Unlimited data
plans are back with all four major mobile
providers
in the United States. In my view, it is no coincidence that announcements
regarding such unlimited plans were made shortly after FCC Chairman Ajit Pai indicated
his disposition for relying on free market-oriented communications policy approaches.
On February 3,
2017, Chairman Pai announced that the FCC
would close its investigation into mobile providers’ free data offerings. On
February 12, 2017, Verizon announced that it was
launching a number of unlimited data plans. A day later, T-Mobile updated its existing
unlimited plan to include high-definition video streaming. A day after
T-Mobile’s announcement, Sprint announced very similar updates to its existing
unlimited plan. And then two days after Sprint’s updates, AT&T expanded the reach of its
unlimited data plan to all consumers, which was previously available to only U-Verse
and DirecTV subscribers.
During his keynote speech at
the Mobile World Congress on February 28, 2017, Chairman Pai summed up the
mobile market’s response to his decision to end the FCC’s investigation:
Earlier this month, for example, we ended the FCC’s
investigation into so-called “zero-rating,” or free data offerings. Free
data plans have proven to be popular among consumers, particularly those
with low incomes, because they allow consumers to enjoy content without
data limits or charges. They have also enhanced competition. Nonetheless,
the FCC had put these plans under the regulatory microscope. It claimed
that they were anti-competitive, would lead to the end of unlimited data
plans, or otherwise limit online access. But the truth is that consumers
like getting something for free, and they want their providers to compete
by introducing innovative offerings. Our recent decision simply respected
consumers’ preference.
The best evidence of the wisdom of our new approach is
what happened afterward. In the days following our decision, all four
national wireless providers in the United States announced new unlimited
data plans or expanded their existing ones. Consumers are now benefiting
from these offers—offers made possible by a competitive marketplace.
And remember: Preemptive government regulation did not produce that
result. The free market did.
Some critics of Chairman Pai’s
policies say that the recent announcements regarding unlimited data plans are
not related to the FCC’s decision to end the investigation of free data
programs. Instead, they claim that competition is responsible for the emergence
of these plans. But I think it is both.
In this instance, the
emergence of free data programs and unlimited data plans are direct results of dynamic
competition and permissionless innovation. Unlimited data plans are only
profitable when mobile providers are able to effectively manage their networks
and efficiently deliver data to consumers. The reestablishment of unlimited
data plans over the last month is an indication that mobile providers recognize
that the FCC, under Chairman Pai’s leadership, will not be monitoring and
second-guessing every decision they make experimenting with new business models
as they seek to be responsive to consumer demands.
The use of
unlimited data plans will increase significantly the amount of data consumers
use. And while mobile providers are updating their networks constantly to
improve the speeds and quality of connections, the emergence of these plans
does not improve automatically the capacity of mobile networks. So as long as
there is a shortage between the amount of data consumers demand and the amount
of spectrum allocated for private use, mobile providers will need to engage in network
management techniques in order to allocate data efficiently to all consumers. (See
this February 2017 blog regarding the
projected growth in consumer demand and mobile data traffic.)
Unfortunately,
network management practices could violate the Network Neutrality rules
established in the Open Internet Order. Before the adoption of the Open Internet Order and soon thereafter when
the Order was under appeal, the uncertainty of its
imposition
discouraged broadband providers from making major network investments. Chairman
Pai opposed the adoption of the Open
Internet Order while he was Commissioner in February 2015 and recently reiterated
that the Order had a direct negative
impact on broadband capital investment. Preemptive
regulations often have unintended consequences that increase the costs of
performing day-to-day business practices, like network management. While the Open Internet Order includes an allowance
of “reasonable network management,” if the FCC construes the scope of its review
for reasonableness too broadly, and divorces from marketplace realities, then
innovative business models like unlimited data plans will be chilled.
But despite that
the Open Internet Order is still in
effect, Chairman Pai’s statements and actions have created more certainty among
broadband providers that the new Commission will not burden ISPs unnecessarily
with more costly regulations. As a result, providers are willing to bear the
costs of network management that come with offering unlimited data plans
because they are less concerned about being hit with enforcement actions for
performing such day-to-day business practices.
Free data
offerings and unlimited data plans give consumers multiple cost-effective
options for accessing more mobile data and online content. But these innovative
offerings would not have emerged if not for permissionless innovation and dynamic
competition in the mobile broadband market. Of course, the Open Internet Order still needs to be curtailed substantially to
avoid further uncertainty and to lessen the regulatory costs that may discourage
providers from creating new and innovative services. Also, regulatory barriers
at the state and local levels should be reduced or eliminated to encourage
additional broadband investment.
All that said, in
my view, it is no coincidence that mobile broadband providers now are willing
to offer consumers unlimited data plans as Chairman Pai leads the new FCC
toward a free market-oriented approach to communications policy.
Posts
