Followup on Net Neutrality -- AT&T Adopts Tiered Pricing Structure for Cell Phones

Last week, I discussed in a lengthy post the current disputes about the pricing of joint products, including internet service.  I noted that the entire net neutrality fight was a dispute between heavy and more moderate users of internet bandwidth.  The latest news is that AT&T has attempted to do something to apply appropriate pricing so that bandwidth hogs are not subsidized by the rest of us.  David Pogue, the NY Times technology guy explains the new pricing structure.

FCC Imposes Three Billion in Costs on Cell Phone Companies without Economic Analysis

The Federal Communications Commission has, with little advance notice, issued a new regulation requiring all cell phone towers, no matter where located, to have a backup power supply of at least eight hours. An Associated Press article today describes the regulation, the opposition of wireless operators, and a stay issued by the DC Circuit Court of Appeals pending oral argument, which is scheduled for May.

The rule results from the proceedings of an independent commission set up by the FCC to study communications problems that arose during Hurricane Katrina. The recommendation for backup power was one of many made by the commission and considered by the agency in a rulemaking proceeding. In July, 2007, the Commission issued a final rule in the proceeding instituting a nationwide regulation requiring backup power for cell phone companies and other communications providers. (72 F.R. 37655) Several organizations petitioned for reconsideration because the regulation violated the Administrative Procedure Act (72 F.R, 57879), and then filed petitions for review with the appellate court, when their claims were rejected.

The striking thing about the rulemaking is that there is absolutely no discussion of economics, even though the rule imposes enormous costs on the industry. The AP article notes that there are 210,000 cell towers and roof-mounted cell sites nationwide, and quotes one industry estimate that the per-site price will be up to $15,000. This suggests an outer range of costs imposed by the regulation amounting to $3,150,000,000. Some towers already have backup power, so the final results would probably not be this high. But, nevertheless, one would hope that an agency would undertake some economic analysis to weigh the proposed benefits against the costs of the regulation.

The proposed rule is also a nationwide bludgeon that does not seem necessary. There are undoubtedly some cell phone towers that overlap others. I recall looking at a tower map on the Internet with respect to my home in suburban Washington, and finding that I was within the range of five different towers. To all of these require emergency backup power? Moreover, there are many towers in rural areas where there would be relatively little damage from loss of service. Does every tower along Interstate 25 in northern New Mexico require backup power?

There is also no consideration of the relative risk of a natural disaster. There may be a risk of hurricanes along the Gulf and East coasts, and earthquakes on the West Coast, but the vast middle of the country is quite stable, with only occasional flooding and tornadoes. Only in Washington would a regulator think that a uniform national law is required.