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Summary:

In blocking Apple’s FaceTime application from its cellular network for certain customers, AT&T is trying to drive customers to new plans and change the debate when it comes to network neutrality. If Ma Bell succeeds it looks like consumers and maybe app developers could lose.

iPhone with AT&T logo crossed out

Updated: AT&T’s decision to block Apple’s video-calling program on its cellular network for certain customers has raised the ire of consumers and public-interest groups, and it may even draw the attention of the Federal Communications Commission. And after the wireless carrier posted its rationale on Wednesday on its decision to limit video over FaceTime to customers who have signed up for its Mobile Shared Data plan, I see two reasons the carrier has picked this fight.

The first is to push more consumers over to the Mobile Shared Data plan, and the second is to establish a precedent that will put its Wi-Fi network on the same legal footing as its cellular one, especially when it comes to network neutrality. Success in the first effort will help AT&T in the near term as it drives people off their grandfathered unlimited plans and tiered plans, while success in the second will give AT&T more wiggle room as it fights the FCC and consumer advocates over network neutrality.

The plans. It’s all about the plans

FacetimeLTE networks were built for apps just like FaceTime. Every carrier has shown off advertisements with attractive people using video calling of some sort as a way to justify the upgrade to LTE. AT&T even once launched a now-defunct video-sharing service back in 2008 over an even less robust HSPA network, so claims from a post on Wednesday by AT&T’s Bob Quinn that defend AT&T’s stance by saying FaceTime is going to overwhelm the network is kind of like inviting your friends over for a brunch buffet and then only letting them eat the grapefruit.

Another problem is that absent real transparency over how congested its network really is, the FCC and consumers have no way of knowing if AT&T is using network management as a screen to implement network limits designed to push people off its unlimited and tiered plans and into the shared data plans.

And that is likely what AT&T is actually doing. It learned from Verizon’s mistakes of forcing consumers onto a shared data plan, but it shares the same goal as its rival in getting customers to switch. As revenue from voice and texting decrease, these shared plans lock in some of the revenue from those services in the form of fixed fees for devices, keeping the average revenue per user from going down. Jan Dawson, an analyst at Ovum, had this to say in an email regarding these advantages:

“Both carriers are using it as a carrot to get people to pay a fixed amount for unlimited texts and voice, while getting them to pay a variable amount for data. Data usage is increasing, so they can expect people to pay a greater amount over time for data under a variable plan (hence getting them off unlimited data that they may have been grandfathered into on those two carriers). Voice and texting usage on the other hand are decreasing, and so revenue would normally decrease as people cut the size of their bucket for voice and data. But by locking customers into unlimited voice and unlimited data, they prevent that reduction in revenue from happening.”

Preloading is a red herring

The motivation behind pushing customers to shared plans seems obvious. But do AT&T’s FaceTime rules violate network-neutrality rules, as public-interest groups say? Quinn says no in his blog post, first because AT&T is being transparent and second because FaceTime is somehow preloaded on the device. But the discussion about preloading is a red herring. What AT&T is really arguing is that because it allows FaceTime on its Wi-Fi network (and other video-chat apps), it’s not blocking a potentially competing app.

Quinn writes (emphasis mine):

“To date, all of the preloaded video chat applications on the phones we sell, including FaceTime, have been limited to Wi-Fi. With the introduction of iOS6, we will extend the availability of the preloaded FaceTime to our mobile broadband network for our Mobile Share data plans which were designed to make more data available to consumers. To be clear, customers will continue to be able to use FaceTime over Wi-Fi irrespective of the data plan they choose. We are broadening our customers’ ability to use the preloaded version of FaceTime but limiting it in this manner to our newly developed AT&T Mobile Share data plans out of an overriding concern for the impact this expansion may have on our network and the overall customer experience.”

In this one paragraph Quinn hides everything you need to know about this move. The shared plans get a plug, the sleight of hand that equates Wi-Fi with cellular access is accomplished, and AT&T plays the network-management card, which is kind of like a get-out-of-jail-free card for net-neutrality violations anyhow. Defining Wi-Fi as wireless helps AT&T in both wireline and wireless net-neutrality fights, which is why this is such an important move.

Network neutrality and Wi-Fi’s double standard

The idea of network neutrality is simple at its core: ISPs can’t discriminate against packets on its network by blocking or prioritizing lawful traffic. This protects against AT&T blocking VoIP apps it doesn’t like on its wireless network or setting up agreements with certain app developers and asking them to pay more for faster or guaranteed delivery over any of AT&T’s networks.

It’s an idea that looks good on paper (and on wireline networks). But when it comes to wireless — where the last mile to consumers is limited by the amount of spectrum a carrier holds — if too many packets try to reach users, packets drop and calls fail. Thus, when the FCC created its network-neutrality rules, it carved out exemptions for wireless, basically telling carriers to be transparent and not to block competing video and voice services. In both the wireline and wireless rules, it also gave ISPs a lot of leeway on how to deal with congestion.

If AT&T can set a precedent here that Wi-Fi is just as good as cellular when it comes to offering competing apps, then it could limit apps it doesn’t want on its more constrained cellular network to its Wi-Fi network. That allows it to strongly influence the apps that consumers use on the AT&T cellular network and drives consumer behavior in a more subtle way than huge early-termination fees.

AT&T may also use this implication — that Wi-Fi is just as good as cellular — to argue that some of the more stringent rules of wireline network neutrality don’t apply on the AT&T Wi-Fi network. Update: While no one can say what AT&T might do, legal sources point out that even if AT&T tries to argue this, the FCC’s network neutrality rules clearly place Wi-Fi under the protections of wireline networks. However, it can use access to apps over its Wi-Fi network as a way to argue it isn’t blocking a competing app as it’s doing here. So perhaps in the future AT&T could block apps over its Wi-Fi network that it doesn’t like but that don’t compete with voice or video. So consumers shouldn’t just get upset over AT&T blocking FaceTime but about the greater games Ma Bell is playing.

  1. It seems to me that the problem is not whether AT&T is offering users with some accounts cheaper access to FaceTime, but whether AT&T is offering FaceTime better access than what is enjoyed by Google Talk, Skype and other videoconferencing services, or even all other services that use data (YouTube, etc.).

    Isn’t ‘packets is packets’ the point of net neutrality?

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    1. No, “packets is packets” is not the point of net neutrality. Carriers can discriminate based on technical criteria. However, they are not supposed to discrimnate based solely on who is sending the packet. Thing is, the regulation is written in a way that lets AT&T weasel its way into this excuse. Ridiculous as it may be, it probably does satisfy the letter of the law. Whether it is a good idea to annoy your customers with moves like this is a separate question.

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  2. So instead of just taking this lying down, as we AT&T customers have done in the past, let’s outline the path forward:

    Wireless subscribers need to understand a little bit of how the cell network works. Better information to make better decisions. Right now, an iPhone on AT&T uses TWO connections: one for voice, one for data. This belies AT&T’s policy of prohibiting tethering, since tethering inherently relieves congestion at the cell tower as limited channel space is freed up by each tethered device that ISN’T then talking to the tower. Also, an inherent throttle is in effect as multiple devices are sharing the one wireless connection, rather than opening and consuming multiple. So right off, AT&T is promoting policy that conflicts with the very goal they claim to work towards (not overwhelming their network).

    The next generation of technology: or why is AT&T making these moves now? “Shared Data” plans, unlimited calling? Well, the sophomoric response is as stated in this article: “data is growing!” It is, but there is another reason. The next generation of technology (LTE Advanced) dispenses with the packet-switched voice channel, and instead implements Voice over Internet Protocol natively. VoIP. Which if you do today, using say Skype or FaceTime, is FREE. So how is AT&T to make any money on voice in the future if it uses the same technology that people are getting now for free? They can’t, or won’t…unless they pull the wool over their customers’ eyes. Same goes for SMS. And you see how AT&T responded to iMessages. The Net Neutrality ruling is great for consumers, bad for LTE Adv carriers; and that’s why it was implemented.

    So what to do? As customers, we need to understand that AT&T’s historical revenue sources are drying up, they have a duopoly, and they’re going to get desperate. Smell that? That’s AT&T desperation. This controversy is a result of that; the proverbial little boy with the finger in the dyke. So we can’t expect AT&T to do the right thing, they’re currently panicking.

    So we should turn to Apple and Google. We are as much their customers as we are AT&T. (And most of us iPhone users confer upon Apple god-like altruism anyhow, regardless seemingly of how undeserved.) Apple fired the first shot with iMessages. Well, not really, Google has been including Google Voice support in Android for a while. But iMessages was the first shot that really hurt. AT&T clearly was able to twist Apple’s arm over the tethering; but that was back when “unlimited” data ruled. Those days are gone. We need to tell Apple, unequivocably, that as customers we no longer trust AT&T and therefore they should bypass them. Let AT&T fight Apple in the public space, in front of the FCC. AT&T doesn’t want that, I can assure you.

    Next we ask Apple to enable the VoIP part of FaceTime now. Bypass the need for AT&T’s “unlimited” voice now. The “feature” is already there: simply start a FaceTime and then Home button back out…voice keeps going, video stops. Let’s see how AT&T responds to THAT. Will they have the gall to block it? Couldn’t possibly.

    Further, if AT&T DOES block it, using “preloaded” as an excuse, we petition Apple to offer FaceTime and VoIP as an App Store download. Basically an app that bypasses AT&T’s “preloading” instructions.

    Plus, there are approx 43,200 minutes in a month. VoIP uses about 300KB per minute (actually, potentially far less). So if you talk every second for month straight, you’d use about 14GB. Not many of us talk that much. I talk about 2500 minutes a month, or about 750MB. So much for “unlimited” talk and 3GB of data. AND I pay an additional $20 for unlimited texting, mostly because it gives me free Mobile-to-Any-Mobile calling. Nice bundling AT&T. That extra $20 would pay for a heckuva lot more than 750MB of data!

    Apple, at this point, has NOTHING to lose in taking on AT&T. Even if AT&T -tried- to kill the iPhone, they couldn’t. And even trying to do so would put AT&T in a dangerous position of fighting a multi-front war (VZW in front, Apple on the side, and Sprint/TMo in behind). AT&T on the other hand has EVERYTHING to lose. And the consumers can finally win for a change. Obviously AT&T is deaf. They don’t care, and they don’t respect us. Let’s redirect our attention to Apple and see if we can’t accomplish greater things!

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  3. The concern over network congestion is complete and utter garbage (or at least it should be, but AT&T will play it all they can). I have an unlimited plan. Guess what happens if I try to use more than 3 GB (the same cap as those with a tiered plan at my pricepoint)? My service gets shut off. Yes, technically I was ‘throttling’, but it literally made my phone useless for a week and a half. Apps would crash left and right until i finally just turned off cellular data completely. (I was traveling for work an usually large amount – I normally use 400-500 MB a month). So really, it isn’t all roses being on their unlimited plan anyway. But it wouldn’t save me any money to switch, so why bother.

    So sorry, I don’t buy it. It is a move to push people the the new plans that make them more money. Nothing else. Network preservation is not the motivation, but will continue to be the scape goat.

    end of rant, back to work.

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    1. Yep, AT&T wants people on the shared plans, because if all you need is data then it needs to offer that without watching its ARPU (currently bolstered by voice minutes and texting plans) fall.

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  4. it’s more about at&t not wanting to be a dumb pipe and pulling back control from Apple (whose iPhone and it’s minions are wrecking profitability of carriers in the starting point of an LTE build up).

    ATT can gain sizable “data fees” enabling FT over 4G/LTE. Just ramp up bandwidth and charge overages to customers. But that is counterproductive to enable Apple to have such control over a mobile account that transcends PHONE NUMBER.

    Plus also, until Apple learns to support other devices…. THANK YOU ATT for standing up to a tech bully.

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  5. I am *so* glad I left AT&T when my contract was up

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  6. Stacey, why do you continually refer to “the AT&T Wi-Fi network”? Bob Quinn’s blog post talked about wi-fi in general, not AT&T’s wi-fi network. I hardly ever use AT&T’s slow wi-fi, and usually use my fast connection at home – so they can’t restrict apps on wi-fi at all, since most of the time I’m on my own network that they have no control over.

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  7. No need to look any further than your own voice in the mater – vote with your wallet! Verizon will welcome new customers with open arms. Why feel burdened by AT&T when you have personal choice??

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  8. Nice insight Stacey! Even with the high douchebaggery quotient, this represents an incredible opportunity to consumers. If ATT customers churn this issue into a mass exodus to another provider, perhaps this corporate greed move can cost them more than it makes them.

    As crazy as it sounds, when providers allow their greed to compromise their customers satisfaction, then their bottom line losses should be hugely impacted.

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  9. Steve Jobs: “The customer pays a little more, but that’s what you want anyway.”

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  10. How AT&T is not violating net neutrality is that AT&T isn’t blocking or favoring anything…. at the network layer. The Application itself (facetime) is what’s blocking access. It’s actually Apple’s fault if you wan to point fingers. Of course Apple is collaborating with AT&T to make it behave this way and AT&T is dictating the terms.
    If Facetime was totally open and AT&T’s network was identifying it as Facetime traffic, then the network blocking you, then it would be net neutrality issue. But AT&T isn’t actually doing anything with their network to enforce this.

    It’s obviously a matter of semantics and basically, if you will, a loophole. But we should call it what it is.

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