This analysis holds up to "unlimited" plans where "tethering" is really a (poor) proxy for "using a lot of data."

But if you have usage-based pricing (which Verizon does), it doesn't matter whether that 4GB originates from an iPhone or a MBP. A packet is a packet and it costs the same to route.

I suppose you could argue that Verizon incurs some additional support burden for tethering. I question whether or not this support burden outweighs the costs of supporting people who call in expecting to be able to tether now.

Almost no business charges strictly by commodity packet, because it would be disastrous for their long-term future: their margins, their ability to learn from their customers, and their ability to dynamically improve over time.

So any criticism of differentiated pricing based solely on the idea that "a packet is a packet and it costs the same to route" may be astute in the static, technical dimension -- but naive in the ultimately more-important dynamic economic and business dimensions.

It may very well be disastrous to Verizon's margins. I do not understand why protecting those margins are my responsibility, or anyone's responsibility other than Verizon's.

We're not talking about some cable in the ground upon which Verizon exerts a legal property interest. We're talking about the airwaves that are the permanent heritage of the taxpayer (or arguably land owner), which we as a landlord collectively and temporarily rent out for our sole benefit, in an adversarial negotiation. The whole point of a negotiation is to increase your own margins, often at the expense of the other party's. To say our analysis does this is to say it represents our interests.

The micro-optimization driven desires of businesses are irrelevant when evaluating the larger picture. Carriers that decommoditize best-effort communications to misappropriate others' value should be taken to court for fraudulently advertising "Internet" access, and the colors of radio waves they enjoy a government-granted "public interest" monopoly on should be put to better use.

>But if you have usage-based pricing (which Verizon does), it doesn't matter whether that 4GB originates from an iPhone or a MBP. A packet is a packet and it costs the same to route.

Potentially, but I think it's a fair bet that a lot of people with data plans don't use nearly 4GB. Will that set overlap significantly with the set of customers who tether? Hard to say.

To add to what gojomo said: tethering fees can act as a price discriminant for providing a service with significant non-marginal costs. It's possible for price discriminants to have positive effects on everyone, although that need not be the case with tethering.

How does it matter if I use data for my phone or my computer? To some extent I agree that this would end up costing higher when the carrier has unlimited data. But even there, if more people start "misusing" the connection (download songs, movies?) the price is going to go up and you don't need tethering to do that.

To give you a perspective: Tethering is available in India with every single connection. You just need a supporting phone (USB or WiFi). The plans are all capped there but so are most plans here. You guys seriously have to wake up and realise that you are severely restricted on everything from which phones you can buy to how you use your phone and what apps are installed. I mean, seriously!

Data prices are already set where Verizon anticipates them maximizing profit so raising them isn't going to "make up" for the money they are now out because they can't rip off a tiny minority of their customers anymore.

I don't see how that follows. There's a percentage of their customers -- let's hypothesize 10% -- who were willing to pay an extra $20 for tethering. Now that Verizon can't charge for tethering, it can still raise base rates in such a way that, as long as these customers aren't paying more than $20 more, these customers are unlikely to switch.

Further, there are some of the 90% of customers who valued tethering, but wouldn't pay $20 for it. They might tolerate a $5-$10 rise in base rates without switching. Then, there are others of the 90% who could also tolerate a $5-10 increase in base rates, and still others who would be lost at each level of increase.

The exact net effect will change based on how many customers fall into which ranges of price-tolerance behavior, but the fact that the base rates now provide an extra value, that some were willing to pay $20 for, strongly suggests some increase in base rates, greater than $0 and less than $20, would be the new profit-maximizing rate for Verizon. And thus everyone who doesn't want tethering at any price loses out.

Regulations which prevent differentiated pricing can often help the high-end customers -- in this case richer people with multiple devices -- by preventing their willingness-to-pay-more from subsidizing the overall service. They may not help the price-sensitive and more likely to be poor customers. Thus the cheering of this regulatory action on some boards (including here) should not be taken as a proof of net consumer benefit. Just that it benefits rich heavy-tethering users.

I agree with that analysis, but my read is that not all the dislike is only from people who stand to benefit (though that's a big part of it), but from a sort of intellectual/aesthetic dislike of markets that don't seem to be pricing commodities in a transparent/consistent way, and instead try to charge different people different prices for the identical product.

For example, your analysis could also apply to differentiated pricing of books. Some people are less price-sensitive, and would pay more if you could manage to charge them in a different tier: say, people buying books charged to their company, or to a university research grant. If you could do that, the base price for poorer people buying books might well be lower. But when Amazon experimented with per-user pricing based on analytics, people got really angry, as it seemed to be removing the idea that books have transparent prices.

Of course, there's often differentiated pricing by differentiating the products, even slightly: SaaS service tiers, limited edition books, hardcover v. softcover, etc. But when the identical product is being priced differently in an attempt to maximize profit in different demographics, it seems worse somehow, like a shopkeeper quoting you different prices based on how you dress (which does happen in countries with haggling-oriented pricing systems, but is contrary to the American expectation of advertised uniform prices).

I agree, there's a retaliatory impulse against those who seem to be arbitrarily price-discriminating... like norm-enforcers taking nothing rather than an unfair split in the ultimatum game. It explains some of the emotion around this issue. But if that effect were strong enough in this market, would it require the FCC to ban the tethering charge? (The FTC didn't have to ban Amazon's pricing experiments.)

Most people don't get that deep into it -- and if they do, there are so very many Apple and subscription-service pricing oddities they can also get worked up about.

Also, the ones most likely to apply a 'packets are packets' reasoning are the richer/sophisticated/multidevice/heavy-users, who also on another dimension are most willing to pay for the time-savings and OS-integration of an official solution.

As someone currently paying for Verizon/iOS tethering support, I do perceive a differentiation against an app-store or commodity-bandwidth offering, or using my own Apple Developer License to compile iProxy/iphone-socks-proxy. I get one-click activation, in the OS settings panel, along a path that Apple/Verizon have designed and support.

It's a good question, and somewhat hard to disentangle. My view is that there's a strong opinion from techies that "the tubes" should be a commodity/utility service, and therefore there's resistance to various kinds of provider control/segmentation of uses. Basically, this view holds that pipes should be treated as utility or common-carrier type provisioning.

Having that kind of view does correlate with being a heavier user, but I think also has an independent basis in technical/political ideals of what the internet should be, i.e. the correlation is due to a common underlying cause. I think it's probably not strong enough to dissuade that activity through market forces, though, because the percentage of users who have that technical knowledge and those technical ideals is quite small.

I'm one example, I think: I'm wary of both tethering charges and of some content providers' attempts to market-segment iPad content, and I own neither a smartphone nor an iPad, so it's not really based on saving me money.

(Offtopic edit: Huh, are you the same 'gojomo' from Bitzi? If so, I'm the 'delirium' that contributed some code to the Bitzi Bitcollider something like 10 years ago, to extract video metadata. Thought that handle sounded familiar.)

As a Verizon tethering subscriber, this decision will save me money... but I can separate the principle from my particular situation. Summed over all cases where a popular bit of price/service control is dictated by a federal agency, and also quite possibly in this particular case, the results are likely to be net-negative for consumers. So I'd rather regulators never intervene in this way. Their decisionmaking apparatus is unable to limit itself to the few reliably beneficial cases, instead intervening in many other cases that are just superficially attractive. On the other hand, if these sorts of differential pricing schemes get chiseled away over time by competition -- perhaps by giving other companies and technologies the marketing hook they need to make inroads, because after all packets are packets -- consumers win other benefits. Even if it takes more time than an 'FCC rescue'.

(I am the Bitzi gojomo! Seeing your comments here, I figured you were the same delirium... thanks for your contributions so many years ago!)

If a large enough percentage was paying the fee yes they can make it up but 10% I think you're off by a factor of 2-4, perhaps 10 when you consider the larger market they're trying to move to data plans to begin with.

When the minority is sufficiently small, the pennies you move the profit maximizing point by aren't enough to justify the groan factor you have to deal with, hence I doubt the rate changes. We'll see I guess.

While I don't disagree that carriers will find new ways to bleed consumers dry I don't think that is a reason to not be ecstatic about this decision. If we held on to your logic it would enable companies to disregard laws or contracts they entered into for their sole benefit.