Bill Would Require FTC Approval For Pay-Per-Byte Pricing

Snow globe/houses A Congressman from upstate New York has introduced a bill to restrict Internet service providers' ability to start charging broadband customers based on consumption.

The Broadband Internet Fairness Act (H.R. 2902), unveiled Wednesday by Rep. Eric Massa, would require Internet service providers with more than 2 million customers to seek Federal Trade Commission approval before shifting to usage-based pricing. The act also would require the FTC to nix the new pricing if it determines that the rates, terms and conditions are unreasonable or discriminatory.

Massa drafted the bill in response to Time Warner's announcement earlier this year that it planned to roll out pay-per-byte billing to four cities on a test basis: Austin and San Antonio (Texas), Greensboro, N.C. and Rochester.

Those plans are now in limbo, but Massa and others are worried that Time Warner and other broadband companies will soon revive the pay-per-byte concept.

The Congressman added that while he typically supports free market principles, he favors oversight of broadband pricing because many consumers lack options for high-speed Web service.

"I believe that with enough competition we won't have this problem," he said. He added that in the meantime, "this bill leverages the long history that the FTC has in overseeing functional monopolies."

In his home district of Rochester, Time Warner is the only cable broadband provider, while the telecom Frontier offers DSL service. Verizon's FiOS network, while available in much of New York, isn't available in Rochester.

The now-shelved test would have offered Time Warner customers a choice of plans, ranging from $15 a month for 1 GB to $150 a month for unlimited bandwidth. Currently, many Time Warner customers pay between $40 and $50 a month for unlimited bandwidth. Downloading just one high-def movie can consume 5 GB.

Local residents rallied against the plan, while groups like Free Press called for a congressional investigation. Among other criticisms, advocates saw the pricing as part of a plan to discourage people from consuming video online for free, rather than to continue paying for cable TV subscriptions.

Time Warner announced in April that it would temporarily delay its plans, but recently it quietly revised its terms of service to provide for pay-per-byte pricing. The company also recently conducted a test of pay-per-usage service last year in Beaumont, Texas.

A Time Warner spokesman said in a statement that the company "has placed all of its plans to test consumption based billing 'on the shelf.'"

Time Warner isn't the only company to experiment with consumption-based billing. AT&T also tested a comparable system in Beaumont and Reno, Nev.

Chris Riley, policy counsel at broadband advocacy group Free Press, said it appears that Internet service providers still intend to move toward usage-based billing. "I think this is a real threat," he said. "If every provider thought they could get away with it, they would probably switch to it."

Recommend (8) Print RSS
3 comments about "Bill Would Require FTC Approval For Pay-Per-Byte Pricing".
  1. John Grono from GAP Research , June 18, 2009 at 9 a.m.

    Sorry, but being from Australia, I just don't get this. Isn't asking people to pay for the volume of internet usage exactly the same as asking people who use more electricty, water or gas to pay more - which is why we have electricity, water and gas meters. Maybe you have "flat-rate" pricing for those utilities in the US, but here in Australia the more you use the more you pay. What next ... every time you fill up the tank in the car you pay the same whether it is a compact or a Hummer?

  2. Dan Euritt from Ocean Street Video , June 18, 2009 at 12:27 p.m.

    don't you australians have a minimum monthly fee that you pay for internet access, regardless of useage? so according to your comparison, australians must also pay the oil companies a minimum fee, regardless of whether they drive the car or not.

    and you australians can only get fuel from one gas station in town, there is no competition?

    you are trying to compare apples to oranges.

  3. John Grono from GAP Research , June 18, 2009 at 6:34 p.m.

    It's not that I am trying to compare apples to oranges - I am trying to understand the US market and the way it bills for internet access.

    We have a variety of ISPs with a variety of plans. For example, you may choose a 1Gb plan, a 5Gb plan, a 10Gb plan, a 20Gb plan, a 50Gb plan or an unlimted plan. For my situation I have chosen a Telstra 10Gb cable plan which is then slowed if I exceed the 10Gb - for $54.95AUD because that is what best meets my needs. I could have chosen cheaper plans but they tend to charge by the Mb if you exceed your limit.

    With our other utilities (and I consider internet access to be a utility these days), you pay a service/connection fee that is a flat rate that everyone pays that is your contribution to the infrastructure, and a usage fee on top of that. To continue the analogy, if you leave the lights on 24/7 or turn the tap on and let the water run down the drain, then you pay more. I think this is fundamentally fair.

    Is the issue that in your markets you tend to have only the one ISP (the one gas station in town scenario)? I live in Sydney and I would have around a dozen ISPs I could choose from who would have dozens of plans each. I'm just trying to understand how your market works and why you would need legislative intervention. Mind you if it was a "pay-by-the-kilobyte" that would be a pain in the proverbial, but using a series of 'stepped' plans with increased caps seems to work fine.