Looks like the FCC, in the next month, is going to mandate net neutrality to all types of Internet access, including cellular networks. In his first major policy speech, FCC Chairman Julius Genachowski proposed new rules including that, “the Internet remains an unfettered platform. . . ” meaning service providers will soon be restricted in managing speed and regulating usage through price. How did we get to this point?
Surely the growth of the Internet and the use of wireless wide area networks to access these networks are driving new rules. As cellular network spectrum is finite and expensive compared to wireline, some controls are needed to inhibit use. Right? Well not really. In a rush to drive data service revenue growth, U.S. wireless operators have increasingly reduced the price of 3G broadband access from around $75 retail, to under $45 per month on average for negotiated rates. The laws of price elasticity say the lower the price, the higher the volume. So demand has surged with a million new subscribers each month. Though providers tried to present their service as a wireline replacement by offering “unlimited” data downloads, the number of new users has put a crush on some networks, causing slower than average speeds and a strain on network capacity. In fact, operators have already changed their terms from “unlimited” to a maximum of 5GB per month–forced by several lawsuits. Operators routinely throttle (slow down) bandwidth of some users during peak times, which doesn’t give an optimum experience. And most users don’t even know it, blaming it instead on poor connections or some other problem that is difficult to trace back to the provider. So wireless, it turns out, is a different service than wireline–and should be priced differently.
Wireless operators are a bit to blame for all of this. In their rush to replace wireline services (particularly cable) they forgot the valuable, limited asset they have and that all networks aren’t created equal. Even newer wireless technologies like 3G and 4G will have a hard time keeping up with increasing demand as data shifts from low end messaging to multimedia. Not to mention the increasing cost of backhaul connections to get to the Internet. They would be wise to keep these lessons in mind as new services are launched–be upfront about pricing, throughput, data caps, throttling–or government regulations will get stricter. New laws will only make carriers think twice about additional investments in this area. In the end, a compromise will need to be reached to satisfy both sides, but wireless operators need to bring full disclosure to the table first, and that has never been easy in this industry.
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