Proposed FCC Net Rules Would Cripple Video Consumption

FCC commissioner Julius Genachowski has finally put together proposed network neutrality regulations, and made good on his intent to protect the open internet for both wireline and wireless broadband. But there’s a big red flag that could seriously impact video consumption on digital platforms: usage-based pricing.

UBP is, of course, a euphemism for metering; the more content you consume, the more you pay. Given that video is far and away the most bandwidth-intensive data in the pipeline, any application that uses it is going to become more expensive.

Think of all the offerings UBP is going to shake up: streaming of films and TV series (Netflix (NSDQ: NFLX), iTunes), video chat (Skype), live video (UStream).

Bernstein Research surveyed consumer attitudes toward UBP on wireless platforms in July, and the results were not encouraging: more than 58 percent of the lowest data users said they would change carriers for an unlimited plan.

“Respondents indicated that they would reduce their usage of virtually every wireless application if forced into UBP plans,” according to the report. “Predictably, wireless video would be the most heavily (adversely) impacted application.”

The conventional wisdom has always been that flat-rate data plans were the best way to get users to sample video products because they didn’t have to be mindful of how much they were consuming.

Phone and cable companies have clamored for UBP for a while, and experimented with variations on the model in recent years, most notably AT&T (NYSE: T). And there’s no question they were going to have to head in this direction or risk losing control of their networks. But ISPs are going to have to be really careful how they price metered plans if Genachowski’s proposal makes it through.