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Net neutrality: Wireless should be looked at through a different lens

Wireless operators' execs are scared $#¡†less about the impact of video on their networks.

T-Mobile’s BingeOn service — and the general practice of “zero rating” — is the poster child for how the wireless industry might get its hand slapped by the net neutrality crowd.
T-Mobile

A version of this essay was originally published at Tech.pinions, a website dedicated to informed opinions, insight and perspective on the tech industry.


With the U.S. Federal Appeals Court ruling earlier this month, it looks like net neutrality is here to stay, at least for now. Much ink has been spilled on both sides of this debate, but I’d like to weigh in on the wireless angle.

Part of what was affirmed in the ruling is that wireless broadband fits under the same rules as fixed broadband, and wireless users "don’t see the difference." In fact, the practice of "zero rating" is coming under fire, and might end up being the first test case of the FCC applying NN rules to wireless. This tells me that, as NN heads toward even more appeals and potentially to the Supreme Court, we need to urge that wireless be looked at through a different lens.

What has changed since the NN discussions started in earnest in 2009 is that wireless network performance is broadband-esque. A good LTE connection with all cylinders firing — wide channel, carrier aggregation, advanced MIMO — offers an experience comparable to middle-of-the-road fixed broadband service. But the economics are fundamentally different.

If wireless got anywhere near average broadband usage patterns that are now approaching 100GB per month, every major operator’s wireless network would fall and not be able to get up.

Even though wireless data prices have dropped by 40 percent to 50 percent over the past several years, the average price paid by consumers still averages in the $8-per-gigabyte range (it’s $3 to $4 per GB at the low end), which is 10 to 20 times that of broadband (where usage caps apply). It still costs a wireless operator in the $1-per-GB range to deliver data to a consumer. Put another way, if wireless got anywhere near average broadband usage patterns that are now approaching 100GB per month, every major operator’s wireless network would fall and not be able to get up.

Now, I realize that network neutrality is more aimed at preventing bad behavior between corporate internet actors. The poster-child example is the possibility that Comcast would provide differentiated access or pricing to Netflix, or speed up its own apps or content. There’s not much evidence of this practice and, in fact, services such as Netflix, HBO Go and even "cord-cutting" are incenting users to buy higher-end broadband plans; 4k and Ultra HD will push that still further.

Despite Netflix comprising some 40 percent of internet traffic at peak times, the cable industry’s broadband business has never been better. In fact, it’s looking much more attractive, long-term, than its pay-TV business. And if the FCC really wanted competition in broadband, it should have required broadband firms such as the cable companies to open up their networks when it wrote the 1996 Telecom Act (a prevalent practice in many European countries, which have far more robust broadband competition and lower prices).

Want to watch a Netflix movie in 4K on your tablet? It might cost more.

So now we get to the poster child for how the wireless industry might get its hand slapped by the NN crowd: T-Mobile’s Binge On service, and the general practice of "zero rating." Binge On basically zero-rates video from certain video streaming providers, such as YouTube, Netflix and HBO, which means that using these services does not count against a customer’s usage in their data-bucket plan. Video in Binge On is slowed down to 480p, using a special adaptive bit-rate coding technique that also reduces consumption on T-Mobile’s network. The quality difference is noticeable, but still tolerable. T-Mobile does provide users with the option to turn video back up to full throttle, in which case it’s counted against data usage per normal. This is viewed as a win-win for both the consumer and for T-Mobile: Binge On customers are spending more time watching video on T-Mobile’s network in a way that’s less consumptive of TMO’s network resources.

With the incredible growth of video consumption on mobile networks, expect more of these situational schemes. I could easily see wireless customers being charged extra for "premium data services" in markets where advanced techniques are used to provide faster speeds or a capacity boost. Want to watch a Netflix movie in 4K on your tablet? It might cost more. An operator might even charge a content provider differentiated pricing. A strict interpretation of NN rules would say this is a violation of equal access principles — the creation of "fast" and "slow" lanes. But how is this any different from how iTunes has historically charged more to download an HD version of a movie compared to a standard version?

Another example: What if live video services such as Facebook Live are really successful and end up choking wireless networks? One option is for wireless operators to say, "all right, you can only do it over Wi-Fi," which is what AT&T did initially with FaceTime over iPhones. They could raise data prices or charge a premium for these types of services. They could try to pass on some of these costs to Facebook, or work out some cost-sharing scheme. The bottom line is that wireless operators' execs are scared $#¡†less about the impact of video on their networks. Binge On is T-Mobile’s technique. Higher data pricing is AT&T and Verizon’s technique, for now.

I’d rather see a constructive conversation of how we handle the incredible traffic growth in wireless.

The economics don’t change markedly with advances in LTE, which is why operators are excited about services such as LTE Unlicensed and the FCC’s recent ruling to open up the 150 MHz of spectrum in the 3.5GHz band using a unique and innovative spectrum-sharing and prioritization scheme. 5G might offer significantly faster speeds and low latency — but it will be very expensive to build. A recently published, well-researched report by New Street Research says that, due to the low propagation characteristics of the 5GHz-and-higher spectrum bands being considered for 5G, it will take one million small cells to reach 10 percent of U.S. homes in relatively dense areas with 5G. Yikes.

I think FCC Chairman Tom Wheeler, who understands wireless economics as well as anyone, realizes that wireless is indeed different. He has basically looked the other way at Binge On and other zero-rating schemes so far. But in the several years since NN became a more serious possibility, regulators have edged closer to treating wireless as part of the NN equation. This is ironic, because we’ve seen a larger-step improvement in average broadband speeds than in wireless speeds during this period, but built for a comparatively lower cost. I’d rather see a constructive conversation of how we handle this incredible traffic growth in wireless than see an onerous set of antiquated rules apply to an industry where services such as Periscope and Facebook Live Video didn’t even exist three years ago.

If network neutrality heads to further appeals, as appears likely, I believe the idea of treating wireless differently should be rekindled.


A leading wireless industry analyst and consultant, Mark Lowenstein is the managing director of Mobile Ecosystem. Most recently, Lowenstein was a member of the senior leadership team at Verizon Wireless, where as vice president of strategy he led the company’s efforts in product and business planning, market segmentation, national pricing and customer intelligence for both consumer and enterprise markets. Reach him @marklowenstein.

This article originally appeared on Recode.net.

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