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Net Neutrality Update II: How Will Usage-Based Pricing Affect Proposal’s Fate

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Questions have been swirling about Federal Communications Commission Chairman Julius Genachowski’s new net neutrality proposal since he first laid it out it out last week.

It would enshrine the concept of treating all Internet traffic equally into law, but it also held out the carrot of allowing Internet providers to charge customers based on their use of broadband, known as usage-based pricing.

As telecom observers begin reading the tea leaves ahead of the Dec. 21 vote, big questions remain.

One of those questions is how Genachowski’s surprising support of usage-based pricing will affect his proposal’s prospects for being adopted.

At the time the chairman first laid out his proposals, The Wall Street Journal reported the usage-based pricing structure represented a “victory for cable and telecommunications companies because it clarified whether broadband providers had the power to charge by what users consumed.”

But customer angst about paying for Internet based on how many gigabtyes of data are used is likely, WSJ reported.

Pay-as-you-go pricing got a rocky start last year in a pilot study by Time Warner, according to FierceTelecom. The pricing structure was “slammed by consumers and lawmakers and ultimately shelved,” because of high overage fees for every GB of data customers used over their limit.

The Washington Post’s Technology blog Post Tech reports that FCC’s stamp of approval on pay-go pricing could be “a boon” for Internet service providers, especially as streaming video over the web has some customers cutting the cord on cable TV.

But several analysts told Post Tech that the usage-based pricing with its prohibitive overage fees could stop the flow of customers to online TV, which bodes ill for firms like Netflix.

Meanwhile, Comcast announced, despite Genachowski’s bid on pay-go pricing, it had no plans to institute fees based on actual customer use, according to The Wall Street Journal.

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