Will Net Neutrality Lead to Higher Prices?

One can make some reasonable guesses about likely outcomes as the Federal Communications Commission weighs new network neutrality rules.

If new proposed rules disallow traffic shaping measures such as slowing peer-to-peer or other traffic at times of peak congestion, the problem of alleviating peak-hour congestion will still have to be dealt with.

If the goal is to manage peak traffic load, and service providers cannot shape traffic by slowing some protocols, or slowing all traffic for users who have exceeded their usage caps, then other available mechanisms will be used.

And price is one of the most-likely tools.

Customers might not like it, but it always is possible to discourage usage by raising prices. And it always is possible to boost usage by lowering prices. And it is wireless plans where the price hikes--or user policing of usage--will be most felt.

If usage caps are tightened, consumers will have the option of spending more, or using less.

That doesn't mean "unlimited" service packages will disappear. Some customers will want to buy them. But the price of such packages likely is going to rise. For similar reasons, usage-based charging is likely to increase for most other plans as well. That will encourage users to monitor their usage and make choices that will alleviate peak hour strain on networks.

As a practical matter, wired network operators already refrain from blocking access to lawful applications, and traffic shaping rules already are tweaked so the policies do not constitute "blocking" or "slowing" of lawful traffic.

But wireline operators have more access bandwidth than wireless providers do. So Oppenheimer financial analyst Tim Horan suggests that wireless usage caps will become more stringent.

Among other possible strategies is structuring pricing to encourage more usage off-peak, as is the case for voice plans.

Application blocking is less an issue than most assume on wired networks, and is a relatively minor irritant for most wireless users, but a significnat irritant for some users on wireless networks.

The real trick is how service providers will handle peak hour loading under new conditions where traffic priorities cannot be applied, as typically is the case for many private enterprise networks.

One other observation also is in order. As was the case the last time a major change in communications regulation was made, with the Telecom Act of 1996, there will be a period of legal wrangling to test and flesh out the rules.

Though most within the communications business would vastly prefer more predictability of business environment, that is not what they are likely to get.