Usage-Based Pricing Can Help Competition, Genachowski Says

BOSTON -- Usage-based data pricing can spur competition in broadband, FCC Chairman Julius Genachowski said of ISPs’ moves to systems not always charging flat prices regardless of consumption. NCTA CEO Michael Powell asked Genachowski about the practice in a Q-and-A Tuesday at The Cable Show, noting ISPs of all sorts, including cable operators, are starting to charge based on consumption. “Business model innovation is very important, particularly in new areas like broadband,” Genachowski replied. The commission’s 2010 net neutrality order allowed such practices. Nonprofits that backed the order criticized Genachowski’s remarks, while AT&T supported the comments.

Some had told the FCC that all-you-can-consume broadband should remain the only acceptable model, Genachowski recalled. “I didn’t agree with that, and the commission didn’t agree with that,” he said. It can “increase choice and competition, and it can increase fairness. It can, we said, result in lower prices for people who consume less broadband, so experimentation in this area with those goals in mind is particularly appropriate.” Charges based on tier of data plan is “something our companies are wrestling with getting right,” Powell said. He criticized “naysayers” on Monday who “wail” at cable ISP pricing changes (CD May 22 p1).

Comcast’s new broadband bandwidth policies and Verizon Wireless’s existing limits are consumer-friendly, their executives said earlier Tuesday. “There’s always demand for more capacity, and more bandwidth,” said Comcast Cable CEO Neil Smit. Increasing data demand by wireless subscribers is “why we're so focused as an industry on spectrum,” said Verizon Wireless President Dan Mead. “We see the hunger in consumers using their devices in so many ways.” He pointed to the carrier’s LTE capabilities and its new Viewdini video portal.

Comcast “had a more rigid structure in place” for data caps, “and we wanted to make it more flexible” for the cable operator’s broadband subscribers, Smit said. If they want to consume a terabyte of data, they “could buy tiers,” he said. “It was about flexibility and choice,” he said of the ISP’s changes last week to its caps which led it to abandon a 250 GB limit. “It seemed to be very well accepted,” Smit said of the change.

Verizon Wireless considers alerts to subscribers who approach data caps “friendly consumer reminders,” Mead said. “We give notices for data consumption to consumers” when they approach certain thresholds, and customers can upgrade, he said. The point “is to never have the consumer surprised,” he said. “One of the things consumers are going through is what a gigabyte is,” and Verizon Wireless and “the wireless industry is doing a good job in responding to those needs,” Mead said. “I think that you'll see that the tiers for consumption will continue to evolve."

Genachowski’s “important statement” isn’t “the first time” he’s “recognized the need for flexibility in broadband pricing,” AT&T Senior Executive Vice President Jim Cicconi wrote in a blog post (http://xrl.us/bm8yho). “But his words today come at a time when one company has been pushing the FCC to impose a particular pricing model on Internet service providers. Under that company’s proposal, the costs of providing their service would be borne by all consumers, not just those who choose to use their service. This would be fundamentally unfair, and that’s why Chairman Genachowski’s pushback is significant.” Netflix has told the FCC that the exclusion of some content from broadband data caps when video is sent by managed networks of AT&T, Comcast and Time Warner Cable violates net neutrality rules. Netflix had no comment Tuesday. Genachowski “recognizes the need for regulatory humility” for the Internet, Cicconi wrote.

To Public Knowledge, Genachowski backing data “caps presents a false picture” that it’s “simply another ‘business model innovation,'” Legal Director Harold Feld said. “The question is not, as the chairman said, whether there is only one model. The question is, will all the benefits of broadband Chairman Genachowski has articulated in the past ever happen in a world where broadband providers get a free pass on any pricing scheme or restriction if they use the magic words ‘bandwidth cap'?” ISPs shouldn’t be able to “exempt their content from the cap while counting the same type of content supplied by others,” Feld said. (http://xrl.us/bm8yh6).

"The FCC should be investigating” caps, “not endorsing them,” said Free Press Policy Director Matt Wood. “All the evidence shows that caps on wired broadband platforms like cable make no sense,” Wood said. “They don’t affect network congestion, even in the rare instances where congestion actually exists on these systems.” Comcast shows the “harms” and “lack of any legitimate reason” for caps, because the ISP began by exempting its own content from the limits and applying them to rivals including Netflix, Wood said. Last week “Comcast changed course and suspended caps temporarily in all but a few markets -- but promised to start overcharging any users there who exceeded these arbitrary limits,” he said. “The FCC has turned a blind eye to this competition problem."

Genachowski “emphasized the importance of consumer choice,” an FCC spokesman said of the remarks on usage-based pricing. Genachowski also emphasized “competition, which includes over-the-top video competition, and lower prices for consumers,” the spokesman continued.

Genachowski keeps hoping more government-occupied spectrum will be used for commercial purposes, he said of the approximately 60 percent of frequencies in certain desirable bands used by federal agencies. “No one anticipated this increase, so we haven’t managed spectrum policy to anticipate this increase” in consumer demand for data and other functions that need spectrum, he said. “We have to think about much more of that for commercial [use] more quickly, and think about innovative ideas like sharing of government use and commercial use, building on some of the ideas in Wi-Fi."

Using cable operators’ Wi-Fi hotspots to “offload” wireless data traffic is “a big part of the solution,” Genachowski said. “In the category of the kind of problems you want to have is mobile congestion,” since without it “we wouldn’t have any demand,” he continued. “Cable has been leading the way in innovating around Wi-Fi,” and Genachowski “was very pleased to see the announcement” Monday that five operators are letting each others’ broadband customers use their Wi-Fi hotspots, he said. “We're just at the beginning of the innovation that we'll see from Wi-Fi."

Addressing a TV station practice opposed by cable operators seeking changes to retransmission consent rules, Genachowski said his agency is giving “closer attention” to shared services agreements. “That raises real issues, and it’s something we're taking a close look at the FCC,” he said of when two or more separately owned stations within a market share some functions. Genachowski joked that the addition of Ajit Pai and Jessica Rosenworcel this month as commissioners means it'll be harder to find a conference room to fit all the FCC members. Powell said both visited NCTA’s show. “We've had a very well functioning commission that has gotten a lot done, a lot done unanimously,” Genachowski said. “When we've disagreed, we've been able to disagree without being disagreeable.

NCTA Show Notebook

FCC Chairman Julius Genachowski and Commissioner Robert McDowell keep working together to spread concerns about efforts by some ITU members to assert authority over international Internet traffic, their aides said. They said at a Cable Show panel that the U.S. cable industry ought to be concerned by those moves, because it could affect ISPs’ domestic subscribers. An open Internet has been “a tremendous driver for the cable industry, even for operators that don’t operate internationally,” said Genachowski aide Michael Steffen. “It’s certain that when some of your customers go online, they are interacting with some content that crosses international borders.” It’s “important for the cable industry to be focused on this as well,” he said Tuesday in Boston. If the efforts by some ITU members to assert authority over cross-border Web traffic are successful, it could “balkanize the Internet,” said Christine Kurth, aide to McDowell: “He’s willing to talk to anyone who is willing to listen about the problem.” A bipartisan effort in the U.S. that includes the administration is working on the issue, said Erin McGrath, an aide to the Republican commissioner. Continuing work on USF continues to be a priority for the agency and its eighth floor, aides said. Last year’s USF ruling on how the fund is spent “was a very big order, and surely there are some things that needed to be adjusted,” Steffen said. One of Genachowski’s goals for the fund is “refocusing this program on broadband,” the adviser said. McDowell still hopes to have an “outcome this fall” on what contributions companies -- and their subscribers -- make to the fund, Kurth said. Commissioner Mignon Clyburn remains focused on the FCC’s implementation of the 21st Century Communications and Video Accessibility Act and to getting better data on minority media ownership, aide Dave Grimaldi said. On issues like indecency and parental controls, “all of this is on our minds, but is not bubbling to the top right now,” particularly as a decision is awaited from the Supreme Court this term on the FCC v. ABC/Fox indecency case, he said. “If the court gives more clarity, I think that’s something that a lot of consumers want,” Grimaldi said. “The clarity that I think will come from the court is something that could provide a pathway forward for content distributors.” On retransmission consent deals, the FCC’s “authority is limited by statute,” said McGrath. “I know there’s a lot of frustration, and a lot of people who want action” via an order on retrans, she said. “It’s a difficult proceeding, so to the extent you're asking why it hasn’t moved, we have to take our time.” The agency “asked Congress for further guidance” on retrans, in preparation for last week’s Senate Commerce Committee FCC oversight hearing, Grimaldi said. “It’s a tough needle to thread in terms of what we can do right now.”