Most people likely would agree that a “postage-paid” return policy is a useful and good thing for suppliers of online retail merchandise. After all, sometimes a garment doesn’t fit, or a customer doesn’t like the fit and finish of an item of clothing purchased online.
Most people probably would agree that a “buy one, get one free” policy is a legitimate retail promotion practice. Most likely would agree that there is nothing unfair, in principle, about a retailer selling any product on a per-unit basis, depending on how many units a customer wishes to purchase.
So should toll-free calls be illegal? It’s a rhetorical question, but by analogy is the same sort of policy a proposed piece of legislation sponsored by Rep. Ron Wyden (D-Ore.) would make law.
Although the bill, known officially as the Data Cap Integrity Act, also deals with less-controversial items, such as ensuring that service providers are accurately measuring consumer data usage when they also use data caps, one element of the bill would outlaw even some voluntary business agreements between content or application providers and Internet service providers.
Specifically, the bill would ban third parties from subsidizing end user data in the same way that third parties now pay for toll-free calls.
The “Data Cap Integrity Act” also would also require the Federal Communications Commission to review whether an Internet provider’s data cap is designed to limit congestion or is an attempt to monetize usage “in ways that undermine online innovation.”
The bill also tries to ensure that ISPs “cannot, for purposes of measuring data, discriminate against any content.” Presumably that means, using the same sort of reasoning underpinning network neutrality, that no end user or application provider could subsidize use of bandwidth, in the same way that advertising defrays the cost of delivering content on a broadcast TV or broadcast radio network, newspaper, magazine or Internet application.
Aside from the usual questions about how any agency can determine that a data cap is, or is not, designed to “make money” rather than “manage congestion,” there are some broader philosophical issues about how much should the Federal Communications Commission and state commissions be explicitly involved in the ways Internet service providers run their businesses.
The question is not simply rhetorical. The FCC does, from time to time, invoke the right to broadly shape the pricing, packaging, terms and conditions under which communications services can be offered.
Special access rates, consumer protection rules and carrier of last resort obligations are examples. Entry rules provide other examples. All such rules virtually dictate whether contestants can lawfully be in the business, and if they are, what prices are permissible, at least for some services.
“This bill is intended to help consumers manage their data more effectively and ensure that data caps are used only to serve the legitimate purpose of addressing congestion,” Wyden says.
But data caps, or any other usage policies, are not different in character from metering of electricity use, or purchases of most other consumer products, which generally are sold by the unit, which is to say, on a consumption basis.
A data cap, one might reasonably argue, is simply a way of matching retail prices to unit consumption. That does not mean it is unreasonable to ask whether the unit prices are usurious or not. But neither is the mere existence of a usage cap unfair. To be sure, some consider the existence of caps to be unfair to consumers.
But some argue that caps and usage-based pricing are not inherently unfair, and do result in higher consumer welfare, and are not simply attempts by ISPs to “protect their profits.”
By extension, since “toll free” use of network services is a form of promotion, marketing and customer support, it also makes sense to question whether such offers, akin to advertising, are inherently unfair to consumers.
Some object, for example, to ISPs making deals with advertisers or content companies regarding use of bandwidth to show movie trailers or other content. The Wyden bill would prohibit such practices.
In principle, two-sided business models, where a service or application provider earns revenue both from subscribers and business partners is an essential part of many content and media business models. It isn’t clear to many of us that “toll free” use of Internet applications is unfair to consumers, any more than advertising is inherently unfair.
Advertising is why most users do not pay direct fees to use Google search, Facebook, Twitter or other popular Internet apps and sites. Advertising, sponsorship, toll free calling and other third party revenue sources are just that, revenue sources. Bandwidth caps are ways Internet service providers tie usage to retail price.
One might argue that caps are too blunt an instrument. That is fair enough. One might argue there are other ways to prevent congestion. That likewise is reasonable. What seems unreasonable are regulatory bans and proscriptions that tell suppliers what means they can use to to prevent congestion, advertise or promote services, especially in the absence of any evidence of consumer harm.
There is no reason toll free calling, ad-supported content or ad-supported applications should necessarily be illegal, especially when there is no evidence consumers are harmed by such practices.
