There was a lot of attention paid recently to a study from Nielsen concerning how much data smartphone users consume. One of the things that some pulled from this report was the idea that AT&T's new iPhone usage caps were somehow a "good deal" for consumers, since many appeared to use less than AT&T's first tier cap. That's because of the following statement from Nielsen, which certainly implies that:

Usage-based pricing may be more fair. The top 6 percent of smart phone users are consuming half of all data. The vast majority of customers, 99 percent according to the 60,000 phone bills that Nielsen collects and analyzes every month as part of their Customer Value Metrics product, are better off with a pricing scheme like AT&T's new data pricing model than under flat-rate pricing where they are paying for much more than they ever use.

Of course, the reality is a bit more complicated. Thankfully, Broadband Reports explains why these claims ignore important trends and other factors:

While many people are applauding AT&T's new data pricing plans as money savers for light users today -- they're not looking at tomorrow's big picture. One, Nielsen ignores the fact that carriers are now making data plans mandatory for smartphone users who previously only used Wi-Fi. That's not "more fair," nor does it save money. Nielsen takes the stance that light users somehow need to be "educated" into consuming more data -- yet many of those users simply prefer to use their device's Wi-Fi functionality alone. That's no longer possible.

Two, the average user already consumes 298MB of data -- while AT&T's base cap is 200 MB. That cap's set just low enough to push today's average user to the higher, $25 a month tier (plus overages, ETFs, an endless assortment of fees). That average is going to quickly skyrocket and the heavy user of today will become the average user of tomorrow -- yet instead of having the option of a simple, unlimited data tier at a fair price -- they'll face heavy and often confusing overages just as smartphones begin seeing interesting video service integration (Netflix, Hulu). That's not about saving money, it's about making money.

Again, incumbent wireless companies are not in the business of making less money, and this new media meme that a shift to low caps and high overages is about saving consumers money, or fairness, or helping minorities -- is simply absurd. If telecom analysts want to analyze -- they should be noting that carriers and investors see the death of SMS and voice minutes heading their direction -- and are changing pricing models to compensate and cash in on an explosion in wireless video (or streaming wireless audio) use. But the suggestion that this shift is driven by altruism is bizarre and disingenuous.

There's also the fact that, with the new plans, if you want to use tethering, it'll run you an extra $20/month -- not to mention that tethering will increase data usage. It also ignores the mental transaction costs when you know you have a cap and potential overages that discourages usage, just as more apps are coming online to encourage usage. The really damning part, of course, is just the basic trend that data usage is increasing and that's not going to slow down any time soon. AT&T smartly set its caps so that it could get analysts to make these kinds of claims, ignoring that a couple years from the average data will be much higher and more and more people will be pushed to higher, significantly more expensive options.

What's kind of amazing here is how no one seems to look back at the consumer internet access costs for comparison. In the early days, when many people had AOL, there were caps and metered billing. And some people used it, certainly, but it was nothing compared to what happened when AOL finally dropped its caps and suddenly people could really embrace and use the internet without worrying about hitting their usage cap. Unlimited internet access is what helped drive internet usage, making it such a powerful and useful platform. Mobile operators seem to want to go in the other direction and are working hard to try to limit how useful many people find their phones, due to limiting data plans. That doesn't seem all that compelling or "fair."

Lots of broadband operators around the world have been talking about how their networks can't keep up with traffic demands, so they'll have to shift back to usage-based pricing. In particular, US mobile operators AT&T and Verizon have led the rhetoric, even as they continue to launch the unlimited plans they say are such a problem. The head of one broadband provider in the UK recently said a switch to usage-based pricing, and away from flat-rate plans, was inevitable as soon as one operator in a market made the switch. He dismissed the idea that operators would seek to differentiate by sticking with flat-rate plans, or by taking any other pricing strategy than usage-based plans, ignoring the fact that consumers have grown accustomed to flat-rate offerings, and that the lack of clarity in usage, billing and pricing that per-unit plans are a big turnoff for them. Already, we're seeing some signs that the operator landscape may not be dominated by such groupthink, as T-Mobile and Leap Wireless have made changes to their mobile broadband plans that are out of step with many other operators. The two companies have changed the way the caps on some of their plans work: for instance, on T-Mobile, when a user reaches their 5GB monthly cap, they don't get hit with overage fees, the speed of their connection gets throttled, avoiding the uncertainty inherent in usage-based pricing. Perhaps it's not a perfect situation, but it does show that some operators aren't afraid to step out from the party line and explore different pricing models. It also builds some hope that when some providers do decide to regress to usage-based schemes, there will be some choices for consumers.

There was lots of press coverage about the FCC's broadband plan on Monday, as the commission released an exec summary of its nearly 400-page plan for broadband in the US. If you want to wade through the details, it's all there online for you. But, if you want a basic summary, it appears that, like pretty much everything this FCC is doing, it's a lot of talk and little of consequence. So far, I've seen statements from lobbyists on pretty much all sides of the issues "commending" or "applauding" or "supporting" the FCC. And that's because there's basically nothing controversial and nothing big at all in the plan. It appears to try to thread the needle and keep everyone happy -- and in doing so, it appears to punt on the all-important questions. If it was really about making the necessary changes, key players would be up in arms. But they're not.

The report pays lip service to greater competition and talks about getting better data and about making better use of wireless spectrum. Well, duh. But it takes no bold steps -- does nothing to really take control out of the hands of the incumbent telco providers -- just as we originally expected, even if really disruptive, but necessary, ideas were considered, they don't appear in the final plan.

In the end, it's the kind of plan you put forward if you're being political and don't want to make waves. It's not the plan you put forward if you're making a bold leadership statement about how to really expand broadband in this country. Too bad.

Back when the $7.2 billion broadband stimulus plan was announced, we were a bit worried that it was really just a bailout plan for incumbent broadband providers. The focus of the plan was on "shovel ready" projects in an attempt to create jobs, and that generally meant incumbent providers who could hire a lot of people. The last thing the government wanted to do in the middle of a recession was help fund an innovative startup that would disrupt a big employer. But there was one interesting aspect of the stimulus package: it suggested that anyone taking the government money would have to share access to infrastructure -- something that makes a lot of sense, if you're encouraging competition.

But, of course, the incumbents don't want competition at all. They've based their entire business models on the very lack of competition in the marketplace. So, it quickly became clear that they would not only resist taking any of the money, but they would actively seek to block upstarts from taking it as well. And... that's exactly what appears to be happening. lavi d points us to the news that lots of smaller companies are applying for the federal funds, and (surprise, surprise) the incumbents are not applying for the funds at all, but are drafting legislation in various local governments to prevent any upstart competitors from getting those funds. So, not only is it not stimulating the creation of jobs, it's not really providing much more broadband or competition.

Almost all of the issues facing broadband in this country (our slow speeds and high prices relative to other countries, questions about "neutrality" and things like customers being forced into broadband tiers) are really symptoms of a lack of significant competition in many markets. Many customers really only have one or two options, neither of which they like (I'm in that camp myself). Yet, the broadband providers want to make everyone believe it's a really competitive market. That's why they've done everything possible to block the FCC from getting accurate data about actual broadband deployments and competition over the years. Their most recent plan has been about pitching the idea of an organization called "Connected Nation" to "map" broadband penetration. However, as has been discussed previously, Connected Nation seems more like a front for the big telcos to try to pretend there's significant competition... and an increasing number of doubts are being raised about Connected Nation's efforts -- even as it seems to remain a darling of DC politicians. However its "mapping" still won't look at house-by-house penetration and competition (by demand from the broadband providers) and the collected data will remain proprietary, rather than open.

Meanwhile, Verizon has put up a video claiming to explain why there's plenty of competition in broadband in the US, but it does so by pulling a neat little trick: rather than defining the market as DSL and cable providers, it dumps wireless providers into the mix... So when you add mobile data providers, yes, there are more players in the space, but that ignores the fact that (1) many of the mobile players and broadband players are actually connected (i.e., AT&T has both, as does Verizon) and (2) that the cellular wireless broadband providers are all greatly limited, and use terms of service that tend to forbid using the data account as a primary connection. In other words, they're not really part of the same market at all.

But, most importantly, the video fails to back up its thesis that the US is "one of the most successful broadband markets in the world." It says there's lots of competition, investment in new technologies and consumers are getting more as prices go down. That suggests there is, in fact, some competition in the market -- a point pretty much everyone agrees on. But it does nothing to compare the US to other markets around the world that have much more competition, much more investment and much greater consumer value per dollar spent. Just saying that because there's some competition, the US is one of the most successful in the world, doesn't back up the thesis at all. It's like saying that you won a baseball game because you fielded nine guys. You forgot about the actual game.

Slashdot points us to the news that BT is blocking its mobile broadband subscribers from accessing The Pirate Bay, claiming that it's a self-regulation effort in order to remain in "compliance with a new UK voluntary code." It appears to have something to do with the already controversial self-censorship program being managed by the Internet Watch Foundation, which has already blocked access to parts of Wikipedia and the Internet Archive's Wayback Machine. At what point do people realize that any such demand to "block" certain types of content will overblock and harm perfectly legitimate sites and technologies?

We've had a lot of concerns about the broadband stimulus package, since it was shaping up to look like little more than a handout to incumbent operators who have a long history of grabbing public money, then not living up to the promises they made to get it. The real problem underlying most issues having to do with broadband in the US is a lack of competition, so any stimulus needs to address that, instead of just throwing money blindly at broadband providers. Mobile operators have already complained about anything that might force them to compete interfering with the government broadband giveaway; now BusinessWeek reports that several incumbent telcos are holding back from the stimulus, because they're afraid the government will attach strings to it to try and increase competition. Most of all, they're worried they may have to allow line-sharing, which, of course, they worked very hard to get tossed out in 2005. The rules are still under discussion, but we're optimistic that the opportunity to effect some positive change on the broadband market won't get left behind in the rush to throw money at it.

Well, US telcos who are sick and tired of people pointing out how far behind the US is in broadband, is certainly happy to hear about a new report that claims the US is actually #1 in broadband. But, of course, the devil is in the details and the details look pretty ridiculous. Apparently, the guy behind the study built a bizarre and somewhat meaningless "connectivity scorecard," where he measured five different factors in a variety of countries, from overall internet penetration to online banking usage to voice minutes (both wired and wireless) to SMS usage per capita and, finally, consumer spending on software. From that, he ranked the countries with the US being number one.

Of course, looking over those factors, it's difficult to see why those specific factors should be the ones measured. Or how the relative weights of those factors should be measured to have any say at all in overall connectivity. SMS usage per capita? Does that really say anything about broadband connectivity? I actually use SMS less when I'm around a broadband connection. And, consumer software spending? That would mean that a hypothetical country that relies mostly on open source technologies is considered less connected than one that buys Microsoft. Even worse, as we see more and more free "cloud" offerings, it would mean those that use something like Google Docs, rather than paying for Microsoft would be seen as less connected, even as it likely means they're more connected.

M2Z's big plan to provide wireless internet to the entire country, if the FCC would just hand over free spectrum, never made all that much sense to us. Yes, the country could have a much better broadband infrastructure, and there are some interesting possibilities in the wireless space, but simply handing over a bunch of spectrum to a single startup company with a promise to provide free wireless to most of the country just seems like a boondoggle. There's little evidence that the plan would work or that it is even necessary. So, it seemed good that the plan went down in flames earlier this month -- though, most of the criticism was focused on the pointless requirement for anti-smut filters on the free connectivity.

However, Kevin Martin is making some news today by telling everyone who will listen that he's willing to drop the filters part if he can get the rest approved. This is a little surprising from Martin, as he's been a pretty big anti-smut crusader in his role at the FCC, but perhaps he's looking to leave a legacy beyond "AT&T lackey" now that he's about to leave the FCC. It still doesn't appear that he has the support to push this through, but that could change. Still, it would be good if someone (anyone?) could explain why it makes sense to just give a single company this spectrum without any clear reason why it should get the spectrum or proof that it can provide what it wants to provide in a reasonable manner? We've seen tons of promises about broadband wireless over the years from upstarts and very few have gone anywhere. Before just handing over valuable spectrum to one provider, why not see if (a) it's actually necessary and (b) if the company in question can actually provide what it claims it will provide.

Remember just two years ago, when there were all sorts of stories about a supposed "broadband price war" in the US, where prices of DSL were even dropping below the cost of dialup lines? While that was somewhat misleading, it's difficult to see how the Wall Street Journal can suddenly claim that the idea of cut rate promotional pricing for broadband is suddenly new. That seems to go against what was being reported just a few years ago. Broadband providers have had such promotions going for quite some time -- and while the specifics of the promotion (and the ease of actually getting the promotion pricing) change over time, it's hard to see how the latest efforts are all that different. And, in the meantime, just as the WSJ is claiming that broadband prices are in some sort of freefall due to this competition, Richard Bennett is trying to make the case that we're all about to get broadband price increases thanks to the FCC's wrist slap on Comcast.

So, apparently, broadband providers are extending all sorts of promotions with cheap pricing to get people onto their network, but if you actually want to use the network, you should expect much higher pricing. That seems like a recipe for disaster.

Of course, the truth is somewhere in between. The so-called "price war" is exaggerated for effect -- as it's often nearly impossible to get the actual advertised prices in many cases. Meanwhile, Bennett exaggerates the claim that we're seeing price increases due to caps. Broadband caps will eventually be recognized as a hindrance to innovation, but they're hardly a price increase in most cases. And, if they really do end up being a huge price increase for users, then won't that create incentives for the other providers (the ones that the WSJ claims are itching to steal customers away) to get rid of the caps or change them? That is unless there really isn't competition in the market -- and Bennett himself was just suggesting that there's plenty of competition in the broadband market.

So, based on these various stories, it seems that, thanks to the FCC's deregulatory efforts, we have tremendous competition in the broadband market that is driving down prices, except for the fact that it's driving up prices due to the lack of competition in the market created by bad FCC rules. Clear?