Daniel Mead, the CEO of number-one U.S. operator Verizon Wireless, is defending his company’s plan to extend its “network optimization” policy—which slows down heavy 3G users at cell sites during periods of high congestion—to LTE subscribers, beginning on 1 October 2014. Mead made the statement after Tom Wheeler, chairman of the Federal Communications Commission, a U.S. regulatory agency, wrote to Verizon objecting to the fact that only customers on unlimited data plans would be affected. Mead said that the operator’s policy targets unlimited data customers because they tend to use the most bandwidth, adding that the throttling would be infrequent in any case. Mead denied Wheeler’s accusation that Verizon was using a network management policy to push customers to drop unlimited plans in favor of more lucrative usage-based plans. Unlimited data plans are still available from Verizon, though they do not come with subsidized handsets.

Tarifica’s Take

Verizon’s plan targets the top 5 percent of unlimited-data plan subscribers, and the company has stated that it will only throttle data for these customers when they connect to certain cells at times of especially heavy congestion. Nonetheless, the FCC objects strongly to the idea of targeting any particular group of users. Chairman Wheeler wrote, “It is disturbing to me that Verizon Wireless would base its ‘network management’ on distinctions among its customers’ data plans, rather than on network architecture or technology. ‘Reasonable network management’ concerns the technical management of your network; it is not a loophole designed to enhance your revenue streams.” In citing revenue streams, he was clearly implying that the operator intends to drive customers from unlimited data plans to plans with data allowances. Kathleen Grillo, Verizon’s vice president of federal regulatory affairs, responded to the FCC by claiming that a small group of heavy users was taking up a “disproportionate amount of network resources” and having “an out-sized effect on the network.” Grillo added, “Not surprisingly, many of these heaviest users of the network are on unlimited data plans.”

While we do not have any independent information as to Verizon’s motivation, if the operator were in fact using this throttling initiative to move customers away from unlimited plans, we feel this would be an ill-advised strategy. Verizon itself has stated that the vast majority of its subscribers are on usage-based plans already, so it seems likely that the advantage (in terms of revenue) gained by incentivizing a small group to change plans would be outweighed by the disadvantage (in terms of bad publicity) of appearing to treat subscribers in an unfair manner.