Network Neutrality: Reconsidering Flat-Rate Internet Access

Later this week, the FCC is expected to release details of a newly proposed policy addressing network neutrality. These rules, motivated primarily by a desire on the part of the Obama administration to encourage openness and innovation on the Internet, are also mired in intense political debate, some of it ideological but much of it driven by a corrupt system of campaign finance. Corporate donors are staking out their turf and finding compromise won't be easy.

Most tech savvy people understand that the purest form of net neutrality, in which "all packets are treated equally" is a practical impossibility in an era of converged time-sensitive network applications. On the other hand, only naive or disingenuous parties would suggest that a laissez-faire regulatory approach is appropriate for service providers, whose financial motivations and near-monopoly status drives their policies and practices. These are the same folks who believe AT&T blocked Skype on the iPhone because they were concerned about the potential negative impact on current customers. Right.

While much of the historical debate about net neutrality focuses on encouraging non-discriminatory practices amongst wireline Internet service providers, the most fascinating aspects of this debate revolve around wireless providers. On wired networks, performance is mostly an exercise in simple economics. If you want better service, you can throw money at the problem. The same is true of carriers. If we expect them to offer low-cost Internet access services, we have to give them license to manage these services in an appropriate manner.

That doesn't mean they should be able to make arbitrary decisions that prevent customers from accessing new services offered by Google or some other innovative cloud services provider, but it does mean that they may need to define and implement packet prioritization policies that sometimes adversely impact other companies. Here's a simple analogy: if a transportation company built a facility adjacent to your neighborhood that resulted in continuous congestion that impeded your car's access in and out of your neighborhood, would you stand up on the side of road neutrality?

This debate really gets interesting when we add mobility to the equation. Anyone who has tried to use an iPhone in Manhattan during peak usage periods understands the powerful reality that bandwidth on mobile networks is a scarce resource. I don't have much sympathy for AT&T, which has clearly oversubscribed its network. They understood the network load characteristics of the iPhone, which consumes bandwidth in inefficient ways. The company is licensing new spectrum and building out more cells, but it can't possibly keep up with increased demand.Consumers tolerate this because they have no choice. We continue to pay AT&T $30/month for unlimited data service that often stinks like a dead fish. (Sorry for the graphic analogy, but I was thinking about a circa-2001 Network Computing cover story we did on carrier service level agreements, where the cover art showed an SLA being used to wrap up dead fish, like an old newspaper. That summed up the value of carrier SLA's in those days.)  

That leads us back to the practice of flat-rate pricing, an element that almost never gets raised in the discourse about network neutrality even though it is a business practice that is inherently unfair to users. It also puts carriers in a position that makes them feel pressured to impose back-door usage restrictions, especially on broadband wireless networks. In this regard, you can certainly understand why a wireless carrier might want to restrict bandwidth-intensive applications like streaming media.

I've always found it interesting that in an era when broadband is increasingly viewed as an essential public utility, it is one of the only utility services that isn't metered. Some small municipalities provide flat-rate pricing for water services, but for gas and electricity, the usage meter is king.  Even with cellular voice services, most usage is metered. Why should broadband data services be different?

The answer, of course, is customer preference. From the earliest days of dial-up networking, consumers made it clear that they hated metered usage for Internet access services. Carriers responded by providing flat-rate pricing, setting the monthly rate high enough so that they would make up for losses from bandwidth hogs by over-charging casual users. It's a pricing scheme that is inherently unfair and it works against efforts to make broadband more affordable, but any actions to change these policies are greeted with hostility by the most vocal advocates for network neutrality.

Perhaps it's time to rethink flat-rate pricing. If carriers charged for usage, they'd have no justifiable reason for denying customers the freedom to run whatever application they choose. For casual users, monthly costs would decline. There would be no prohibition against carriers offering flat-rate pricing, but they could do so only under the condition that they did not discriminate by application. It's not clear whether consumers would have the stomach for usage-based Internet access, but if advocates of neutrality are really interested in fairness, this seems like the logical way to go.