When otherwise intelligent writers get sucked into industry propaganda and advocate against their own readers’ best interests, the blowback can become substantial.

VentureBeat is about to learn that principle firsthand as it bungled a piece about wireless carrier mobile data growth into a confusing article claiming “Net Neutrality” will be used by AT&T and Verizon to “drive Sprint and T-Mobile into the ground.”

What?

Authors Tim Chang and Matt Marshall then journey across the landscape of mobile data networks in the United States, regularly stopping to hammer home the requirement for limits on usage, blaming it mostly on online video.  The factual potholes litter the landscape, unfortunately:

What that means is the country’s major wireless carriers — Verizon, AT&T, Sprint and T-Mobile — are going to have to abort the all-you-can-eat mobile data plans most of us take for granted. It’s just getting too costly for them to give us the service on their networks for the pricing they offer today.

Video 'is the big problem' justifying Internet Overcharging for wireless mobile data, yet one of the nation's largest providers sees no problem providing its own video service on its network.

Actually, none of these carriers provide unlimited all-you-can-eat mobile data plans.  They either explicitly or implicitly (buried in the fine print) limit consumption, usually to 5GB of usage per month.  What happens beyond that does vary by carrier.  The big four impose overlimit penalties at punishing prices.  Some smaller carriers, like Cricket, simply throttle your connection or suspend service on a case-by-case basis.

The reasons for these limits:

• Limited spectrum (the frequencies the provider operates on) may not sustain demand using currently available technology and network design. Could additional spectrum, new technology standards, and more localized delivery of data reduce network congestion?
• Lack of competition.  The two primary carriers, AT&T and Verizon, have essentially provided nearly-equivalent pricing.  Their robust coverage areas make either a natural choice for most users who travel.  Sprint and T-Mobile have larger gaps in coverage.  Spectrum auctions, which is how carriers obtain new blocks of frequencies, raise huge sums for the government, but those costs inevitably do get passed down to customers.
• Psychological: Consumers accustomed to limited wireless broadband from the outset are less likely to complain if it is taken away later.
• Economical: Data packages with low limits produce profitable results, with the future possibility of earning even higher profits from subscribers who routinely exceed them and pay penalties and fees, or for carriers to create and market “additional usage packs.”

Jon Metzler, an industry consultant who has conducted research for the CTIA, says he’s heard estimates that a YouTube video of 3-5 minutes costs $1 for a carrier to handle. At this rate, a carrier would be killed when a typical user streams a mere two videos a day. That day is coming soon, because of the race by the smartphones to offer these cool video services.

Of course Metzler works for the CTIA-The Wireless Association, an industry trade and lobbying group.  They have a vested interest in pushing the “bandwidth flood” theory to preserve carrier pricing models.  The factual basis for this YouTube assertion has been challenged as well, once even by a VentureBeat reader.

Verizon doesn’t see wireless mobile video as the harbinger of doom — it sees it as a feature it can rake profits from, charging $13-25 a month extra for access to VCAST Mobile TV, a Verizon Wireless portal filled with video clips and streams.

It’s always ironic when carriers complain about the impact of services like video, while also heavily marketing their own services that, by their nature, impact their network.  YouTube bad, VCAST good.

So far, it hasn’t really been enforced, or hasn’t mattered much because very few users have hit that ceiling yet. But the carriers charge extra if you want to use more. “Net neutrality,” the concept that governs access the Web, whereby anyone anywhere can access any Web site anytime, won’t have a chance in wireless.

It has been enforced.  Horror stories of wireless bills running well into the tens of thousands of dollars are becoming more common, as customers end up reading marketing copy that claims usage is “unlimited” and then defines it in a sea of fine print as really amounting to 5GB of usage.  Many customers have no idea what a gigabyte represents, either.  The keyword in VentureBeat’s quote is “yet.”  As bandwidth usage continues to increase because of the growing size and scope of online services (video among them, but not exclusively so), more and more customers will find themselves paying penalty overlimit fees for using “too much.”

Net Neutrality has nothing to do with this discussion except if/when carriers impede access to content or exempt their own services (like VCAST) from any usage limitations or allowances.

But conveniently, it does give them a nice way to drive Sprint and T-Mobile into the ground. Those two carriers have weaker financial resources, and so won’t be able to withstand the costs of subsidizing all-you-can-eat data plans as long.

Neither carrier offers all-you-can-eat data plans, so the argument is moot.  The more likely scenario, should providers continue under the “barely regulated” principles of oversight we’ve had for at least the last decade, is that there will be additional mergers in the marketplace.  T-Mobile uses the same wireless network standard AT&T does, and Sprint would be a natural fit with Verizon Wireless, both using the CDMA standard.  Regulators looking the other way could easily reduce competition further with additional mergers.

It’s clear net neutrality won’t last. Think of it this way: Wireless bandwidth is becoming as valuable and critical as basic electricity or gas utilities to our home. Yet nobody expects to get all you-can-eat electricity or gas. Why should broadband be any different in the long-run?

More nonsense.  Net Neutrality doesn’t belong in this topic at all.  The old power and gas chestnut is back again.  The one service that is most comparable to this subject, and the one the propaganda/Re-education campaign never addresses, is the telephone business.  Telephone calls travel across both wired and wireless networks as data packets, just like Internet services do.  Wired telephone companies have provided local flat rate calling for decades, and both wired and wireless carriers are moving into flat rate calling for local and long distance calling.  The authors advocate the direct opposite direction for Internet service.  The reason, of course, is that carriers are trying to exert new revenue streams from their broadband services with Internet Overcharging schemes.

But take wired broadband as a proxy, because it has been studied more. The marginal cost of delivering wired broadband is projected to decrease roughly 10 percent a year, in terms of total costs per GB, according to a study by Stuart Taylor, leader of the North American Mobile segment within the Cisco Systems Internet Business Solutions Group (IBSG). This figure factors in the additional investment needed to keep networks growing (capital expenditure and operating costs). Broadband revenues per GB are declining in the order of 15 percent per year, however. When you combine the cost and revenues in broadband, you get a breaking point in the next 5 years or so, Taylor predicts.

This was outright disingenuous.  The authors admit that the costs for both the delivery of bandwidth and the bandwidth itself are declining, but that somehow the “capital expenditures and operating costs” are going to cause a breaking point?  Exactly how this article never explains, and the link provided to back up an assertion about wired broadband ostensibly made by Taylor never appears in the article being linked.

The truth can be found in the financial reports of most wired broadband providers — profits are up, costs are down, and life is good.

For mobile data, “killer apps” often end up meaning “bandwidth-killer” and “profit-killer”: namely, mobile streaming video today, and soon online multiplayer mobile gaming. Not to mention always-connected social apps like Facebook mobile, Twitterberry and SocialScope, which will often have users receiving background updates from hundreds if not thousands of contacts.

One can rapidly lose confidence in the assertions of an article filled with this many factual errors.  Mobile video certainly isn’t killing the profits of Verizon Wireless when they are marketing VCAST subscriptions and pocketing much of that revenue.  One would think if these concerns were true, Verizon Wireless would be in a hurry to exit the business.  Multiplayer mobile gaming typically relies on very compact “control data” to indicate player movements and actions over a network that is already slower than wired provider networks.  The smaller the amount of data, the faster it can reach other players. The amount of data actually consumed by many of these games is much smaller than many people think.

Twitter moves individual messages so limited in size, they rival text messaging, a mobile phone product so front-loaded with extra fat profits, especially for those with no “texting” service plan, the neighborhood loan shark wouldn’t think of charging those kinds of rates.  The amount of bandwidth consumed by most of these kinds of applications carries far less impact than the authors want you to believe.

In some industries, even pricing is hard to change. The Internet has created a giant tidal-wave of market value destruction in several industries: print, movie, and music. Billions of dollars of value from companies in these industries have been shed, and it will never come back. This is great for consumers, but not great for the content providers. The providers of wireless bandwidth don’t want this to go the same way. If they stick to low pricing, they’ll surely ask themselves: “What the hell are we doing?”

“Blame it on the Internet” is the new Blame it on the Bossa Nova.  The authors ignore the run up in valuation of many of these companies as part of the enormous stock market bubble and accompanying merger mania that this country experienced over the past decade.  Large corporate media became larger, with higher and higher values assigned to companies, and more and more debt carried to acquire them.  Broadband providers are not comparable to content providers here.  Content providers create and distribute the content that drives consumers to do business with the broadband providers in the first place.  Without that synergy, we could all live happily ever after with dial-up or low speed broadband.  Quality broadband content drives subscriptions to broadband service providers.

What broadband providers are really arguing for in all of this is a justification for them to be paid twice — once by consumers subscribing to their service and then a second time by content providers who deliver their content to those consumers.  It’s the equivalent of making you pay for making a long distance call -and- the person called also has to pay.

The million dollar answer to this dilemma is simple.  Broadband providers can improve their networks and market extra speeds to consumers looking for a faster online experience.  They can individually license content that doesn’t exist online and provide it to subscribers and split the revenue with the content owner.  They can market support services to help consumers use their service, and they can create customized bundles of services which promote loyalty for a consumer’s online, telephone, and cable TV business.

The shining beacons for the wireless industry are the cable companies: They’ve long offered differentiated pricing plans, packs like ‘basic,’ ’silver’ and ‘gold.’ If you talk with content company MTV, you’ll find out they are insanely jealous of a cable company like Comcast.

There is not a shred of evidence to back this up either.  MTV doesn’t believe in differentiated pricing plans, particularly on the cable side.  Their contracts with cable operators routinely demand the operator place their owned networks on the standard basic tier.  They have no patience for a-la-carte pricing of their various networks, where consumers can pick and choose the ones they wish to receive.  The only “silver” and “gold” they care about is in the money they collect from every cable and satellite subscriber who is forced into paying for their networks whether they watch them or not.

After everything was said and done, readers had an opportunity to share their views, and many did not like what they saw.

• “You lost me when you compared wireless network bandwidth with electricity and gas.”
• “There is no analogy to the utility world: it’d be like paying a higher price for drinking water and a lower one for shower water out of the same pipe; just because drinking water delivers more value per liter.”
• “You clearly don’t understand what “net neutrality” means.”
  
• “Hint: pricing is born of what the market will bear.”
• “Since it wasn’t mentioned in the narrow scope of this article, how do the insane profit margins from ever-so-popular text messaging play into supporting wireless data networks?”
• “It pains me when techies mix half baked economics into an analysis that is predisposed against a carriers. Oh the headaches.”

We don’t either.