Will Wireless Carriers Soon Get Their Dream—Internet That Works Like Pay-Per-View?

By Andrew Moseman | December 20, 2010 6:10 pm

Mobile phoneUPDATE: Today (Tuesday) the FCC voted to pass the net neutrality regulations mentioned toward the bottom of this post. The rules include the provisions that wireless and traditional Internet be treated separately, and generally made everyone unhappy. However, expect a fight in Congress to either overturn the rules or strip the FCC of its authority in this sphere.

Behind closed doors, wireless providers are talking about a future that’s a net neutrality advocate’s worst nightmare.

Last week the tech companies Allot Communications and Openet, which provide products for large carriers like AT&T and Verizon, demonstrated new products in a web seminar, some details of which have leaked out. The PowerPoint slides detail a plan to monitor your online behavior and charge you for your use of certain applications. For example:

In the seventh slide of the … PowerPoint, a Vodafone user would be charged two cents per MB for using Facebook, three euros a month to use Skype and $0.50 monthly for a speed-limited version of YouTube. But traffic to Vodafone’s services would be free, allowing the mobile carrier to create video services that could undercut NetFlix on price. [Wired]

Such a scenario hits two depressing points for backers of net neutrality: First, that the openness of the Web will be smashed by carriers charging more for certain applications, and second, that carriers will be able to push their own applications by hampering the quality of their competitors or over-charging for their competitors’ services to make their own more enticing.

That’s not how anyone actually wants the internet to work — except carriers, who’ve been saying increasingly insane things about charging even smartphone manufacturers for customer data usage lately. What’s more, it’s rumored that the FCC will cave to Verizon and AT&T and exempt wireless internet service from major parts of net neutrality regulation it’s expected to pass [this] week, so this nonsense could very well hit the US sooner rather than later. [Engadget]

That FCC vote on proposed rules by chairman Julius Genachowski is scheduled to come tomorrow, though the exact details of the plan have yet to be released. Despite attacks from onlookers who see the rules as too stringent or too weak, there is a good chance that they pass with the needed three votes out of five.

Democratic Commissioners Michael Copps and Mignon Clyburn have said they favor net neutrality rules. But they say there are still weaknesses in the proposal by Chairman Julius Genachowski. Both commissioners said the rules need to cover wireless networks more broadly than a draft proposal did. And they have expressed concern over what some view as a loophole that would allow Internet service providers such as Comcast and AT&T to charge companies for priority traffic on their networks. [Washington Post]

Related Content:
80beats: Mark Zuckerberg—Not Julian Assange—Voted TIME Person of the Year
80beats: 5 Reasons Super Wi-Fi Might Not Be So Super
80beats: “Do Not Track?” FTC Proposes an Opt-Out for Internet Users
80beats: Opinions: What Google and Verizon’s Plan for Net Neutrality Means

Image: iStockphoto

  • http://clubneko.net nick

    This would be like PG&E charging you more money for using your TV vs. your fridge. Either I’m paying for bandwidth and connectivity or I’m not.

    However, I believe these ideas will come back to bite carriers in the bum. There’s a reason the cable TV model is failing. There’s a reason PPV isn’t as popular as netflix or rentals or RedBox. This will happen, and whomever offers the best deals will get the most customers, whomever offers unlimited will be bombarded with customers.

    I would be okay with paying per gigabyte, if all I had to pay was a per GB fee. If it’s gonna be $10/GB, and I use .1GB, charge me $1. If I use 10GB, charge me $100. Don’t charge me $70 for a connection, then extra for the data, then extra-extra for certain specific data. Then don’t try to turn around and charge the data providers for providing me with that data as well. As they may well know, profit talks, and as they try to pry profit out of others, we will seek alternatives. :)

  • http://www.myspace.com/cameraspecialist joe

    internet should be free.

  • Walt French

    @nick, it is in the financial interest of ISPs to set up monopoly-type pricing if they can. In competitive markets, Econ 101 says that firms charge the last MB of data at the cost of providing that last MB. In monopoly situations, or markets with weak competition, prices are set higher (on average) and rather than reflect costs, are scaled up to reflect perceived “value.”

    There’s no reason for ISPs to price as if they were actually competing. They don’t, thanks to spectrum allocations, lock-in contracts, etc. The worst thing for them — the reported reason why Verizon told Apple to take a hike — is for them to be turned into “dumb pipes” where they’re selling you what you call for — megabytes that don’t have “Verizon ®” stamped on them.

    In my humble view, there might be price differentiation by time-of-day or latency of data (lags between when you talk and your recipient hears you) or other variables that actually reflect costs. The current, all-you-can-eat plans are optimal if most of the cost are fixed, e.g. for connection, administration, whatever, but if there are significant per-bit costs, the networks are not actually pricing as if they were competitive. And that is part of what we are hearing: that Android users are “data hogs” or that Comcast is capacity constrained due to Netflix during evening hours, etc. Naturally, however, having achieved the scale necessary to make new competition unprofitable, the ISPs are trying to shift towards Intel or Apple or Google-level profit margins, and that will require installing “value-based” pricing in place of flat rate.


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