FCC's pay-as-you-go Internet plan raises video, access questions

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At a UBS investors conference Tuesday, Comcast chief executive Neil Smit said the cable and Internet giant doesn't have plans to move to usage based pricing. The firm, which is seeking regulatory approval for its merger with NBC Universal, has a cap on Internet use to 250 gigabytes - enough data to provide hours of streaming video viewing.

Kyle McSlarrow, president of trade group the Nation Cable and Telecommunications Association, wrote in a blog post that usage-based pricing gives cable companies the flexibility they need to experiment with new business models.

"A usage-based pricing model, for instance, might help spur adoption by price-sensitive consumers at the lower end of the socioeconomic ladder," he wrote.

It is also a way for cable firms to prevent users from "cutting the cord," or canceling their television services, analysts say.

Genachowski's draft proposal is vague on language about how broadband providers could charge partners to serve up their sites faster, according to one source at the FCC who has seen a draft of the rules. Known as "paid prioritization," the FCC's proposal could make it easier for Time Warner Cable, for example, to strike a deal to serve up faster downloads of Hulu.com. With tiered usage caps, that could lead to higher Internet charges for subscribers of bandwidth hogging sites such as Netflix.

"Usage-based pricing is a clear positive for cable, telecom, and wireless providers, but it also might be a concern for Netflix," said MF Global analyst Paul Gallant. "Depending on where the tiers were set, usage-based pricing on wire line broadband could end up deterring some people from dropping cable for over-the-top video."

Netflix has argued against paid prioritization of services over the Web. In its third-quarter conference call, chief executive Reed Hastings said the company is watching usage pricing with concern.

"We have some vulnerability depending on cap usage and what happens," he said.