4 ms·

This is the sort of price/service regulation that superficially appears beneficial to consumers... but might not be pro-consumer in its total effects. In part

by gojomo 14y ago

This is the sort of price/service regulation that superficially appears beneficial to consumers... but might not be pro-consumer in its total effects. In particular, it could mean customers who would never use tethering wind up paying incrementally more, because all plans now include that capability, and Verizon still has sufficient pricing power make up the loss from tethering fees with other incremental fee increases.

sankara 14y ago
How does it matter if I use data for my phone or my computer? To some extent I agree that this would end up costing higher when the carrier has unlimited data. But even there, if more people start "misusing" the connection (download songs, movies?) the price is going to go up and you don't need tethering to do that. To give you a perspective: Tethering is available in India with every single connection. You just need a supporting phone (USB or WiFi). The plans are all capped there but so are most plans here. You guys seriously have to wake up and realise that you are severely restricted on everything from which phones you can buy to how you use your phone and what apps are installed. I mean, seriously!
DamnYuppie 14y ago
While I don't disagree that carriers will find new ways to bleed consumers dry I don't think that is a reason to not be ecstatic about this decision. If we held on to your logic it would enable companies to disregard laws or contracts they entered into for their sole benefit.
drewcrawford 14y ago
This analysis holds up to "unlimited" plans where "tethering" is really a (poor) proxy for "using a lot of data." But if you have usage-based pricing (which Verizon does), it doesn't matter whether that 4GB originates from an iPhone or a MBP. A packet is a packet and it costs the same to route. I suppose you could argue that Verizon incurs some additional support burden for tethering. I question whether or not this support burden outweighs the costs of supporting people who call in expecting to be able to tether now.
- gojomo 14y ago
  Almost no business charges strictly by commodity packet, because it would be disastrous for their long-term future: their margins, their ability to learn from their customers, and their ability to dynamically improve over time. So any criticism of differentiated pricing based solely on the idea that "a packet is a packet and it costs the same to route" may be astute in the static, technical dimension -- but naive in the ultimately more-important dynamic economic and business dimensions.
  - mindslight 14y ago
    The micro-optimization driven desires of businesses are irrelevant when evaluating the larger picture. Carriers that decommoditize best-effort communications to misappropriate others' value should be taken to court for fraudulently advertising "Internet" access, and the colors of radio waves they enjoy a government-granted "public interest" monopoly on should be put to better use.
  - drewcrawford 14y ago
    It may very well be disastrous to Verizon's margins. I do not understand why protecting those margins are my responsibility, or anyone's responsibility other than Verizon's. We're not talking about some cable in the ground upon which Verizon exerts a legal property interest. We're talking about the airwaves that are the permanent heritage of the taxpayer (or arguably land owner), which we as a landlord collectively and temporarily rent out for our sole benefit, in an adversarial negotiation. The whole point of a negotiation is to increase your own margins, often at the expense of the other party's. To say our analysis does this is to say it represents our interests.
- jessriedel 14y ago
  To add to what gojomo said: tethering fees can act as a price discriminant for providing a service with significant non-marginal costs. It's possible for price discriminants to have positive effects on everyone, although that need not be the case with tethering.
- mistercow 14y ago
Steko 14y ago
Data prices are already set where Verizon anticipates them maximizing profit so raising them isn't going to "make up" for the money they are now out because they can't rip off a tiny minority of their customers anymore.
- gojomo 14y ago
  I don't see how that follows. There's a percentage of their customers -- let's hypothesize 10% -- who were willing to pay an extra $20 for tethering. Now that Verizon can't charge for tethering, it can still raise base rates in such a way that, as long as these customers aren't paying more than $20 more, these customers are unlikely to switch. Further, there are some of the 90% of customers who valued tethering, but wouldn't pay $20 for it. They might tolerate a $5-$10 rise in base rates without switching. Then, there are others of the 90% who could also tolerate a $5-10 increase in base rates, and still others who would be lost at each level of increase. The exact net effect will change based on how many customers fall into which ranges of price-tolerance behavior, but the fact that the base rates now provide an extra value, that some were willing to pay $20 for, strongly suggests some increase in base rates, greater than $0 and less than $20, would be the new profit-maximizing rate for Verizon. And thus everyone who doesn't want tethering at any price loses out. Regulations which prevent differentiated pricing can often help the high-end customers -- in this case richer people with multiple devices -- by preventing their willingness-to-pay-more from subsidizing the overall service. They may not help the price-sensitive and more likely to be poor customers. Thus the cheering of this regulatory action on some boards (including here) should not be taken as a proof of net consumer benefit. Just that it benefits rich heavy-tethering users.
  - _delirium 14y ago
    I agree with that analysis, but my read is that not all the dislike is only from people who stand to benefit (though that's a big part of it), but from a sort of intellectual/aesthetic dislike of markets that don't seem to be pricing commodities in a transparent/consistent way, and instead try to charge different people different prices for the identical product. For example, your analysis could also apply to differentiated pricing of books. Some people are less price-sensitive, and would pay more if you could manage to charge them in a different tier: say, people buying books charged to their company, or to a university research grant. If you could do that, the base price for poorer people buying books might well be lower. But when Amazon experimented with per-user pricing based on analytics, people got really angry, as it seemed to be removing the idea that books have transparent prices. Of course, there's often differentiated pricing by differentiating the products, even slightly: SaaS service tiers, limited edition books, hardcover v. softcover, etc. But when the identical product is being priced differently in an attempt to maximize profit in different demographics, it seems worse somehow, like a shopkeeper quoting you different prices based on how you dress (which does happen in countries with haggling-oriented pricing systems, but is contrary to the American expectation of advertised uniform prices).

by gojomo 14y ago

sankara 14y ago

How does it matter if I use data for my phone or my computer? To some extent I agree that this would end up costing higher when the carrier has unlimited data. But even there, if more people start "misusing" the connection (download songs, movies?) the price is going to go up and you don't need tethering to do that. To give you a perspective: Tethering is available in India with every single connection. You just need a supporting phone (USB or WiFi). The plans are all capped there but so are most plans here. You guys seriously have to wake up and realise that you are severely restricted on everything from which phones you can buy to how you use your phone and what apps are installed. I mean, seriously!

DamnYuppie 14y ago

While I don't disagree that carriers will find new ways to bleed consumers dry I don't think that is a reason to not be ecstatic about this decision. If we held on to your logic it would enable companies to disregard laws or contracts they entered into for their sole benefit.

drewcrawford 14y ago

This analysis holds up to "unlimited" plans where "tethering" is really a (poor) proxy for "using a lot of data." But if you have usage-based pricing (which Verizon does), it doesn't matter whether that 4GB originates from an iPhone or a MBP. A packet is a packet and it costs the same to route. I suppose you could argue that Verizon incurs some additional support burden for tethering. I question whether or not this support burden outweighs the costs of supporting people who call in expecting to be able to tether now.

gojomo 14y ago
Almost no business charges strictly by commodity packet, because it would be disastrous for their long-term future: their margins, their ability to learn from their customers, and their ability to dynamically improve over time. So any criticism of differentiated pricing based solely on the idea that "a packet is a packet and it costs the same to route" may be astute in the static, technical dimension -- but naive in the ultimately more-important dynamic economic and business dimensions.
- mindslight 14y ago
  The micro-optimization driven desires of businesses are irrelevant when evaluating the larger picture. Carriers that decommoditize best-effort communications to misappropriate others' value should be taken to court for fraudulently advertising "Internet" access, and the colors of radio waves they enjoy a government-granted "public interest" monopoly on should be put to better use.
- drewcrawford 14y ago
  It may very well be disastrous to Verizon's margins. I do not understand why protecting those margins are my responsibility, or anyone's responsibility other than Verizon's. We're not talking about some cable in the ground upon which Verizon exerts a legal property interest. We're talking about the airwaves that are the permanent heritage of the taxpayer (or arguably land owner), which we as a landlord collectively and temporarily rent out for our sole benefit, in an adversarial negotiation. The whole point of a negotiation is to increase your own margins, often at the expense of the other party's. To say our analysis does this is to say it represents our interests.
jessriedel 14y ago
To add to what gojomo said: tethering fees can act as a price discriminant for providing a service with significant non-marginal costs. It's possible for price discriminants to have positive effects on everyone, although that need not be the case with tethering.
mistercow 14y ago

Steko 14y ago

Data prices are already set where Verizon anticipates them maximizing profit so raising them isn't going to "make up" for the money they are now out because they can't rip off a tiny minority of their customers anymore.

gojomo 14y ago
I don't see how that follows. There's a percentage of their customers -- let's hypothesize 10% -- who were willing to pay an extra $20 for tethering. Now that Verizon can't charge for tethering, it can still raise base rates in such a way that, as long as these customers aren't paying more than $20 more, these customers are unlikely to switch. Further, there are some of the 90% of customers who valued tethering, but wouldn't pay $20 for it. They might tolerate a $5-$10 rise in base rates without switching. Then, there are others of the 90% who could also tolerate a $5-10 increase in base rates, and still others who would be lost at each level of increase. The exact net effect will change based on how many customers fall into which ranges of price-tolerance behavior, but the fact that the base rates now provide an extra value, that some were willing to pay $20 for, strongly suggests some increase in base rates, greater than $0 and less than $20, would be the new profit-maximizing rate for Verizon. And thus everyone who doesn't want tethering at any price loses out. Regulations which prevent differentiated pricing can often help the high-end customers -- in this case richer people with multiple devices -- by preventing their willingness-to-pay-more from subsidizing the overall service. They may not help the price-sensitive and more likely to be poor customers. Thus the cheering of this regulatory action on some boards (including here) should not be taken as a proof of net consumer benefit. Just that it benefits rich heavy-tethering users.
- _delirium 14y ago
  I agree with that analysis, but my read is that not all the dislike is only from people who stand to benefit (though that's a big part of it), but from a sort of intellectual/aesthetic dislike of markets that don't seem to be pricing commodities in a transparent/consistent way, and instead try to charge different people different prices for the identical product. For example, your analysis could also apply to differentiated pricing of books. Some people are less price-sensitive, and would pay more if you could manage to charge them in a different tier: say, people buying books charged to their company, or to a university research grant. If you could do that, the base price for poorer people buying books might well be lower. But when Amazon experimented with per-user pricing based on analytics, people got really angry, as it seemed to be removing the idea that books have transparent prices. Of course, there's often differentiated pricing by differentiating the products, even slightly: SaaS service tiers, limited edition books, hardcover v. softcover, etc. But when the identical product is being priced differently in an attempt to maximize profit in different demographics, it seems worse somehow, like a shopkeeper quoting you different prices based on how you dress (which does happen in countries with haggling-oriented pricing systems, but is contrary to the American expectation of advertised uniform prices).