Tiered Pricing: Watch Out For That Speed Bump

In the debate over Net Neutrality and Universal Service, the idea for tiered pricing of broadband usage is often a point of contention. When I entered the debate, I was against tiered pricing. However, today I hold a different view. Broadband is not a community asset. It is invested in, developed and managed by private entities. It is both appropriate and fair for users to pay for the amount of broadband consumed over a period of time. The challenge for the FCC, ISPs and ITSPs is finding the correct amount to charge.

How we consume broadband is going through a revolution. It is not merely evolving. The amount of broadband required to support the average employee has grown tremendously and is in fact monitored and restricted by many companies. The Cisco Visual Network Index notes that businesses will see a 42 percent CAGR for data to support desktop video conferencing from 2011 to 2016 and global IP traffic is expected to reach 1.3 zettabytes per year, or 110 exabytes per month, by 2016, nearly a fourfold increase from the approximately 31 exabytes per month in 2011. We discussed zettabytes previously, but as a reminder, a zettabyte is a trillion gigabytes.

Last week, FCC Chairman Julius Genachowski supported usage-based pricing for broadband while addressing participants at the annual NCTA (National Cable and Telecommunications Association) show. This is significant because consumers have balked at the various caps imposed either openly or secretively by cable companies and other broadband service providers. It is also significant because Genachowski is viewed as having the political position of being a consumer advocate. Consequently, this view must be seen as part of his evolving” on the issue as usage accelerates at a break neck pace driven by mobile and streaming applications such as video (movies or conferencing).

Yet, as I indicate my preference for tiered pricing, I must state that it is important to consider three critical criteria: access, speed and price (ASP). Today, the U.S. remains behind in the penetration of broadband outside urban areas, below the global average for developed countries in the speed delivered and pays a higher price per megabyte. Now, Genachowski claims that his policy position will increase competition and the result will be lower prices. Somehow, I am very skeptical of seeing reduced prices for consumer cable or broadband services. Although, businesses have seen a price reduction for broadband as Ethernet over Copper and other IP related bandwidth offerings are made available. Even PRIs and T1s have been dropping in price. However, the overall bill for these products continues to swell because of the ever increasing demand for broadband.

The FCC should support policies that increase choice, better products and competitive pricing. The current ASP analysis continues to show that it still faces a few speed bumps on the Internet super highway or more future correct, turbulence in the air traffic boulevards required to support the emerging mobile devices and applications.

David Byrd is vice president of marketing and sales for

Broadvox
, and is responsible for marketing and channel sales programs to SMBs, enterprises and carriers as well as defining the product offering. Prior to joining Broadvox, David was the vice president of Channels and Alliances for Eftia and Telcordia. As director of eBusiness Development with i2 Technologies, he developed major partnerships with many of the leaders in Internet eCommerce and supply chain management. As CEO of Planet Hollywood Online he was a pioneer in using early Internet technologies to build a branded entertainment and eCommerce website company partnered with Planet Hollywood. Having over 20 years of telecom sales and marketing experience, he has held executive positions with Hewlett-Packard, Sprint and Ericsson.