Verizon CTO Tony Melone Says New Business Model has a “51-49 Chance”

Earlier this year, and to the chagrin of net neutrality advocates, AT&T announced it was considering different pricing plans that could alleviate the pain consumers feel when they obliterate their data plans too quickly every month. The idea was to base mobile data pricing models—to some extent—on the old-fashioned “1-800” pricing model. An application provider would essentially foot the bill for consumers to access its content via a mobile device, and then the consumer’s data plan would not be depleted. It sounds like a great way for consumers to try new apps that don’t use data and possibly avoid excessive overage charges, but as mentioned above, hard-line net neutrality advocates do not like it.

At the CTIA show in New Orleans this week, Verizon came forward with a similar announcement, according to CNET.  Verizon cto Tony Melone “said that there is a more than 50-50 chance that carriers will adopt a business model that allows destination services, such as Google or Netflix, to pay for clear access to their customers.” Melone continued, “As we move away from flat rate pricing, there is room for a 1-800-type of service where certain destinations could offset the cost of the network to get customers to those destinations.” But of course… “There are net neutrality issues that have to be addressed, too.” He later adjusted his odds of this pricing model coming to fruition to 51-49.

CNET explains that broadband providers see 1-800 pricing as “just another creative business model for keeping up with growing demand on the network,” but it really goes beyond that. Without the networks who invest billions, and the customers who collectively pay billions, the Googles of the world wouldn’t have a business at all—so why can’t they help offset the costs, and maybe give consumers a break?

Well, as CNT explains, “Consumer advocates and others who have supported the notion of net neutrality say that selling priority offers an unfair advantage to companies that are large enough to have money to pay for such preferential access for its customers.” In other words, a start-up app developer entering the market with very little funding might not be able to shoulder the “1-800” cost. The theory then is that this app might be lost in the app store behind all the apps who do pay the providers, and it will never reach a critical mass necessary to attract further funding—thus depriving the world of the next “Angry Birds.”

In reality, things might play out differently for some content providers versus others. But, don’t consumers benefit at least from getting some of their favorite apps and services could be “free?” CNET said AT&T cto John Donovan “said it’s tricky to balance the deployment of new technology to satisfy demand for new services from customers with the cost of deploying such services.” Clearly, the same principle is at play in the USF Contributions Reform FNPRM, where the FCC plans to consider broadening the contributions base to include broadband connections for the first time. In the coming months, expect to see the debate over new pricing models for broadband heat up—there will certainly be quite the power-struggle between net neutrality advocates and service providers (again).