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Broadband pricing is naturally evolving to usage tiers (Part 7 in a series)


Exploding overall broadband usage, combined with increasingly varied usage between average users and heaviest users, is naturally evolving the broadband market towards the flexibility of tiered usage-pricing over time.

Yesterday, Verizon Wireless indicated that it will begin to move its wireless data users away from unlimited data plans for single users that upgrade to its 4G LTE wireless broadband network, towards more-shared, tiered usage-pricing data plans, where with the potential added-price comes the added-flexibility of combining the usage of multiple devices of a family or a small business.

Today Comcast announced a transition from its current very-high, but static 250G monthly data usage cap, to a more flexible and expandable 300G monthly usage threshold, where a user would then have the option of buying additional usage above 300G -- at the likely cost of about an additional $10 per additional 50G used in a month. So in addition to choice of broadband speeds, the heaviest-use Comcast consumers will now also be able to choose how much more capacity they want to use/buy as well.

Both companies, which invest billions of dollars in their broadband infrastructures, are naturally evolving their pricing and competitive business offerings over time to address the exploding high-bandwidth usage of smart phones and tablets, market segments that did not even exist five years ago.

Broadband critics who oppose market-based pricing and seek heavy-handed government price regulation will try and claim that these natural market-based price changes are a violation of net neutrality or the FCC's Open Internet Order, when they clearly are not. In para 72 of the FCC's order, the FCC made clear that the above-discussed usage-pricing approaches are not a regulatory problem: "…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. It would also foreclose practices that may appropriately align incentives to encourage efficient use of networks. The framework we adopt today does not prevent broadband providers from asking subscribers who use the network less to pay less, and subscribers who use the network more to pay more."

Pro-regulation activists like FreePress and Netflix are also whining that Comcast's IP-based cable service, which allows users to use their Xbox 360 controller as their combined set-top box/remote control, should be subject to the same data cap/tiers that broadband users are subject to. This is wishful thinking that ignores both the law and FCC policy. Comcast's cable service is a Title VI service that is legally separate from Comcast's broadband information service offering. What FreePress and Netflix don't say is that Congress, the court and the FCC have all disagreed with Freepress/Netflix' imagined conflation of broadband and cable services, so they remain legally and operationally separate and distinct.

In sum, exploding usage of smart phones and tablets, combined with fierce market competition to keep or win consumers' business, is naturally evolving companies' broadband pricing to the greater flexibility and fairness of usage-based pricing tiers.