Phone Service Feature

T-Mobile (News - Alert) UK has recently changed terms and conditions for use of mobile data bandwidth for new customers, starting Feb. 1. Under the new plan, new customers will have a 500 Mbyte cap for unrestricted usage. Once the cap is hit, a smartphone user will lose the ability to stream video. Customers can buy bigger buckets of service, however.

The issue is whether such a plan could be offered in the U.S. market, under the Federal Communications Commission's network neutrality rules.

One can argue about whether that same approach would pass regulatory muster in the U.S. market, under the network neutrality rules. The FCC (News - Alert) itself says it will be more lenient for services and apps provided over the wireless networks. Also, even when service is not "unlimited," the typical data caps are more on the order of 5 Gbytes in U.S. mobile markets. 

Still, despite those clear differences, the network neutrality rules specifically bar application "blocking," and it might be argued that this is precisely wheat T-Mobile UK is doing: it is blocking video apps. 

One might argue about the appropriateness of the T-Mobile UK rules, but at the moment they might strike observers as fair. The typical U.S. smartphone user, for example, consumes about 230 megabytes of data in a month. If U.K. consumers behave in similar ways, then the 500 Mbyte cap represents about twice the typical amount of total usage.

Of course, every observer would agree that typical usage grows over time. Typical U.S. smartphone data usage grew about 50 percent over the last six month, says wireless consultant Chetan Sharma (News - Alert).

So a reasonable argument can be made that the 500-Mbyte cap will have to be adjusted upwards over time. But note that the T-Mobile UK cap really applies to video streaming or downloading specifically, as a category of activity, not to use of mobile broadband overall. Even once the 500-Mbyte cap is reached, users can still surf the Web, use email and other Web apps. 

The other twist on the issue is whether other conceivable access plans could be crafted, in ways that differentiate between lawful video apps, on one hand, and other lawful applications that place less stress on the access networks. A service provider might offer several plans, at various price points, where the lowest tiers do not support much video, while the top tier supports lots of video consumption. 

Unfortunately, some might say, it will take court cases to answer such questions. Specific plans will have to be offered, those plans will have to be challenged in court, decisions rendered and appeals exhausted. The wiser course, one might argue, is for providers simply to observe the key "no blocking" rules, which all ISPs were doing in any case, but take advantage of the FCC's blessing of tiered rates based on usage. 

The intended consequence, some might argue, is that ISPs will have clear incentives to shift pricing plans to buckets based on usage, just as voice minutes and text message plans now are structured in the mobile business. The unintended direct consequence will be to put more pressure on mobile ISPs. Of course, lots of observers would prefer it if mobile and fixed ISPs just became "commodity providers" of best-effort access.

Left unsaid are adjectives. "Low margin," "low gross revenue" or "less powerful" or "less important" are some of the unstated adjectives some have in mind when using the term "dumb pipe" approaches to pricing and packaging. 

Nothing can be settled immediately. Most ISPs will try to move in the direction of differentiated buckets of usage, as the FCC has signaled its approval of those approaches. Sooner or later a test case will arise, though. The question is whether any U.S. ISP will bother crafting any service plans akin to T-Mobile UK's plan. 

Some might argue MetroPCS is doing so. But even that case is quite complicated. The most-affordable plan allows unlimited access to YouTube (News - Alert), for example, but not to all similar services. The other plans offer a level of access that would support any typical user's access to streaming or downloaded video, while the top plan has unlimited access.  

After having said it will act with a lighter touch and allow mobile services to develop over time, it is unclear whether the MetroPCS plans will provide a meaningful test case of the rules.