I’ve thought more about the one weakness so far in the Tariff Rebate Passthrough plan – pricing flexibility. Contrary to what I implied a few hours ago, I now believe that Tariff Rebate Passthrough (TRP) is fully compatible with the kinds of service pricing flexibility providers and consumers are used to or would want. To see that, let’s consider the basic kinds of telecom service pricing:
- All-inclusive flat rate for everything. If that’s the pricing scheme, extreme net neutrality has won, TRP is moot, and the discussion is over.
- Flat rate plus price-per-unit. Analogies can be found in the telephony sphere (long distance, text messaging, etc.) This is the simple case for TRP, which I’ve already discussed previously.
- Flat rate for base service plus fixed number of units; additional price-per-unit thereafter. This is the current US cellular service model, and the most important one for TRP to replicate. An example might be “$50 per month, which includes unlimited ordinary service and 10 gigabytes of high-QOS service, plus $1 per gigabyte over that.*” The problem with simple-minded TRP is that ESPN.com rebating the whole $1/gigabyte for the consumer might be oversubsidy; with all those free bundled bytes, the rebate might not be WORTH $1/gig to Joe Sportsfan. But there’s an easy solution: Let the ISP set a price** for the plan (the aforementioned $50 plus $1/gig), and also set a “buyout” tariff (say, $0.40 per gig). As long as the pricing is wholly based on QOS and not on the identity of the information provider, the dangers of net non-neutrality are averted.
- Channel-based pricing. The whole point of the net neutrality debate is that telecom companies should not be allowed to charge for “Yahoo” the way cable providers now charge for “ESPN.” But there’s nothing in TRP that keeps Yahoo from charging its own subscription rates – just as it does today for many premium offerings, and just as AOL does today for its whole bundled service. So I don’t see this as a big loss.
*I haven’t checked those numbers to see if they make sense. They’re just examples.
**Subject to the usual kinds of regulation stemming from the monopoly/oligopoly status of last-mile providers.
What kinds of price structure does Tariff Rebate Passthrough not allow for? Mainly, discriminatory connection-based pricing is sharply reduced. E.g., “friends and family” calling plans, “free calls but only to other subscribers to our service,” etc. might be hard to replicate under TRP. But I think TRP leaves plenty of other pricing options for service providers to still make money hand over fist.