The words "unlimited data" have become one of the most heavily
qualified phrases in the English language, and the Federal
Communications Commission has taken issue with
latest attempt to redefine the term.
The FCC sent a letter to the wireless carrier in late July
that questioned the company's plan to to reduce data speeds for
heavy data users on unlimited data plans. Monday, Verizon
Wireless's CEO answered the federal board, telling reporters he
was "surprised" to receive it in the first place and saying that
some of it was "flat-out wrong."
At the core of the debate is how liberal companies can be in
defining unlimited data. Is a restaurant "all you can eat" if it
limits its heaviest customers to one plate every two hours during
busier times? That's a culinary version of throttling, and it's
unlikely the public would accept it as easily as they do when
major qualifications are applied to online data.
What is the FCC charging?
As Verizon sees it, you're paying for unlimited data, and that's
what you're getting -- just at throttled speeds, depending upon
the level of demand and your overall usage. In July, the company
began lowering speeds at the times of heaviest demand for the top
5% of data users, but only those who pay for unlimited plans.
Verizon lets heavy data users who pay for a set amount each month
use as much as they want at top speeds because that could lead to
Unlimited-data customers who use a lot of data don't make
Verizon any more money. They're like the guy at the buffet who
skips the bread, salad, and other cheap items to scarf down crab
legs, shrimp, and roast beef. Rather than accept that a few
people will beat the system, Verizon has decided to use
technicalities to keep the heaviest users on unlimited plans in
The FCC does not like this, and Chairman Tom Wheeler said as
much in a letter that questioned why the throttling only applied
to unlimited data users.
'Reasonable network management' concerns the technical
management of your network; it is not a loophole designed to
enhance your revenue streams. It is disturbing to me that
Verizon Wireless would base its 'network management' on
distinctions among its consumers' data plans, rather than on
network architecture or technology.
Verizon no longer offers unlimited data plans but has allowed
users who already had them to keep them. Wheeler's letter took
umbrage with the idea that Verizon has suggested that customers
afraid of having their data speeds reduced could switch to
usage-based plans to avoid that possibility.
How Verizon responded
Verizon Wireless CEO Daniel Mead defended the throttling
plan, saying that the company has been using it since 2011 with
3G customers. The July announcement simply extended the slower
data to 4G users.
The FCC has not responded to the "but we're already taking
advantage of our other customers" defense. The Verizon letter has
not been made public, but
obtained a copy and has published parts of it. In the document,
Verizon Senior VP for Regulatory Affairs Kathleen Grillo
defended the policy as consistent both with the reasonable
network management definitions set in the 2010 Open Internet
Order and the interpretations made by FCC and Verizon regarding
rules established by the 700MHz C Block Order, the website
With network optimization, our customers continue to be free
to go where they want on the Internet and to use the
applications, services, and devices of their choice. Although
the policy may result in slowed throughput under very limited
circumstances, neither the C block rules nor the Open Internet
rules requires any particular minimum speeds, so long as
providers are transparent with their customers.
Essentially, Verizon is saying that while what it's doing
might be crummy for a small amount of people, it's allowed to do
it. Using the same interpretation, the company could
theoretically sell unlimited data plans but throttle the
customers down to 1990s dial-up speeds.
Has this hurt Verizon?
Verizon Wireless has been posting strong results, and the FCC's
attention could derail that. The company added 1.4 million
subscribers in the last quarter and reported $21.5 billion
in total revenue in the period, up 7.5% over the corresponding
quarter in 2013.
While the FCC is singling out Verizon, Mead points out that
his company's policies are no different than the ones being used
by the other major carriers,
. That makes the FCC's stand a little peculiar. But the agency is
tasked with making rules that govern network usage policies, and
its attack on a Verizon may just be a first salvo.
Relatively few Verizon customers are affected by this change,
and it makes little sense for those users to leave, because they
would find similar policies elsewhere. It's possible, however,
that the negative publicity might slightly impact customer growth
and retention, since press coverage has focused on Verizon -- not
the other providers with similar policies.
How will this impact customers
The days of unlimited data at top speeds are over, at least with
the big-four carriers. The throttling impact for most customers
will be minimal, but for heavy users it may become a problem.
This could force them to either change their consumption habits
or drop unlimited plans for tiered ones, which is exactly what
Verizon -- and every other carrier -- wants.
There's a level of dishonesty in selling unlimited plans that
offer a lesser data experience. Verizon is guilty of that, but
the company is hardly alone in treating its customers
Being throttled or paying more is a choice heavy-use customers
will have to make. This may cause some subscribers to bounce
around the major providers, looking for the best deal. It could
also open the door for a company that finds a way to cater to
this particular type of user. Until that happens -- barring FCC
action -- it appears customers must take whatever they are
Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to
profit? There's $2.2 trillion out there to be had.
Currently, cable grabs a big piece of it. That won't last. And
when cable falters, three companies are poised to benefit.
for their names. Hint: They're not Netflix, Google, and
Is Verizon Giving Its Unlimited Data Customers
Less Than They Pay For?
originally appeared on Fool.com.
has no position in any stocks mentioned. He has a Sprint
unlimited data plan. The Motley Fool has no position in any of
the stocks mentioned. Try any of our Foolish newsletter services
free for 30 days
. We Fools may not all hold the same opinions, but we all believe
considering a diverse range of insights
makes us better investors. The Motley Fool has a
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a