Two data points in the news over the past 24 hours to consider:

• A new report on “Smartphone Adoption & Usage” by the Pew Internet Project finds that “one third of American adults – 35% – own smartphones” and that of that group “some 87% of smartphone owners access the Internet or email on their handheld” and “25% of smartphone owners say that they mostly go online using their phone, rather than with a computer.”
• According to the Wall Street Journal, the “Average iPhone Owner Will Download 83 Apps This Year.” That’s up from an average of 51 apps downloaded in 2010. (At first I was astonished when I read that, but then realized that I’ve probably downloaded an equal number of apps myself, albeit on an Android-based device.)

As I explain in my latest Forbes column, facts like these help us understand “How iPhones And Androids Ushered In A Smartphone Pricing Revolution.” That is, major wireless carriers are in the process of migrating from flat-rate, “all-you-can-eat” wireless data plans to usage-based plans. The reason is simple economics: data demand is exploding faster than data supply can keep up.

“It’s been four years since the introduction of the iPhone and rival devices that run Google’s Android software,” notes Cecilia Kang of The Washington Post. “In that time, the devices have turned much of America into an always-on, Internet-on-the-go society.” Indeed, but it’s not just the iPhone and Android smartphones. It’s all those tablets that have just come online over the past year, too. We are witnessing a tectonic shift in how humans consume media and information, and we are witnessing this revolution unfold over a very short time frame.

Unsurprisingly, therefore, “unlimited” wireless data plans are probably on the way out since, as I observe in my Forbes piece:

That model created unsustainable network traffic burdens and it’s surprising unlimited plans have lasted this long. With smartphone users increasingly using their mobile devices to access the Internet and consume more cloud-based services and mobile video than ever, the “all you can eat” data buffet eventually had to end.

But critics are far too quick to suggest this is some of nefarious, anti-consumer conspiracy. In reality, I argue:

Tiered and metered pricing schemes are a sensible way to price demand for bandwidth-intensive users and applications and, in the process, alleviate network congestion, encourage new investment, and ensure that average costs for consumers are more reasonable over time.

Using usage data provided by Nielsen, I document the dramatic traffic growth that carriers are struggling to deal with but also show how most average consumers will do better under the new tiered plans. That’s because, even with a significant uptick in wireless data demand, the vast majority of users will not exceed the lowest tier of service (2 GB) that carriers are pricing at $20-$30. That’s less than most of them pay today. Thus:

It’s only the most rapacious mobile data consumers who’ll pay the higher tier prices. Doesn’t it make more sense that the most intensive network users pay more instead of raising average costs for all consumers? Why should minimal data users subsidize the big eaters?

Instead of repeating it all here, I’d just encourage you to bounce over to Forbes to read my entire essay.

The interesting policy question raised by all this is whether critics and policymakers will give network operators the freedom to innovate and employ creative business models so market experimentation can determine which pricing schemes will best calibrate supply and demand while also ensuring optimal network investment. You may recall that usage-based pricing has already become a flashpoint in the Net neutrality wars, and just last Friday I wrote about Netflix’s shameless attempt to get the feds to regulate usage-based pricing on the wireline front.

So, stay tuned. This fight could really heat up. Perhaps it’s time to dust off the old books and papers about how to fight off government price controls!

Related Reading:

• Netflix Falls Prey to Marginal Cost Fallacy & Pleads for a Broadband Free Ride (July 8, 2011)
• Why Congestion Pricing for the iPhone & Broadband Makes Sense (October 7, 2009)
• The (Un)Free Press Calls for Internet Price Controls: “The Broadband Internet Fairness Act” (June 17, 2009)
• Free Press Hypocrisy over Metering & Internet Price Controls (June 18, 2009)
• Once Again, Why Not Meter Broadband Pipes?  (September 7, 2007)
• Why Not Meter? (March 12, 2007)
• The Real Net Neutrality Debate: Pricing Flexibility Versus Pricing Regulation (October 27, 2005)

Yesterday I engaged in a lively luncheon debate about Net neutrality regulation with Ben Scott of Free Press at a Catholic University Law School event on “Implementing the National Broadband Plan.” To open the debate, I made a very quick 5-Part Case against Net Neutrality Regulation. I argued that the the objections to a Net neutrality regulatory regime can be grouped into 5 major categories: (1) Legal; (2) Economic; (3) Engineering; (4) Practical; and (5) Philosophical / Principled. Down below you will find my working notes to see how I then elaborated on each objection in a bit more detail. And then Ben and I engaged in some spirited banter for the next 45 minutes.

Unfortunately, it doesn’t appear that the video of our debate is online just yet, but once it is I will post it here. However, the folks from NextGenWeb asked me to shoot a short 2 1/2 min video clip after the debate summarizing my remarks. If you can stand the sight of my big fat head in your browser for that long, here ya go:

The 5-Part Case against Net Neutrality Regulation

The objections to a Net neutrality regulatory regime can be grouped into 5 major categories: (1) Legal; (2) Economic; (3) Engineering; (4) Practical; and (5) Philosophical / Principled. Each objection will be briefly summarized below:

(1)   The Legal Case

• The FCC utterly lacks the authority to regulate in this way: The Commission’s current effort, which is tantamount to throwing stuff at wall to see what sticks, is troubling. They should go to Congress for authority.
• Importantly, Sec. 230 & 706 of the Telecom Act cannot be the hook: They were deregulatory in nature & aimed at keeping govt’s hands off the Net.
• Litigation nightmare : Regardless of how the FCC or Congress plows forward, we’re going to get tied up in the courts for years if we continue down the regulatory path. It will become “full employment” for telecom lawyers.

(2)    The Economic Case

• NN will likely create substantial disincentives to invest and innovate: At a time when we’re trying to build out broadband infrastructure the last thing we should be doing is disincentivizing network investment.
• NN could regress into old fashion rate or return / price control regime. In the history of network regulation, price and rate controls have always accompanied service regulations.
• Sharing is not competing: If this is all just greasing the skids for a new line-sharing or forced access regime, well, we’ve been there before and it didn’t end well. Creating networks built on paper is a worthless endeavor.
• Facilities-based competition, not infrastructure sharing is the path forward if we want truly robust & competitive networks and markets.
• Contestability counts: This is a contestable market. Threats of new entry at margins keep incumbents on their toes.

(3)   The Engineering Case

• We shouldn’t be freezing networks in stone: (Can you imagine if we would have frozen 1999 walled garden model in place?) The Net was “designed for change” (Richard Bennett) and it should be allowed to adapt to changing circumstances.
• Flexibility is crucial for fast-moving technologies & networks: In particular, we need to grant network managers the flexibility to deal with congestion, latency, malware & other unforeseen problems.
• Innovation at the core of networks is every bit as important as innovation at the edge: We don’t want stagnation at the core or networks, and the applications that ride on them, will suffer.

(4)   The Practical Case

• The FCC just isn’t very good at regulating fast-moving industries & technologies: And its track record is poor when it comes to incentivizing new things (remember Video Dialtone? Open Video System rules?)
• No such thing as a “simple rule” when it comes to Net neutrality or network regulation in general: Consider the paperwork burden generated by just three major “competition” rules the FCC issued in an attempt to implement the Telecom Act and define the “cost” of unbundled network elements (“UNEs”):

o   Local Competition Order (1996): 737 pages, 3,283 footnotes o   UNE Remand Order (1999): 262 pages, 1,040 footnotes o   UNE Triennial Review (2003): 576 pages; 2,447 footnotes o   That’s 1,575 pages and 6,770 footnotes worth of regulation in just three orders! o   This was all implemented following the passage of a bill (The Telecom Act) that was supposed to be deregulatory in character! And this doesn’t even begin to cover the tens of thousands of pages of legal filings, economic studies, consultant reports and other filings submitted to the FCC and state agencies by groups and individuals looking to have a say in the matter. That’s an enormous deadweight loss.

• The potential for industry capture grows in proportion to size of the regulatory regime: Alfred Kahn, author of the seminal Economics of Regulation said it best long ago: “Responsible for the continued provision and improvement of service, [the regulatory commission] comes increasingly and understandably to identify the interest of the public with that of the existing companies on whom it must rely to deliver goods.”
• Markets need not be perfect to be preferable to government regulation: That’s especially true in light of the inefficiencies associated with bureaucratic regulation.
• Community policing can help: Any deviations from “neutrality” will be policed by the watchful eyes of the digital world (and the press) and the white hot spotlight of public attention will scrutinize every carrier move (and already is). Plus, experts and technical bodies (ex: Net Neutrality squad) will be watching.

(5)   The Philosophical/Principled Case

• Whatever happened to “Hands Off the Net”? Do we believe in markets or not? And are we willing to let the experiment we started with the Telecom Act continue or not?
• NN is a declaration of surrender and a call to return to the era of public utility-style regulation. We should not give up so easily on the idea of facilities-based competition. Even just two major rivals per region is better than one regulated monopoly.
• The slippery slope of regulation is real: Neutrality mandates will gradually spread to other layers of the Net and cover content and applications. (FCC is already hinting at interest in regulating in the cloud and other Net services and content). Google and Apple’s necks will be on the neutrality chopping block next.
• There are some First Amendment concerns in play here, but not those raised by regulatory advocates (Net Neutrality is not the Internet’s First Amendment as the regulatory advocates claim; the First Amendment is the Internet First’s Amendment).

Interesting piece here from Slate’s Farhad Manjoo on why AT&T should dump unlimited data plans and end what he calls the “iPhone all-you-can-eat buffet.”  He notes that: “The typical smartphone customer consumes about 40 to 80 megabytes of wireless capacity a month. The typical iPhone customer uses 400 MB a month. AT&T’s network is getting crushed by that demand.” Because “some iPhone owners are hogging the network” and causing “a slowed-down wireless network,” Manjoo recommends a congestion pricing model as a method of balancing supply and demand:

How would my plan work? I propose charging $10 a month for each 100 MB you upload or download on your phone, with a maximum of $40 per month. In other words, people who use 400 MB or more per month will pay $40 for their plan, or $10 more than they pay now. Everybody else will pay their current rate—or less, as little as $10 a month. To summarize: If you don’t use your iPhone very much, your current monthly rates will go down; if you use it a lot, your rates will increase. (Of course, only your usage of AT&T’s cellular network would count toward your plan; what you do on Wi-Fi wouldn’t matter.) To understand the advantages of tiered pricing, let’s look at AT&T’s current strategy of spending billions to build more network space. Why won’t this work? For the same reason building more roads doesn’t reduce traffic—more capacity increases the attractiveness of driving, which brings a lot more cars to the road, which leads to more gridlock.

Congestion pricing and metering is something I’ve written quite a bit about here in the context of wireline broadband (1, 2, 3), but Manjoo is equally correct that it could be applied for wireless data plans.  It has the added value of taking pressure off lawmakers to impose Net neutrality regulation since pricing of the pipe becomes an effective substitute for most other forms of network management. In other words, price, don’t block bandwidth-hogging customers and applications.  The problem, Manjoo explains:

Of course, users would cry bloody murder at first. The traditional criticism of tiered pricing on telecommunications systems is that it’s too expensive and too annoying for customers; people don’t know how much they’re spending during the month, and then they’re smacked with huge bills. Most Internet companies aren’t big fans of tiered pricing, either. They worry that adding a meter to Internet time will reduce people’s propensity to try out new stuff online—killing innovation on the world’s most innovative communications platform. But tiered pricing on the iPhone doesn’t have to be onerous. I’d call on AT&T to create automatic tiers—everyone would start out on the $10/100 MB plan each month, and your price would go up automatically as your usage passes each 100 MB tier. The key to implementing this policy is transparency. The phone should have an indicator—sort of like the battery bar—that changes color as you pass each monthly tier. That way, people can adjust their usage to suit how much they’d like to pay—limiting surfing if they approach the next tier, or deciding to press on if money’s no object.

What Manjoo is getting at here is what economists refer to as a “Ramsey two-part tariff.” A two-part tariff (or price) would involve a flat fee for service up to a certain level and then a per-unit / metered fee over a certain level. It is widely regarded by most economists as the most efficient and pragmatic solution to high-fixed cost, low marginal cost investment conundrums.  It’s hard to know where the demarcation should be in terms of where the flat rate ends and the metering begins, but that’s for market experimentation to sort out. But the clear advantage of this solution is that it preserves flat-rate, all-you-can-eat pricing for casual to moderate bandwidth users and only resorts to less popular metering pricing strategies when the usage is “excessive,” however that is defined.

Some companies have shown signs of embracing it, but few have formally adopted congestion pricing or metering.  Worse yet, some of the regulation-happy activist groups in D.C. (like the neo-Marxist charlatans as the UnFree Press) have already made ridiculous accusations that metered pricing is somehow “unfair” when, in reality, it is the fairest system under the sun. There’s even been legislation introduced by Rep. Eric Massa (D-NY) that would forbid the practice through the imposition of Internet price controls.  Foreclosing experimentation with such innovative pricing schemes would be a real innovation-killer.

I hope we get there eventually for all high-speed data services, whether we are talking wireline or wireless. Although I generally try to be agnostic about business models, I think this one is worth doing a little cheerleading for because it helps take regulatory pressure off the marketplace.  Pricing also acts as a signal for others innovators and entrepreneurs in the market regarding how to adjust investment strategies or enter new markets.

Make sure to read George Ou’s two recent articles over at the Digital Society blog setting the record straight about broadband usage caps: “Putting American Bandwidth Caps into Context” and “We Need to be Reasonable about Broadband Usage Caps.”   George is one sharp cookie. I particularly like the way he takes apart Free Press for their hypocrisy on this issue, something I have commented on here before after George brought it to my attention. See:

• Free Press Hypocrisy over Metering & Internet Price Controls; and
• The (Un)Free Press Calls for Internet Price Controls: “The Broadband Internet Fairness Act”

… and here’s some older material on the issue…

• Why Not Meter?
• Once Again, Why Not Meter Broadband Pipes?
• Bandwidth Cap Hysteria & the Alternative
• Bandwidth Cap Worries (by Tim Lee)
• Net Neutrality Rules = Price Controls (by Ryan Radia)
• The Real Net Neutrality Debate: Pricing Flexibility Versus Pricing Regulation

In response to my essay last night about this new Free Press campaign to layer price controls on the Internet by banning metered prices via Rep. Massa’s new bill (the “Broadband Internet Fairness Act“), George Ou and Richard Bennett reminded me of some of the contradictory statements that the (Un)Free Press crew have made on this issue.  Indeed, if you look back at what Free Press and their chairman have said about the matter over just the past 18 months, they seem to be whistling two very different tunes.

For example, George Ou reminded me of what Free Press had to say in its November 2007 filing in the FCC’s Comcast-Bit Torrent proceeding:

“More importantly, if Comcast is concerned that the collective set of users running P2P applications are affecting quality of service for other users on a cable loop… they could also charge by usage.” (p. 29) […] “Indeed, in many nations, network providers do meter, and bill their customers on the basis of amount used. So the transaction costs of doing so must not be prohibitively high. Indeed, a network provider can apparently meter cheaply because, in most networks, users’ traffic to and from the Internet passes through a single gateway, the network access server.” (p. 31)

And Richard Bennett reminded me of what Tim Wu, chairman of the Free Press, had to say about metering to the Washington Post just one year ago:

“I don’t quite see [metering] as an outrage, and in fact is probably the fairest system going — though of course the psychology of knowing that you’re paying for bandwidth may change behavior.”

So, what gives?  Will the real Free Press please stand up? Does the Free Press believe in pricing freedom or price controls for the Internet?

You really have to hand it to the folks over at the (Un)Free Press with their endlessly shameful attempts to use doublespeak to remake the entire media, communications, and Internet landscape in their preferred Big Government image.  Their latest bit of charlatanism is the so-called “Stop the Internet Rip-Off of 2009” campaign.  It’s another one of their computerized “stuff-the-FCC-and Congressional-complaint-box-with-electronic-form-letters” efforts that involves getting their merry band of radical reformistas to encourage lawmakers to sign on to Rep. Eric Massa’s (D-NY) newly-introduced “Broadband Internet Fairness Act.”

Ah yes, “Internet fairness.”  Who can possibly be against it?  Well, before you rush to click send on that UnFree Press form letter, let’s be clear what this effort is really all about.  Free Press claims that the Massa bill is needed because “phone and cable giants [are] weighing schemes to hike prices, shut down the free-flowing Web and keep user innovation in check.”  How are those companies doing that?  Tiered pricing!   Rep. Massa says that, “Time Warner has announced an ill-conceived plan to charge residential and business broadband fees based on the amount of data they download.”  Oh my God, no… you mean some people might be charged for the costs they impose?  What’s next?  Are we going to force people to pay for their own energy use by metering gasoline, electricity, or water?  Think of the horror!  (This is sarcasm, folks.  All those things are metered currently. And yet, somehow, the Earth hasn’t spun off its axis.)

Like all the other propaganda produced at the Free Press techno-spin factory, their latest crusade is based on a combination of outright lies and blatant economic ignorance.  Metering broadband access is not an effort “to restrict Internet use,” as Free Press claims. Rather, like every other metered system under the sun, it’s an effort to price a scarce resource in such a way so as to maximize use.  Broadband operators don’t sit around all day scheming to find ways to decrease network usage.  They wouldn’t make any money that way!!  They need to find business models that encourage increased uptake while also investing in and growing their networks to meet new demand and competitive challenges.

Moreover, there are other pro-consumer reasons for companies to consider metering options.  Unless it is your goal to allow some particularly aggressive users to be subsidized by all other users, it is sometimes sensible to price usage based on demand.  If you don’t, you potentially create a perverse incentive for a small handful of over-grazers to to be feeding at the trough at everyone else’s expense. As economist Russell Roberts aptly noted in the title of a famous 1995 Wall Street Journal editorial, “If You’re Paying, I’ll Have Top Sirloin.”  Thus, you would never want to make the “all-you-can-eat” pricing model the only option for the provision of a scarce resource. Even if you choose not to deploy it, it is useful to have the metered pricing model available in case you need to charge the over-grazers at some point.

As I’ve pointed out before, part of the reason broadband operators have been cautious about metering of the pipe so far is that they knew it would likely encounter a great deal of resistance–from both consumers and potentially even policymakers.  (Time Warner found this out the hard way when they began a recent experiment with metering.)  I made this point in this older essay on networking pricing:

First, broadband operators are probably concerned that such a move would bring about unwanted regulatory attention. Second, and more importantly, cable and telco firms are keenly aware of the fact that the web-surfing public has come to view “all you can eat” buffet-style, flat-rate pricing as a virtual inalienable right. Internet guru Andrew Odlyzko has correctly argued that “People react extremely negatively to price discrimination. They also dislike the bother of fine-grained pricing, and are willing to pay extra for simple prices, especially flat-rate ones.” And George Gilder, another famous Net guru, noted in his book Telecosm that, “Everyone wants to charge different customers differentially for different services. Everyone wants guarantees. Everyone wants to escape simple and flat pricing. Forget it.” Gilder basically argues that simple and flat pricing is almost always preferable from a consumer perspective and, therefore, network providers should avoid more complicated pricing schemes.

I understand where Odlyzko and Gilder are coming from, but I do not think that means we need to give up on metered pricing altogether. What I think would be the most efficient and pragmatic solution is what economists call a “Ramsey two-part tariff.” A two-part tariff (or price) would involve a flat fee for service up to a certain level and then a per-unit (or metered) fee over a certain level of use. I don’t know where the demarcation should be in terms of where the flat rate ends and the metering begins; that’s for market experimentation to sort out. But the clear advantage of this solution is that it preserves flat-rate, all-you-can-eat pricing for casual to moderate bandwidth users and only resorts to less popular metering pricing strategies when the usage is “excessive,” however that is defined.

Regardless, what we need right now is more experimentation with various business / pricing models. We should not be foreclosing such innovation with misguided bills like the “Broadband Internet Fairness Act,” which is tantamount to a price control regime for the Internet.  It’s not surprising that UnFree Press would favor such a destructive notion, but let’s hope Congress doesn’t follow their misguided lead.

I’ve posted another response in the Cato Unbound online debate over the impact of Lawrence Lessig’s Code and Other Laws of Cyberspace upon the book’s 10th anniversary.  You will recall that I went fairly hard on Prof. Lessig in my essay, “Code, Pessimism, and the Illusion of ‘Perfect Control,’” and Lessig responded with a counter-punch that went after me for it.  I respond in a new essay about “Our Conflict of Cyber-Visions.” In the piece, I address Lessig’s assertion that I just didn’t understand the central teachings of Code, as well as his reluctance to accept the “cyber-collectivism” label that I affixed to his book and life’s work.  Again, please hop over to Cato Unbound for my complete response.

But one thing from the essay that I thought worth reproducing here is my effort to better define the key principles that separate the cyber-libertarian and cyber-collectivist schools of thinking.  I argue that it comes down to this:

The cyber-libertarian believes that “code failures” are ultimately better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions. Moreover, the decisive advantage of the market-driven approach to correcting code failure comes down to the rapidity and nimbleness of those response(s).

Of course, another key difference relates to how quickly one jumps to the conclusion that “code failures” are actually occurring at all. I argue:

What concerns me about the way Prof. Lessig approaches these issues in Code and in his subsequent work is that he is far too quick to declare the debate over by labeling short-term code hiccups as sky-is-falling market failures. The end result of such myopic techno-pessimism is the inevitable call for governments to intervene and “do something” to correct supposed code failures.  The cyber-libertarian instead counsels patience. Let’s give those other forces — alternative platforms, new innovators, social norms, public pressure, etc. — a chance to work some magic. Evolution happens, if you let it. Moreover, if you are always running around crying “market failure!” and calling in the code cops, it creates perverse marketplace incentives by discouraging efforts to innovate or “route around” bad code or code failure. We don’t want the whole world sitting around waiting for government to regulate the mousetrap to improve it or even give everyone better access to it; we should want the world to be innovating to create better mousetraps! To reiterate a key point I already stressed in my original essay: One need not believe that the markets in code are “perfectly competitive” to accept that they are “competitive enough” — or at least, better than regulatory alternatives.

Anyway, please head over to the Cato site to read the whole thing and let me know what you think.  If nothing else, I’m sure that Seth Finkelstein will have something incredibly nasty to say about me!  And I will wear his scorn as a badge of honor.

As Hance discussed last Thursday, the FCC will soon rule on AT&T’s petition for regulatory forbearance. Over at Openmarket.org I blog about why the FCC should grant phone companies relief from costly reporting requirements:

America’s two largest phone companies, AT&T and Verizon, recently filed forbearance petitions asking the FCC for relief from various regulations. Verizon is asking for the freedom to set prices on wholesale connections to competitive local carriers, and AT&T has requested exemption from certain FCC audit requirements and service quality reporting mandates.   The real question is, why should Verizon have to ask permission from bureaucrats to decide how much to charge for its products? And why must AT&T spend millions of dollars to fill out intricate paperwork just to prove to the FCC its product is good enough for customers?  Interventionists say this is because phone companies won’t ensure service quality unless they are subject to government oversight. But this claim ignores market conditions. With competition intensifying between phone providers and new wireless networks on the verge of completion, the market will discipline any communications company that skimps on service or price. Sprint and Comcast have learned this lesson the hard way.  

Because of the FCC’s price caps and audit requirements, incumbent providers face substantial costs to comply with detailed accounting procedures. And price caps reduce the incentive to invest, ultimately hurting consumers. Instead of entrenching the status-quo through network price controls, government should reward private sector risk-taking by letting companies establish prices and service guidelines without government supervision.  As voice, video, and data all move toward IP-based transit, telephone and cable lines are converging. Soon, both will basically function as alternative vehicles for delivering the same set of services. But the FCC, oblivious to this paradigm shift in telecommunications technology, subjects phone companies to a totally different set of regulations from cable competitors. This is one of many examples of the FCC’s unfair regulatory treatment toward competing broadband operators—Kevin Martin has imposed similarly unreasonable rules on cable companies, abrogating apartment TV contracts and barring cable providers from attracting too many subscribers.  Succeeding in the marketplace shouldn’t be about dodging obsolete regulations, but about competing to offer consumers the best quality and value.  Whenever the topic of deregulating telcos is brought up, big-government types argue that FCC rules are justified because phone companies were supposedly given billions in public money after promising to build an advanced, national fiber optic network that never materialized. Yet this oft-repeated assertion is a myth. What actually happened is that during the 90s, state lawmakers relieved telcos from certain restrictions like price ceilings, and allowed companies to depreciate capital investment on an accelerated basis. Though eliminating unfair price controls and taxes may count as a book loss for government coffers, it’s entirely different than granting public subsidies to private producers.  Baby Bells didn’t secure taxpayer funds to build next-generation networks; rather, America owes its infrastructure wealth to private investment.  To be sure, some in the communications industry have at times offered overly optimistic predictions, but the underlying argument against price controls holds true to this day. Infringing on the property rights of telecommunications companies curtails freedom and innovation.   Thanks to Verizon FiOS, fiber to the home is now reality for millions, and AT&T and Qwest are rapidly deploying advanced VDSL services like U-Verse. As cable competitors begin upgrading networks to a faster, newer standard (DOCSIS 3.0), further deregulation of telecommunications services is needed to foster network investment and faster connectivity.  Getting rid of burdensome audit rules and price caps is the first step towards stimulating broadband competition. Until then, network operators’ hands will be tied in upgrading services to meet growing demand for bandwidth. For consumers, FCC rules are all pain, no gain.