Julius Genachowski Raises Concerns About Data Caps

Julius Genachowski Raises Concerns About Data Caps

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GigaCom reported last week that Federal Communications Commission Chairman Julius Genachowski appears to be concerned about the use of data caps by wireless service providers. According to GigaCom, Mr. Genachowski reportedly opined that, “Anything that depresses broadband usage is something that we need to be really concerned about.” And he further said, “We should all be concerned with anything that is incompatible with the psychology of abundance.”

Data caps place monthly limits on the amount of megabytes of data a subscriber consumes.  AT&T announced last March the discontinuance of its unlimited data plan. Customers that were paying around $30 a month for unlimited data usage are now limited to three gigabytes of data usage a month.

Data caps are seen by some advocacy groups as a dampener on broadband use and a regulator of consumer behavior. On the other hand, wireless carriers have seen data caps as a necessary network management tool, given the increasing shortage of available spectrum for commercial use.

So far the FCC has not opened a proceeding directly addressing the use of data caps by broadband providers such as AT&T, Comcast, and Verizon. The FCC’s official focus appears to be on continually opening up additional spectrum for commercial use. For example, on September 12, Mr. Genachowski released a statement announcing an FCC initiative that would implement recommendations made by the President’s Council on Science and Technology. Among those recommendations is small cell use inside the 3.5 GHz band.

In apparent acknowledgment of the constraints wireless carriers are experiencing in the face of the limited availability of spectrum, the chairman said, “Today’s iPhone announcement and last week’s release of the new Kindle Fire, Windows 8/Nokia Phone, and Droid RAZR by Google/Motorola offer the latest evidence that, over the past few years, the U.S. has regained global leadership in key areas of communications technology. These high-performance devices, and the demands they place on our broadband networks, underscore a critical challenge.”

And it’s not like there is no burgeoning competition that offers unlimited data plans. Today, Voyager Mobile announced an unlimited data plan for its wireless services in New York City. The company will offer its service for $17 per month.

In August, T-Mobile announced that it was introducing an unlimited data plan for its wireless service. T-Mobile offers unlimited plans for $69.99 and $89.99 and reserves the right to slow down data speeds for consumers that go over their limits on other plans.
Sprint, the nation’s third largest wireless carrier, also provides an unlimited data plan. The company was late to get onto the iPhone bandwagon and unlimited data is one of the incentives offered to consumers to get them to purchase iPhones from the carrier.

Unfortunately the FCC isn’t ready to say the wireless market is competitive. Mr. Genachowski’s concerns should be muted given consumers could leave AT&T and Verizon for the unlimited data plans offered by Sprint and T-Mobile. More importantly, he should not be giving any weight to any interventionist policymaking.

The innovation displayed by Voyager Mobile combined with the willingness of larger carriers such as Sprint and T-Mobile to offer unlimited data plans should incent the FCC to not consider addressing data caps via any additional regulation. If consumers are unhappy with the caps, they can switch to other carriers. Trying to deter AT&T and Verizon from maintaining data caps may have the opposite effect on competition. Regulations that would force AT&T or Verizon to reconsider using data caps may stem the flow of consumers ready to make a switch, and that would not be good for Sprint or T-Mobile.

At most we should just take Mr. Genachowski’s comments as mere musing. I wish he had kept the thoughts to himself, but given other gaffes from slightly more prominent political figures, Mr. Genachowski’s musings are minor.

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