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Metered Broadband Is the Future: Verizon CTO

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dicklynchsmallVerizon (s vz) Chief Technology Officer Dick Lynch said today that in the coming years, wired broadband will likely be sold in packages based on the amount of data a person wants to consume, much like wireless broadband is sold today. In comments made to press at the 2009 Fiber to the Home Conference Expo in Houston, Lynch stressed that he wasn’t announcing a shift in pricing for Verizon, but that: “We’re going to have to consider pricing structures that allow us to sell packages of bytes, and at the end of the day the concept of a flat-rate infinitely expandable service is unachievable.”

He went on to explain that the pricing paradigm shift will mirror what already exists in the wireless world, rather than a per-GB pricing model. Verizon has been one of the last holdouts on the idea of metered broadband, in which an ISP charges users based on the amount of data they consume as opposed to charging a flat-rate fee for an always-on connection. The company has never said it would meter its broadband, but has defended the right of other carriers to do so.

Lynch’s comments came amid a broad discussion about net neutrality, notably how a carrier can manage its network and deliver quality applications without running afoul of the principles. Given the rise in high-bandwidth applications and services Lynch said, “We believe that you have to be allowed to have a level of service that is not on a public Internet. What you’re suggesting is different kind of IP service that’s not delivered over the public Internet and that needs to be part of the option set in the argument.”

While he admitted that there are legitimate fears around net neutrality that need to be addressed, he differentiated between the public Internet and the idea of services that will require more than a best effort attempt at delivery. However, he said, “There are services that will not be happy on the public Internet, and we don’t want to be in a place where we have to provide the public Internet as the only place to deliver those services.”

Below I’ve also include a video taken the evening before with Mark Wegleitner, senior VP of technology for Verizon. We talked about the history of Verizon’s FiOS push, a bit about what one might do with a symmetrical 100 Mbps connection (which Verizon doesn’t offer today, but could) and why wired will never be replaced by wireless broadband as the home connection to the web.

50 Responses to “Metered Broadband Is the Future: Verizon CTO”

  1. There’s no way I can see this working, as we watch more video, download more apps etc data usage will increase, and consumers will demand unlimited broadband and mobile broadband at fair prices.

  2. Art Spivy

    I certainly don’t agree with Verizon’s perspective, but I personally feel like I’m paying too much today given I pay the same price as the guy down the street downloading 200GB of movies every month. We both pay about $40 a month, so I must be paying extra given I incur a lot less cost . I personally wouldn’t mind paying $20 while the other guy pays $60. The key is to deliver value for your money and broadband providers shouldn’t look at this as an opportunity to raise everyone’s prices. They should lower the price, a lot, for people who do more simple email and web browsing.

  3. >at the end of the day the concept of a flat-rate
    >infinitely expandable service is unachievable.

    Why do these executives always seem to fall back on hyperbole rather than addressing the issues? In parts of Asia and Europe, broadband access is being offered at much greater speeds and with flat rate pricing. So instead of saying things can’t expand infinitely (who ever said they could), why not tell us why what works elsewhere is impossible in the U.S.?

    [Could it be that the answer is that It isn’t impossible – unless companies like Verizon are allowed to make it that way be having legislating barriers erected to consumer choice?]

  4. Verizon currently charges $.015 per Kilobyte ($15/megabyte) that they send to my cell phone, but an unlimited plan on a crackberry is $30/month. Lets hope the rate they would charge over fiber is a lot less than $15/MB or we are going to see a downfall of online services.

    Part of my reason for supporting bandwidth caps has to do with the ad support web. If people are going to have to pay for an ad to load, they are going to block the ad — fast. I think there is a compromise to be had including “lite” or slower plans as well as a plan that offered either unlimited data and potential to be capped if use is too high — currently time warner road runner terms state that they reserve the right to limit your usage based on amount of data transmitted or speed which you can connect.

    Also since the website is paying for the connection from their server to the customer, I think the network owners would then be double dipping and perhaps there is more compromise to be done later on.

    Whats the point of 100mbit internet connection if you can only watch a few shows on hulu and then your done – shows on hulu seem to range between 400mb and 800mb per 30 minute show (which is 22minutes). Some 44 minute episodes are about 1.6GB.

    They will continue to push you unlimited data to your tv set, but limit the amount you can use on your computer.

  5. Brett Glass

    Cell phones are different from data service. People need to get off the phone now and then to eat, sleep, work, and otherwise get on with their lives. But computer programs, working autonomously, can saturate a broadband connection 24×7. This can make metering a real necessity.

    With the FCC threatening to impose “network neutrality” regulations which would make it impossible to rein in bandwidth hogs via any other method than high bills, carriers won’t have a choice. Bandwidth is not free, and I don’t expect to see a “bandwidth fairy” leaving free bandwidth under providers’ pillows anytime soon.

  6. It will effect the cloud computing future! If they charge per GB transfer, the science, technology, education and business will suffer in the USA. What we need is more bandwidth at lower cost, not less at higher cost!
    Wimax might help, because it will bring competition to the internet, and from what I understand it will be faster than the current cable speeds. For my company ( and companies like mine, higher cost for Internet is bad news>>>>

  7. I won’t mind as long as my monthly bill doesn’t exceed more than what I pay now. It’s a good idea. I would probably save money if it were metered. I guess the people who used the internet non stop crazy will the ones affected the most.

  8. Personally, I’d like to see metered broadband, not nickel-and-dime but a few broad service tiers. Frankly, you get what you pay for. If you’re not paying for it, then someone else is, and it will ultimately serve their interests not yours. I’d rather have Verizon working for my dollar than for Google or GE.

  9. @Patrick Since the telco’s and cable cos. operate in collusion Mr. Lynch’s comments really aren’t specific to Verizon. If one company goes to metered broadband they all will. And their levels of usage will all be similar. Look at cell phone service – the base plans all have 450 minutes. Can you find a base plan with 800 minutes? No. They’ve pretty much carved up the broadband pie across the nation with agreements not to go into each others market. There are a few markets that have a choice but in most cases it is an either/or choice. Very few markets have more than 2 options.

    Broadband, cell phone service, and cable television are all true monopolies. Monopolies via collusion. This way there are multiple companies our elected officials can point to as being “competitors” and still rake in the payoffs the monopoly members pay them.

  10. They should go with tiered, not metered, as there is some consumer tolerance for this. E.g sell 500kbps, 1Mbps, 2 Mbps etc….all uncapped, no meter (other than speed).

    This will help them manage their networks but doesn’t quite solve one of the problems they are seeking to control which is the 5% of always on users that consume 80% of the BW….

  11. Metered broadband will stifle web innovation.

    Yes some users do use more than others, yes some are broadband gluttons but on the flip side, most people aren’t. It’s within their power to increase network capacity to handle much more than what anyone can hope to suck through their pipes.

    With LTE on the way, we’re looking at maximum speeds of up to 100 Mbps. Not only will we have super high speeds, but we’ll have mobile devices capable of using these speeds (netbooks, notebooks and smartphones). With an ever growing segment of the population using mobile broadband, even using a cap/metered system will still require massive increases in network capacity.

    They know it’s coming because they’re researching, developing and preparing to sell products to us based on it.

    They need to stop fronting, get with the program, increase net capacity and stop trying to squeeze every penny out of consumers. You already got free money from the government to develop your business to make more money (think subsidized profits), how much more do you need from us?

    Maybe more competition will do it. People in Japan pay $60 for a 150 Mbps connection. Last I checked Comcast stand-alone internet after taxes without promotions is around $40 – $60…for like a 10 Mbps connection.

    Enough financial shafting already

  12. “wired will never be replaced by wireless” – never is a bold statement in the world of technology, but I do agree that wired has major advantages over wireless for the foreseeable near future.

    Right now wireless just doesn’t cut it for stability and larger data transfer applications like HD video.

    But I welcome the day when we are using the internet from our cars.

  13. There’s something fundamentally wrong with the whole setup here, the telcos are used to pay per use – they are like the railroad companies, which were good for point to point traffic rather like phone calls.

    The Internet, on the other hand looks a lot like car travel – you pay a fixed fee (tax) for all the roads you want to use and people make money building businesses along the roadside.

    The metered approach sounds like a road network with a bridge toll down every street. But you can understand why a company that has previously been charging a toll for low bandwidth voice traffic is not happy with having to remove it for higher bandwidth and the same infrastructure costs.

    Ultimately, if the Internet is like the freeway system, then its infrastructure is surely not the domain of free-enterprise capitalism.

    • I think this is what he is alluding to in his public internet comments. He seems to be acknowledging that the public internet is likely to be viewed more like a basic infrastructure which isn’t a great place to make money. Then he is setting up the notion of a parallel environment with a different set of rules for more specialized services.

      Of course this is basically torpedoing net neutrality without appearing to do so. Neutrality is fine for the plebs on the basic public internet, but some services have to be treated specially (and paid for).

  14. How can they consider implementing “metered broadband” when they won’t even take the time to make a meter?

    Most people have no idea how much data they consume and won’t know which package to subscribe to. 50,000 photos? What does that mean when I have a home network? Where’s that meter Comcast promised over a year ago? If these companies insist on going in this direction they better start doing more to educate consumers now about their own usage or else the backlash will be severe when they try to ram this down their customer’s throats.

      • This all makes me think of the studies that surfaced a couple of years back showing how much people were overspending on voice services. Unused minutes were the norm. Then, they moved to rollover minutes, more flexible pricing (free in-network calling), and eventually unlimited voice plans. I feel like with the operators, we always have to go through the pain before we get to a good place.

  15. Didn’t explain it very well. Metered means the providers will have to always play the edge. Set the limits to low and consumers push back. To high and you don’t make money. Just right will only last for a small period of time because consumers will always require more over time and will push back again. Can providers be hugely profitable playing at the always adjusting edge? I find it highly unlikely.

    • Stacey Higginbotham

      Doug, I think you are onto something with this. I took issue with one of Lynch’s comments about consumers’ devices in the future connecting to LTE networks even when their owners aren’t aware of it and I though, not with the current overage charges for going over a 5GB limit on the wireless network. Fear of excess fees will turn people back into broadband or minute hoarders.

      • Doug is more right than he knows. Why do you think the Asian providers and service levels smoke us in nearly every way. They have already come to similar conclusions and fashioned networks that are nearly bullet proof and serve more than customers can ask for in order to be ahead of the game ALWAYS. When your customers are happy and getting what they want in a reasonable way for a reasonable price then the impetus to start looking … let alone make the move elsewhere is nearly Nil! The Verizon attitude is endemic of the diseased arrogance of corporate America and an indicator of just how broken doing business in the country is at the moment.

  16. I think it will go the other way. I think that the metered broadband idea has already been lost on the consumer front. I think the metered wireless idea is already in the agony pains of defeat. Wired and wireless will be un-metered in the end. Sorry fellas.

  17. Another exec who doenst get it. People HATE being nickel and dimed.

    These phone companies are the worst (well actually the banks are the worst). They are sooooo friggin clueless about how much their customers hate their phone companies.

    No one likes their phone company. Its like voting for congress, you have to pick the best of the worst.

  18. If they charged per GB across the board, then either SMS would be essentially free or a movie download would be more than the cost of a house.

    It surely removes their ability to cream off fees for value add like MMS, unless its per GB per packet type and not simple metering.

    Are they a utility or a service provider?

  19. While I understand the argument that is supportive of the metered-broadband idea, it’s really not a good idea. The cell industry is proving that the whole metered aspect doesn’t work (every major carrier now has an “all-you-can-eat plan”) and that more people are looking for dumb pipes with access to anything they might want.

    If companies are going to insist on the metered approach they better have a nice “all-you-can-eat” plan at a reasonable cost if they want to stay competitive.