It was quickly obvious that AT&T Inc.'s (NYSE:T) decision to charge wireless subscribers based on the amount of data they consume, announced Wednesday will have far-reaching affects on mobile phone service. Other carriers will rethink their invoices, causing all but the most indulgent smart-phone users to pause before data bingeing.
Less apparent, but equally important, is the way the pricing shift may influence the debate over network neutrality and the government's ability to regulate Internet service providers.
Debaters of net neutrality are prone to polemics. The pitch is rising since Federal Communications Commission Chairman Julius Genachowski said a month ago that he wants to reclassify broadband as a telecommunications service, so that the government can prevent service providers from stifling the Internet.
Despite Genachowski's assurances that he envisions a "third way" for regulating broadband, without the vast restrictions put upon phone companies, wired broadband providers fear that new regulations will prevent them from managing their networks and setting prices.
Usage-based pricing has been a contentious issue. Time Warner Cable Inc. (NYSE:TWC) faced such intense criticism when it tried tiered pricing for wired broadband in 2009 that it abandoned the plan within weeks.
Mobile broadband networks receive more regulatory leeway than landlines. AT&T's wireless billing plan may help draw out the FCC on its thinking, and guide the arguments of the broadband providers in the net neutrality negotiations.
"One of the lessons here might be that it is easier to establish a precedent first in wireless than in wireline," says Washington communication lawyer Andrew Lipman of Bingham McCutchen LLP.
Genachowski himself acknowledged that wired and wireless are different creatures. In his May "Third Way" manifesto, he cited the "unique congestion issues" wireless providers face because they transmit over wavelengths rather than fiber cables.
AT&T's plan is spin friendly. By replacing its unlimited $30 per month data plan with tiered plans starting at $15 per month, it has created a cheaper option for many customers.
In a press release, The Dallas telecom touted "Lower-Priced Wireless Data Plans to Make Mobile Internet More Affordable to More People," not "New Plans to Squeeze Google and Data Hogs!"
For now the debate over net neutrality is academic, but the slow-moving wheels of regulation are turning. There will be lengthy FCC hearings, testimony, proposals and comments.
If wired broadband providers can make the case that wireless tiered pricing works, they will have evidence to sway the FCC -- or ammunition to blast the agency's rulings in court.
Mayer Brown LLP hires Lawrence V. Berkovich as a partner in the banking and finance practice, amid "rapid growth of the CLO market." For other updates launch today's Movers & shakers slideshow.
The firm's Daniel Bonoff discusses the difficult environment for finding quality targets, but welcomes a hot market for issuers. More video