Verizon CTO advocates for metered broadband pricing
Will consumers one day pay for every megabyte they use while downloading video, streaming music, or updating their Facebook statuses?
They just might. The notion of metered billing gained a major supporter Tuesday when Verizon Communications' CTO Dick Lynch told press and attendees at at fiber-to-the-home industry conference in Houston that broadband service providers "cannot continue to grow the Internet without passing the cost on to someone," according to Telephony Online.
In the future, broadband service will likely be sold in packages based on how much bandwidth a person consumes, Lynch said during that press conference at the FTTH Conference & Expo, according to reports. This metered approach is similar to how the wireless industry has operated. Voice calls are charged by the minute. Wireless carriers have long offered a "bucket" that gives subscribers a set number of voice minutes or data service. And when users go over the allotted amount, they are charged on a per minute basis.
But broadband has typically been sold in the U.S. at a flat rate. For example, consumers might pay $40 or $50 a month for 3 Mbps of service. Verizon offers its Fios Internet service, which provides 15 Mbps for $55 a month, without a Verizon phone service contract. Fios is Verizon's fiber to the home network that offers nearly limitless bandwidth capacity.
But even this super fast infrastructure that Verizon has been building for the past five years has its limits, Lynch said. He didn't announce a pricing shift, the blog GigaOm reports. But he said that even Verizon, with all its fiber capacity, will have to be careful about how it manages its bandwidth and traffic.
"We're going to have to consider pricing structures that allow us to sell packages of bytes, and at the end of the day the concept of a flat-rate infinitely expandable service is unachievable," GigaOm quoted him as saying.
Prior to Tuesday, Verizon has never advocated for metered broadband service. But the company has defended the right of other carriers to do so. In the past, Verizon has always maintained that is has plenty of capacity to offer any kind of bandwidth intensive services its customers may want. And it has often pointed out that its cable competitors cannot, because they are much more limited in terms of capacity.
During the formal portion of his speech Tuesday, Lynch once again bragged about Verizon's Fios network. The network, which has been under construction for five years now, will reach 15 million homes by the end of the year. And the company is offering up to 50 Mbps downstream and 20 Mbps upstream, some of the fastest speeds in the country.
Lynch also said during his speech that Verizon is spending $17 billion this year to build out its Fios network, maintain its 3G wireless network, begin deploying its 4G wireless broadband network, and expand its global IP network.
When he talked about why Verizon decided to make the investment in a fiber network, he explained how fiber would allow the company to add capacity indefinitely to keep up with future demand.
"Fiber gave us a future-proof technology to meet our customers' bandwidth needs today and for years to come," he said, according to a transcript of the talk. "(And) as demand grew, we (knew we) could add more capacity by upgrading the end-point optics and electronics, without changing the fiber infrastructure."
So why would Verizon need to meter its bandwidth if the company seems to have plenty of capacity?/p>
That's a good question. Lynch didn't say that Verizon had metered broadband plans in the works today. And he was quick to point out that the company is not shifting its pricing, But he did say that he hoped the that the Federal Communication Commission's plans to make Net neutrality principles formal regulation would not hurt broadband providers' ability to offer such premium bandwidth offerings, Telephony Online reported.
According to Lynch, Verizon wants to be able to offer tiered levels of service, allowing some customers to pay more for different levels of traffic. For Verizon, the idea of tiered or metered billing may not be so much about controlling bandwidth as much as it is about making money.
Dick Lynch,
Verizon CTO
Market leader
There's no question that Verizon has more bandwidth capacity than any other major commercial broadband provider on the market. Cable companies are working hard to upgrade their networks to Docsis 3.0 technology and AT&T is upgrading its fiber as much as it can. But Verizon is the only one that has taken the gamble to take fiber all the way to the door step.
And because it has enough capacity to serve its customers' very heavy bandwidth needs, Verizon doesn't have to throttle its traffic like other providers, such as Comcast, have done. And because it doesn't have any real bandwidth constraints, it doesn't have to look to metered billing as a way to control network usage, as Time Warner Cable once suggested.
But as Lynch said, Verizon wants to keep its options open. And it doesn't want the FCC with its Net neutrality rules to screw it up.
What's somewhat ironic in Lynch's argument for metered billing is the fact that voice calling in the U.S. is actually moving toward the broadband model. Verizon Wireless and its major competitors AT&T and Sprint Nextel offer unlimited talking plans that charge subscribers a flat rate for voice minutes. But Verizon is being careful not to lump data into the same bucket. While there are supposedly unlimited wireless data services, they are actually capped at 5GB per month. This unlimited wireless service is offered to air card subscribers as well as smartphone users.
Soon Verizon Wireless will be putting more stringent bandwidth caps on wireless plans for its regular feature-phones. And customers, who buy some phones with Internet access and Qwerty keypads, will be forced into one of two data plans with low bandwidth caps.
It seems like these moves suggest that Verizon is looking for more ways to monetize its network.
"We don't want to be in a position to offer a public Internet service only," Telephony Online quoted him as saying. "Customers would have to pay for premium services, but it would allow us to differentiate based on the type of service, time of day, etc."
Verizon has every right to get the most money it can from its customers for its service. The company has invested heavily in its network. And most experts would agree that it has one of the best wired and wireless broadband networks in the U.S. But judging from how people reacted to Time Warner's suggestion that they might tier service or offer metered billing, it's not likely to go over well with consumers.
People are used to paying a flat rate for broadband service. And while most people know what a minute during a phone call feels like, they have no idea how many megabytes it takes to send e-mails, download pictures, surf the Web, or update their Facebook status.
Still, Lynch is convinced that the government must make sure that regulation does not hurt the company's opportunity to make money in this way.
"We need to guard against turning technical and business decisions into political decisions," he said during his speech. "Dynamic industries like ours require flexible solutions that can evolve and adapt to a changing environment--not rigid regulatory solutions that are one step behind the marketplace."
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
I pay $50 a month for Internet only. Ditched cable and phone service long ago - downloading movies & shows satisfied my needs. Now Hulu and other sites like it provide the content i like watching.
Of course, this would be helped by getting rid of all those ridiculous legacy taxes and fees from decades ago that are still tied to anything the government can claim as "communications". We should also end the pseudo-monopoly status local governments give companies.
But given the current government-heavy climate, I'm guessing we'll be going the other way. Politicians like their little fiefdoms so the idea of taking their hands off something and letting the market work is anathema to their control-freak mindsets.
It internet goes usage based then it should be treated like a utility, and federally controlled like power and water. I am sure that would change their tune. If I am going to be metered then is should not be by media companies: it should be by companies that do NOTHING but provide me bandwidth.
Unless they're the only broadband provider in town (which in many cases they are).
The same wonderful system has me using $10 of electricity in a month but paying $25 because there are 10 (TEN!) taxes and fees attached to my bill. Turning internet service into a complete government monopoly is the opposite of the direction we should be moving.
Stop trying to seize control of everything, and get the government out of it. Let Verizon bring their FIOS to town with whatever pricing system they want, let Comcast compete against them with copper, and Google with wi-max. The last thing we need is more political control to lock in stagnation and stamp out innovation.
A better example of this is AT&T right now. In the bay area or NYC, we can all get a full strength 3G connections, but if the cell towers can't support the number of people connecting simultaneously, everyone gets slowed down.
I really hope we don't see metered broadband coming to the US, but lets face it... people are starting to cancel their cable service because they can get a lot of the same content online. When that starts happening in greater numbers, I suspect the cable ISPs are going to be the first to go metered... it's all about saving their cash cow. We'll see how the telco ISPs decide to compete.
1) This would set the U.S. yet farther behind the rest of the world.
2) We have ALREADY paid them to expand services way beyond what they are providing....
http://www.newnetworks.com/ShortSCANDALSummary.htm
3) Yet, they seek ways to suck more $ out of people. We paid, they haven't delivered, and now they want more.
4) pmgreene (above) has a good point... I bet if they did go to this model, they would have a minimum set price they would charge all the people who didn't use much data.
5) His example of how the cell phone industry billing works, is a great example of what is wrong with THAT industry as well.
6) This violates the principals of Net Neutrality. ISPs should provide a pipe. They can set pricing for how big a pipe you get for your monthly fee... but not be concerned with how much data or limiting various data types. If they do, it will KILL Internet innovation.
We lag in the US behind countries like South Korea and a good part of Europe as far as broadband goes. This will hurt small businesses tremendously and make this an even more hostile country to do business in. These corporate guys just don't get it. They are choking the roots (people) that make this country work.
Lynch's thinking is what's wrong with most of our companies in the US. I'm not a person who advocates for more regulation (maybe except for some of our wall street buddies) but, for the most part broadband connections are almost a utility at this point so I could see a new wave of regulation coming if they don't step up and keep it fair. There's drawbacks to regulations too. More often than not, companies like Verizon use the overhead for following regulations as an excuse to hike prices too.
I think for what the big guys pay for bandwidth, and what we as consumers pay, they're coming out way ahead. They wouldn't be in this business if they weren't already making boat loads of money off of us. Ridiculous.
We in the US pay more for wireless and broadband services than just about anybody and the services that we are rendered are not as good as other parts of the world. Mr. Lynch, please address the quality problems that plague your industry before thinking about how to rip us off any further. Please.
Oh, and can someone please explain to this to me?
"While there are supposedly unlimited wireless data services, they are actually capped at 5GB per month. This unlimited wireless service is offered to air card subscribers as well as smartphone users."
What does unlimited actually mean anymore?
This is the internet. Get the word out.
I use Verizon for my wireless and now I have an excellent reason to find a more reputable provider!
With VZW and ATTWS sucking up their competitors, the FCC will be the only entity left to keep pricing fair and competitive. Those companies need a better system of busting abusers of their data networks before they start pinching people and business who abide by their respective TOS agreements.
that way everyone's happy...
i know as long as more services are going toward digital distribution, from TV shows, movies, music, software, books, and games, i would HATE to be charged with over-limit rates when i downloaded my quota....
they are floating a reason to jack up prices. not that they "need" to, but just cause they can. that ceo pay plan is rather expensive after all.
But it should also see a decrease in price on average, assuming most uses aren't using much data, as they'd no longer have to subidise the heavy users. If this doesn't occur, then it'll be a rip off.
Let's face it. Articles like these give more opportunities to educate other Americans that they are paying WAY TOO MUCH MONEY for some of the worst broadband (or cellular) service of all industrialized nations.
Broadband Internet connectivity is 10-20 times faster at the same price in most of Southeast Asia and Europe. Same with cellular service. AT&T is struggling to offer 3.6Mbps service (which is often throttled down to 1.8Mbps) in major metropolitan areas while Japan/Hong Kong and some European markets already have 28.8Mbps networks in service.
Heck, you can sit on a train in continental Europe and get 8Mbps WiFi service. And wave your cellphone over a sensor in Japan to pay for your train ticket or groceries.
The United States is five years behind Southeast Asia and perhaps three years behind Europe.
Do not let these American corporate types convince you that they are doing a good job. They are doing a p*ss poor job and you are paying through the nose for it.
Lets see if this helps.....
METERED BROADBAND PRICING CANNOT BE DONE BECAUSE PEOPLE WITH DISABILITIES ARE PROTECTED WITH 911 EMERGENCY AS WELL AS THE ADA-AA AND THE FCC CLEARLY STATE TIER-PRICING AND METERED PRICING IS IN CONFLICT WITH FEDERAL LAW.
Will this topic come up again in the future? you bet it will when memory is gone again.
* webmail (and/or use your ISP's webmail service to ditch the spam beforehand).
- by CyR00k September 29, 2009 11:05 PM PDT
- Great idea since Verizon can't supply broadband internet to the entire of the markets that they offer the service in, they should charge people they do provide access to more for it and keep them from using it as much as possible. Great way to make me believe that you actually have the best service for the price.
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Showing 1 of 2 pages (57 Comments)Also Bravo on a wonderful way to stifle innovation and to hurt thousands and thousands of people's lives. Think of all the people at Hulu, CNet, Netflix, etc who are going to be downsized since no one will be able to afford to use their sites. If I know that people won't be able to afford to go to the web to get their news, watch, TV and Movies where is the incentive to bother producing new technology?
CTO Dick Lynch you are a ******* profiteering glutton destroying innovation for the sake of lining your grubby frakking pockets and I am grateful that your service has never been, nor ever will be, an option for me. This goes for every other company that thinks screwing their customers in the second worst economic climate in the history of the US is a frakking good idea. All of you should have your frakking MBAs revoked.