FCC Chair Approves Tiered Pricing For Broadband
May 23, 2012

FCC Chair Approves Tiered Pricing For Broadband

Federal Communications Commission (FCC) chairman Julius Genachowski said Tuesday that he supports tiered broadband internet plans, a growing trend that he claims could be “healthy and beneficial” for broadband and high-tech industries. Streaming services such as Netflix do not agree, reports Washington Post´s Cecilia Kang.

Cable service providers and wireless carriers are revising their billing practices to charge users based on how much data they use and moving away from unlimited data plans. Users, they say, congest networks with their heavy use of internet services, especially wireless services which are growing dramatically.

Calling tiered pricing “healthy and beneficial,” Genachowski claims, “Business model innovation is very important. There was a point of view a couple years ago that there was only one permissible pricing model for broadband. I didn´t agree.”

This is not the first time the FCC has visited this issue, writes Wendy Davis from Media Post. In late 2010, the FCC voted to enact neutrality rules. Genachowski endorsed usage-based pricing, and the FCC´s neutrality order itself repeats that view.

“Prohibiting tiered or usage-based pricing and requiring all subscribers to pay the same amount for broadband service, regardless of the performance or usage of the service, would force lighter end users of the network to subsidize heavier end users,” the order states.

Netflix CEO Reed Hastings has publicly criticized the practice, saying users would be punished for watching streaming video services, for example, that tip them over their monthly limits. Hastings has also decried how cable provider Comcast isn´t counting video use of its own XFinity services against data plans, putting Netflix at an unfair disadvantage, Hastings has said.

Comcast counters that its Xfinity for Xbox app isn´t transmitting data over the public internet, which enables it to treat Xbox data differently than other web streams, reports Reuters reporter Yinka Adegoke. Consumer advocates wish the FCC chief had taken on Comcast about its Xbox plans, rather than give a stamp of approval to usage-based billing.

The FCC´s reaction also drew sharp criticism from public interest groups long concerned with cable companies´ handling of broadband pricing. “Broadband providers should be free to try different pricing strategies,” said Free Press Policy Director Matt Wood.

“But the FCC´s apparent endorsement of these plans only makes sense in a world with real broadband competition. Unfortunately, the wireline broadband market is at best a duopoly and is trending toward a cable monopoly.”

Harold Feld, legal director for Public Knowledge, said in a statement, “We still do not know how the caps are set, how they are evaluated and how they affect consumer. Also unanswered is the question what counts against the cap and what doesn´t. Companies should not be able to exempt their content from the cap while counting the same type of content supplied by others.”

Time Warner Cable, the second-largest cable company, launched a trial of usage-based pricing in 2009. It was halted after negative feedback from consumer groups.