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Netflix to FCC: Scrap Data Caps

Cable operators counter that agency should stick with deployment 9/19/2016 8:00 AM Eastern
TakeAway

Multichannel video providers would lose a service differentiator if the federal government was to restrict data plans.

WASHINGTON — Netflix is telling the Federal Communications Commission that data caps and usage-based pricing threaten broadband deployment and violate the congressional mandate on advanced communications services.

 

The agency, under chairman Tom Wheeler, has already signaled concerns about usage-based pricing as a potentially anti-competitive tool, including by making unlimited data part of a quid pro quo requirement for some broadband subsidies. The FCC also imposed a seven-year moratorium on data caps or usage-based pricing on Charter Communications as a condition of approving its acquisition of Time Warner Cable and Bright House Networks.

 

At the time of the merger, the FCC said the Charter condition was meant to guard against subscribers getting charged fees intended to make online video consumption more expensive, leading them to stick with a traditional pay TV bundle.

 

In comments to the FCC on its upcoming 12th report on the availability of advanced telecommunications, Netflix, not surprisingly, wants the ability to access video to be the test of whether broadband is being deployed in a reasonable and timely manner.

 

Internet-service providers say usage-based business models help differentiate their services and manage bandwidth demands on limited capacity.

 

Netflix, which relies on bandwidth to serve customers hungry for online video, is pushing back hard, calling caps an ineffective management tool.

 

Netflix has said any data caps on fixed broadband service should be considered “inconsistent with Section 706” — the portion of the Telecommunications Act of 1996 that mandates the annual FCC study of advanced communications service availability and encourages its deployment — and “low data caps” on mobile networks should be disallowed as well.

 

Data caps “discourage a consumer’s consumption of broadband, and may impede the ability of some households to watch Internet television in a manner and amount that they would like,” Netflix said.

 

Netflix also takes aim at zero-rating plans, in which providers exempt certain services from caps, a move ISPs has said is pro-consumer but Netflix has argued is potentially anti-competitive.

 

“By imposing limits only on certain video services,” Netflix said, BIAS (Broadband Internet Access Services, or ISPs) “effectively increase the cost consumers must pay to access those services while making exempt content comparatively cheaper, steering consumers toward the exempted services.”

 

Whether or not the FCC concludes that is the upshot will likely determine the regulatory fate of usage-based pricing.

 

The FCC is currently collecting information — and has been for most of a year — on usage-based pricing and zero- rating practices under its so-called general conduct standard for network neutrality, which is a way for it to potentially regulate practices not expressly prohibited by its new Open Internet order.

 

Wheeler has signaled that usage-based pricing could be an innovative business model, but also that the FCC will prevent anticompetitive behavior wherever it concludes it is occurring.

 

The National Cable & Telecommunications Association told the commission to focus on what consumers need now to access popular applications, saying to do otherwise was unnecessary and goes beyond its statutory mandate.

 

Those out-of-bounds topics include “broadband subscription, performance consistency, and usage allowances,” the NCTA said.

 

Mobile broadband providers were even more pointed and expansive in their pushback, including on the ongoing FCC inquiry.

 

CTIA—The Wireless Association, which represents mobile broadband providers, told the commission that free data programs and allowances (usage-based pricing) provide “greater choice, more data use and more innovation,” given the range of offerings and price points.

 

That is an incentive to use broadband “efficiently” and a way to expand access by “closing the digital divide” — zero-rating plans reduce consumer cost — and supporting “new apps and services,” the CTIA said.

 

“Recent commission inquiries into these offerings, including whether to permit ‘financial inducements’ and related proposals in the broadband privacy NPRM to restrict data allowances, threaten this vibrant source of competition,” the CTIA said.

 

ACA: FCC Should Rethink Unlimited Data Requirement

 

WASHINGTON — The American Cable Association has said the Federal Communications Commission should rethink its requirement of an unlimited data usage offering for the top two performance tiers as a quid pro quo for getting Connect America Fund (CAF) broadband build-out subsidies.

 

Telco Verizon Communications has told the FCC that there is no evidence that such an offering was reasonably comparable to urban broadband offerings, the standard the regulator used for requirements for lower tiers of service.

 

The ACA, which represents smaller, independent cable operators, said last week it agreed with Verizon that the FCC’s rationale was “thin” and suggested the CAF approach needed to be fattened with more data.

 

“Given that it has provided insufficient support for its proposal, the commission should reconsider its decision, gather evidence about data usage,” ACA told the FCC, “allowances in urban offerings for these top two performance tiers, and use these data to establish a “reasonably comparable” requirement for data usage allowances.”

 

The FCC back in May voted on a framework for letting competitive broadband and telco providers, including cable companies, bid on more than $2 billion in CAF Universal Service Fund money that bigger carriers — Verizon and AT&T, for instance — chose not to take.

 

The CAF fund is the subsidy for high-cost advanced communications services (to mostly rural areas) that the FCC is migrating from phone support to broadband.

 

Incumbents, with all of their incumbent infrastructure, were given first crack at the funds and took $9 million, but that left $2 billion for competitive carriers, which the FCC is making available for bidding.

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