The Federal Communications Commission's new net neutrality rules have claimed their first pro-consumer change.
Sprint (NYSE:S) has halted its practice of throttling data delivery speeds for its heaviest users during the busiest time of day for its network. The move comes just days after the change in the law brought the wireless carrier's data network under the domain of the FCC.
The company made the move pre-emptively to avoid any scrutiny from the federal agency. A Sprint spokesman told The Wall Street Journal that the wireless carrier believes its throttling policy would have been allowed under the new rules, but dropped it anyway.
"Sprint doesn't expect users to notice any significant difference in their services now that we no longer engage in the process," the spokesman said.
What Sprint was doing
While Sprint is acting like this is some sort of act of generosity made just in case the FCC might decide it's doing something just a bit wrong, that assertion is silly. The only reason a company changes an unpopular (albeit little-known) policy right after a major law change coupled with increased federal oversight is because the company believed its policy would at the very least attract regulatory scrutiny.
Before the change, Sprint had slowed data speeds for its top 5% heaviest data users during peak times. The company explained the policy on its since-updated website in the following way:
To more fairly allocate network resources in times of congestion, customers falling within the top five percent of data users may be prioritized below other customers attempting to access network resources, resulting in a reduction of throughput or speed as compared to performance on non-congested sites.
Sprint's contract with its customers had allowed the company to change data speeds based on various payment tiers.
What are the other companies doing?
All four major wireless carriers throttle data -- generally for their heaviest-use customers during the peak times of day. AT&T (NYSE:T) was, until recently, the worst of the bunch, throttling its unlimited data users after they hit 5GB in LTE data per month at all times of the day regardless of network traffic, Ars Technica reported on June 18. The company changed that policy in May "so that heavy users on the unlimited LTE plans are only throttled when the network is congested," according to the technology news site.
Then AT&T was fined $100 million by the FCC earlier this month for throttling customers with unlimited data plans. That fine was under the old rules, not net neutrality, and it was levied due to the company "not properly disclosing the policy to consumers who thought they were getting 'unlimited' data," according to the FCC. The company violated the FCC's rules on corporate transparency, FCC Chairman Tom Wheeler said in a statement. T
"Consumers deserve to get what they pay for," said Wheeler. "Broadband providers must be upfront and transparent about the services they provide. The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure."
It's worth noting that Sprint changed its policy before this fine was levied.
95% of our data customers are not affected. Those who are in the top 5% who have 3G devices on unlimited data plans may experience managed data speeds when connected to a cell site experiencing high demand after reaching certain data-usage levels in a bill cycle. These high data users will feel the smallest possible impact and only experience reduced data speeds when necessary for us to optimize data network traffic in that area.
T-Mobile (NASDAQ:TMUS) is generally the most straightforward of the major carriers since most of its plans offer a certain amount of high-speed data followed by unlimited data at a throttled speed. The company does, however, also sell unlimited high-speed data plans that are not exactly that. The company's policy shows that unlimited high-speed data customers who use more data than 97% of customers are throttled during times of peak network demand.
Will the other companies follow Sprint?
The net neutrality rules do not allow for throttling except in "reasonable network management decisions." FCC Chairman Tom Wheeler has been aggressive in letting companies know what he considers reasonable, and he made his thoughts clear in a 2014 letter to Verizon.
"Reasonable network management" concerns the technical management of your network; it is not a loophole designed to enhance your revenue streams. It is disturbing to me that Verizon Wireless would base its "network management" on distinctions among its customers' data plans, rather than on network architecture or technology.
With Wheeler now having teeth to enforce his position, it's hard to see how the carriers won't at least move to policies that are actually based on network needs. The net neutrality rules set clear standards and give the FCC more enforcement power over Internet service providers. The FCC laid those out in the "effective enforcement" section of the press release announcing the policy, saying "The FCC will enforce the Open Internet rules through investigation of formal and informal complaints."
That might not end throttling, but it should restrict it to peak users during top times for network congestion. That is still a bit of a hedge on the meaning of the word unlimited, but it's a more reasonable plan than throttling based on arbitrary usage amounts with no regard for when that usage occurs.
Daniel Kline owns shares of Apple. He is pretty sure he has never been throttled. The Motley Fool recommends Apple and Verizon Communications. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.