Feature Article

April 03, 2012

Freemium Model for Wi-Fi is Not a Net Neutrality Problem

A change in pricing policies for the Denver International Airport illustrates a continual and recurring challenge for providers of broadband services, namely the issue of “tiers of service,” traffic shaping, the freemium business model and network neutrality.

Up to this point, there has been one tier of ad-supported service. But that has created a “tragedy of the commons” problem, where there is over-exploitation of a finite shared resource, according to John Payne, Pueblo Technology Group CEO. 

The new Wi-Fi service that DIA will roll out in coming months will break from that practice and offered differentiated tiers of service, with usage controls on the free service to prevent a few users from monopolizing available bandwidth. 

The free service also will be rate limited, running fast enough for checking email but apparently not fast enough to support streaming media, corporate remote access and virtual private networks, for example. Higher speeds are possible on the “for fee” version of the service.

The switch illustrates the logic and value of offering tiered services, including free and premium tiers, with bandwidth managed and offered at a variety of speeds. User experience is protected, while the additional revenue provides the ability to expand the network and increase the capacity, Payne says. 

Such challenges are directly embedded in discussions of “network neutrality,” which, it might be said, conflates separate problems. 

Predatory business behavior is a potential issue. But that is a separate issue from network management and pricing mechanisms that can help a shared network provide better end user experience, indeed recoup enough revenue to support the network. 

U.K. regulator Ofcom relies on competition to maintain an open Internet access business and avoid predatory behavior, while at the same time generally allowing Internet service providers to use network management tools so long as they are transparent about such practices.

The Ofcom rules are less restrictive than current U.S. rules, which do not allow any packet prioritization on fixed networks, at all. What Ofcom does seem to warn against is forms of management that have the business result of favoring an ISP's own services, over competing services offered by other contestants.

Mobile and fixed network operators can meet new demand for high-speed Internet access either by investing in new capacity and partially by rationing existing capacity, in part by using traffic management tools, Ofcom says.

“The question is not whether traffic management is acceptable in principle, but whether particular approaches to traffic management cause concern,” Ofcom says. The U.K. communications regulator rightly notes that just two broad forms of Internet traffic management exist, either a “best effort” approach that simply randomly slows down under load, or some form of “managed” access that could include priorities for delay-sensitive or higher value traffic.

Ofcom generally argues that access providers can do quite a lot where it comes to traffic management, so long as they are transparent about it and communicate those practices to end users. There is an expectation that users will have access to all lawful applications, of course.

While recognizing that best-effort and managed services will coexist, Ofcom says it would consider intervening if the amount of “managed” bandwidth jeopardized the amount of “best effort” access Ofcom considers key to continued innovation.

Likewise, Ofcom says it would be concerned if any particular management technique was applied in a way that harmed competitors to ISP-owned services. 

The point is that many network neutrality discussions conflate separate problems, namely potential predatory business behavior and network management. Nor are tiered access policies “inherently” unfair. In most business settings, and especially where a “freemium” model is used, such policies are necessary, one might argue.


Edited by Jennifer Russell

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