In Broadband Service, ‘Discounts for Data’ Are Pro-Consumer, ITIF Argues in New Report

August 15, 2016

WASHINGTON—Broadband Internet service plans that offer discounts to customers in exchange for permission to use their data are decidedly pro-consumer, according to an analysis by the Information Technology and Innovation Foundation (ITIF). Privacy advocates have urged the Federal Communications Commission to ban the practice as the agency implements its recent proposal to impose sweeping new privacy regulations on broadband services. But ITIF, a leading tech policy think tank, details in its new report how such a prohibition would unnecessarily harm consumers and slow broadband adoption.

“Consumers derive significant value from broadband service plans that offer discounts for data. Policymakers should allow providers to continue the practice,” said Doug Brake, telecommunications policy analyst at ITIF, who authored the report. “Privacy advocates have tried to tar any such business model as ‘pay-for-privacy,’ but they represent a small minority of absolutists. Prohibiting data-based price differentiation for the majority of consumers who are far more pragmatic would be terrible policy and a remarkably paternalistic departure from a common practice that is widely accepted throughout the economy.”

“These price-differentiation models allow service providers to offer cheaper broadband Internet to those who choose to allow their data to be used in machine-based analytics that enable things like better ad targeting,” said Brake. “Discounts also put downward pressure on prices even for consumers who choose not to take the discount, and they help add users to the broadband ecosystem.”

“Advocates calling for a ban want to have their cake and eat it too,” Brake noted. “They want ubiquitous, undifferentiated service for everyone, but they don’t want to pay for it. They bemoan the price of high-speed broadband as too high for low-income Americans. Yet they want to close off opportunities to lower prices. It makes no sense.”

“Price differentiation based on exchange of information is a cornerstone of the Internet economy, including in services from online email to search. Broadband discounts are no different,” Brake concluded. “Consumers benefit from this arrangement and many would gladly choose a discount in the context broadband access, too.”

Read summary.

Download report.