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FCC Chair Renews Support for Usage-Based 'Net Pricing' Public-Interest Groups Cry Foul

Thursday, May 24, 2012
By Paul Barbagallo

Julius Genachowski, the chairman of the Federal Communications Commission, gave his personal endorsement in principle May 22 to usage-based internet pricing, a move that drew a swift rebuke from public interest groups.

Genachowski, speaking at the National Cable and Telecommunications Association's Cable Show 2012 in Boston, said usage-based pricing would “help drive efficiency in the networks” and could be “healthy and beneficial” for the cable, telecommunications, and high-tech industries.

Such a tiered pricing approach may also even “increase consumer choice and competition” and result in “lower prices for people who consume less broadband,” Genachowski said during a question-and-answer-style interview with former FCC Chairman Michael Powell, NCTA's current president and chief executive officer.

It was not the first time that the chairman endorsed data caps or usage-based pricing. In 2010, Genachowski noted that the agency's work has “demonstrated the importance of business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing.”

His remarks at the Cable Show come on the heels of an announcement by Comcast Corp. that it plans to raise its residential internet service data cap by 20 percent as it tests different pricing models over the next few months in two metropolitan markets.

Company executives told reporters May 17 that it will test one model that will offer customers the choice of selecting either a data cap level above 300 gigabytes per month, which will come at a higher monthly rate, or paying $10 for an extra 50 gigabytes.

Another model will allow heavy users of data to pay $10 for the extra 50 gigabytes only.

According to Comcast, the average customer uses eight to 10 gigabytes per month, or about 4 percent of the company's current 250 gigabyte cap.

Public-Interest Groups Want Probe.
Public interest groups were quick to criticize Comcast's new pilot, reiterating calls for an investigation of all providers' tiered-pricing policies and newly imposed caps.

Following the chairman's speech May 22, those same groups questioned how usage-based pricing and caps will affect consumers.

“We still do not know how the caps are set, how they are evaluated and how they affect consumers,” said Harold Feld, legal director of Public Knowledge, in an emailed statement. “Until the FCC answers those questions … it should not be endorsing any pricing scheme that has the potential to drive up costs for consumers as this does. 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.”

In a similar statement, Matt Wood, policy director for Free Press, argued that the caps are only put in place to discourage customers from using competing services, like Netflix.

“Comcast's recent actions show both the harms of these caps and the lack of any legitimate reason for them,” Wood said. “Comcast started out by exempting its own content from its own caps, while applying them to Netflix and other online video providers. Then 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.”

Last year, the same groups urged the FCC to more closely examine new broadband data caps instituted by AT&T Inc. (89 TCM, 5/9/11).

Like Comcast, AT&T has said that the new caps--150 gigabytes per month for DSL (digital subscriber line) subscribers and 250 GB per month for subscribers of the company's U-Verse service, which employs a mix of fiber-optic and DSL technology-are being imposed as internet users are increasingly running data-consuming applications and choosing to watch video programming online via sites like YouTube, Hulu.com, and Netflix.

“FCC Chairman Genachowski made an important statement today in support of usage-based pricing,” Jim Cicconi, AT&T's senior executive vice president of external and legislative affairs, wrote in a blog post May 22. “This isn't the first time the chairman has recognized the need for flexibility in broadband pricing, 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 Genachowski's pushback is significant.”

He was referring to Netflix, which has 24.4 million subscribers, 21.7 million just from its streaming service.

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