How much do FCC tethering rules matter?

by on July 30, 2013 · 6 comments

Over at The Switch, the Washington Post’s excellent new technology policy blog, Brian Fung has an interesting post about tethering and Google Glass, but I think he perpetuates a common misconception:

Carriers have all sorts of rules about tethering, and sorting through them can be like feeling your way down a dark alley. Verizon used to charge $20 a month for tethering before the FCC ruled it had to allow tethering for free. Now, any data you use comes out of your cellular plan’s overall data allowance. AT&T gives you a separate pool of data for tethering plans, but charges up to $50 a month for the right, much as Verizon once did.

Fung claims that due to the likely increase in tethering as devices like Google Glass come to market, “assuming the FCC didn’t require all wireless carriers to make tethering free, it’d be a huge source of potential revenue for companies like AT&T.”

In fact, the cost of tethering on AT&T is not very different from the cost of doing so on Verizon, which means by definition that AT&T is not likely to get a windfall from increased use of tethering. It’s also evidence that the FCC tethering rule for Verizon doesn’t matter very much.

Let’s look first at the state of tethering on Verizon. New post-paid consumer contracts on Verizon must be for the new Share Everything plans that first came out last year. The plans charge a monthly line access fee per device, which includes unlimited calling and texting, and a monthly fee for data, which includes tethering. You decide which devices you want to connect and how much data you want to use. Let’s say you have 2 smartphones that each use 3GB of data per month. You pay $40/device and $80 for data per month, for a total of $160/month. Again, allegedly because of FCC rules, this plan includes tethering.

AT&T has comparable plans, called Mobile Share. The pricing is a little different, because AT&T charges a different amount per line depending on how much data you get. But if you want 2 smartphones and 6 total GB of data, it costs you $160/month, the same as on Verizon. And guess what, the AT&T plan includes tethering, even though the FCC doesn’t mandate that AT&T provide it.

Unlike Verizon, AT&T still offers its legacy plans to new customers. These plans do not come with free tethering, but the additional cost of tethering is at most $20 per line. Tethering is included if you pay for 5GB of data, and the upgrade from 3GB of data to 5GB of data is from $30 to $50. And that $20 upgrade cost includes 2GB of extra data. But if you want 2 smartphone lines with unlimited calling and texting, with 3GB per line and no tethering, it costs $210/month under the legacy plan. So at least for some users, switching to the Mobile Share plan is both cheaper and comes with the added bonus of free tethering.

When you consider that a) Verizon doesn’t even offer legacy plans any more, and b) many consumers, especially heavy callers and texters, are better off under the Mobile Share plans anyway, it becomes clear that tethering is not really more lucrative for AT&T than for Verizon. The FCC’s tethering mandate for Verizon did not make tethering much cheaper on Verizon than on AT&T, because there is actually fierce competition between Verizon and AT&T. If anything, the mandate probably incentivized Verizon to ditch their legacy plans for new customers, restricting consumer choice. But the bottom line is that, contra Fung, tethering is not likely to be a major source of revenue for AT&T absent FCC intervention.

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