Last week, Verizon appeared to cave to FCC pressure when it shelved a new network management policy which would have extended the controversial practice of “data throttling” to 4G customers with unlimited data plans. Verizon’s decision put an end to its two-month spat with the FCC over whether the new policy would have violated the FCC’s Open Internet Order.
To provide some background: Verizon has “throttled” (i.e. slowed) data speeds for some customers on its 3G network since February 2011. This practice only affects customers on “unlimited” data plans whose data usage ranked in the top 5%, and only lasts for the duration that they are connected to a “congested” cell site. On July 25 of this year, Verizon announced that, starting in October, it would extend this network management policy to its 4G network.
Luckily for 4G customers on unlimited data plans, the FCC was paying attention. In a letter sent less than a week after Verizon’s announcement, FCC Chairman Tom Wheeler expressed doubts as to whether the new policy fit within the Open Internet Order’s definition of “reasonable network management.” In particular, Mr. Wheeler found it “disturbing” that Verizon would “base its network management on distinctions among its customers’ data plans, rather than on network architecture or technology.” Verizon responded swiftly to Mr. Wheeler’s criticism. In a letter sent just two days later, Verizon explained that the policy targeted customers on unlimited data plans because they do not have an incentive to limit their data usage, which made them disproportionately responsible for network congestion. On its face, this argument seems reasonable—after all, the FCC gives “mobile” broadband providers more leeway to manage their network than it does “fixed” broadband providers. So why wasn’t the FCC satisfied?
From the FCC’s point of view, the fatal flaw in the new policy was not that Verizon throttled data speeds for some customers, but that Verizon chose which customers it throttled based on their data plans. If the new policy’s purpose was to discourage or punish heavy data users, then it should not matter whether the customer being slowed had unlimited data. Put another way, a customer with a 4G device who uses 5 gigabytes worth of data per month puts the same strain on Verizon’s network regardless of whether the customer is on a usage-based plan or an unlimited plan.
Had the policy gone into effect, it would have effectively forced 4G customers on unlimited data plans to choose to either (a) put up with potential throttling, or (b) switch to usage-based data plans (which are more profitable for Verizon). As both of these options would have resulted in customers receiving something less than “unlimited” data, the FCC was understandably skeptical of Verizon’s motive behind the new policy.[1]
Regardless of whether the FCC’s concern was justified, Verizon’s decision to throw in the towel was likely influenced by other concerns. For one, this dispute came at an awkward time between Verizon and its chief regulator. Earlier this year, Verizon successfully challenged many of the FCC’s “net neutrality” regulations, which the FCC is currently in the process of rewriting. Consequently, Verizon may have decided that it risked stricter regulations if it continued to fight. (The fact that the FCC held a roundtable in September in which it discussed rescinding some regulatory exceptions for mobile broadband networks seems to reinforce this idea.) It’s also possible that Verizon decided it was unlikely to persuade the FCC in light of the FCC’s recent requests for information from other major wireless carriers’ regarding their own data throttling policies. This move could signal that the FCC intends to more carefully scrutinize network management policies going forward, or even that the FCC will be less permissive of data throttling policies going forward.
Whatever Verizon’s true reason was for ditching its policy, the significant number of customers who remain on unlimited data plans suggests this may not be the last we hear about “reasonable network management” practices.
[1] By contrast, when Verizon first began throttling speeds for 3G customers in 2011, customers on unlimited data plans still had the option to keep their plans without speed limits by upgrading to the higher-capacity 4G network. In fact, some industry experts speculated that Verizon began throttling 3G precisely to encourage customers to make the switch to 4G.