FCC Ruling Will Save Verizon Wireless Customers Big Bucks

Last week, the Federal Communications Commission handed down a decision that could save millions of Verizon Wireless subscribers up to $240 a year.

Smartphones now account for more than half of the mobile phone subscriptions in the United States, and adoption is accelerating. But that computer in your pocket doesn’t come cheap. Recent data from J.D. Power and Associates indicates that the average monthly wireless bill in 2011 was $86 — representing a twenty-five-percent jump over four years.

But thanks to the innovation created by the open Internet, consumers now have more options and choices today for how they use their connections. To the relief of everyone who has stared in horror at their monthly voice and text bills, there are apps like Viber, Skype and Google Voice that help consumers replace or reduce their use of their carriers’ overpriced texting and voice plans.

This growth in the use of “over-the-top” voice and text alternatives shows that with today’s technology, data is, well, just data — whether it’s a voice or video chat, a text message or a webpage. And since we’re all paying our cellphone carriers ever-higher prices for our monthly buckets of data, we might as well make the most of what we’re paying for.

Many of us are. In addition to using apps to bypass their carriers’ expensive texting services, subscribers are using “tethering” applications to connect their laptops and tablets to the Internet. Since most wireless customers use just a fraction of the data they’re paying for each month, these tethering apps help save them money that would otherwise be spent on multiple monthly Internet subscriptions.

To no one’s surprise, the powerful telecoms want to stop consumers from using these apps and services. So companies like Verizon try to preserve their existing revenue streams by artificially segmenting the different ways you use data. These carriers could charge you just once for all the data you use, whether you use Verizon’s voice and texting services or a competing application. But a wireless company can reach deeper into your pocket by charging you separately for data, voice minutes and text messaging and thereby maintaining multiple monthly revenue streams.

In a competitive market, carriers couldn’t control how you use your data, and if you were dissatisfied with the terms of your plan you could vote with your feet. But it’s not a competitive market. It’s extremely expensive to switch carriers, and if you do, you’ll find that all carriers tend to offer the same general experience.

Free Press has long fought against these kinds of restrictive policies. We believe data is data, and that it’s an abuse of market power if carriers impose $20 tethering fees to double-charge you for using the data you’ve already paid for. We also think it’s bad news for innovation and openness when wireless carriers start dictating which Internet apps will and won’t work on their networks — all in the name of protecting their legacy business models.

In 2007, we worked with other public interest groups to convince a bipartisan Federal Communications Commission to adopt a minimal set of consumer protections on a portion of the nation’s airwaves used to deliver mobile broadband. The protections state that a carrier using these particular airwaves “shall not ... deny, limit, or restrict the ability of their customers to use the devices and applications of their choice on the network.”

The obligations, named after the section of airwaves they applied to, became known as “the C Block rules.” Longtime consumer champion Rep. Ed Markey compared this policy to the historic Carterfone decision, which led to new uses — like fax machines and computer modems — of the telephone network. Rep. Markey suggested that the C Block rules provided “a rare chance to foster similar innovation in the wireless marketplace.”

Verizon Wireless uses this C Block spectrum to provide its 4G mobile broadband service. So when reports came out that Verizon was restricting and limiting its subscribers from downloading and using tethering applications, Free Press filed a complaint with the FCC.

We argued that any actions to cripple smartphone features and applications should concern policymakers who say they are interested in promoting innovation and competition. We also noted that Verizon’s actions violated the C Block rules against application blocking.

Last week, the FCC agreed with us.

The Commission fined Verizon $1.25 million and ordered the company to inform all of its partners that it was changing its policy and ceasing its campaign to limit and restrict use of these money-saving applications. This was a resounding victory not only for innovation policy and the open Internet but for consumers.

Verizon Wireless customers who have 2GB or 4GB data plans can now use tethering applications for free to connect any device they choose to the Internet. They no longer have to pay Verizon a separate $20 per-month device fee if they want to share their wireless Internet connection and use some of the data they’ve already bought on their laptop or tablet.

Carriers are in the business of nickeling and diming their customers, and until we see more robust competition that’s unlikely to change. However, applying open Internet policies like the C Block rules to the entire wireless world is the best way to give consumers a shot at saving money — and to preserve the ability of entrepreneurs to produce apps that loosen the iron grip carriers have on online innovation.

Tech-savvy consumers will always find ways of bringing cost-savings mechanisms to the mainstream, but maintaining this open environment won’t be easy. It will require vigilance from policymakers, and ongoing oversight of a market with serious competition problems.

The FCC’s actions last week are a huge step in that direction. They send a signal to the marketplace that cellphone and cable companies don’t own the Internet, and that consumers have a right to access the lawful content and services of their choice. And thanks to the FCC, many of these consumers will now save some serious money.

Original photo by Flickr user Tanel Teemusk

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