC isn’t ready to give up its consumer advocacy on usage-based pricing plans. An FCC spokeswoman emailed me a statement attributed to a senior FCC official that said, “Usage-based pricing can create more choice and flexibility for consumers. But practices that are arbitrary, anti-consumer, or anti-competitive would cause serious concern. The FCC will be a cop on the beat for consumers.”
In principle, usage-based pricing is great. One pays for what one uses. However, in the broadband arena where there is little competition among providers and a tendency to avoid investment in networks because of pressure from Wall Street and (again) a lack of competition, usage-based pricing could lead to expensive broadband and stifle burgeoning technologies such as online video and HD video conferencing. While there are several pro-consumer elements in this network neutrality proposal, beginning with the fact that the web may soon actually get network neutrality rules, the whole plan never addresses the elephant in the room, which is competition. In reality, if U.S. broadband were competitive, it likely wouldn’t need intricate network neutrality rules, because consumers could dump providers that didn’t offer them what they wanted and needed.
Related GigaOM Pro Content (sub req’d):