I don't see how that follows. There's a percentage of their customers -- let's hypothesize 10% -- who were willing to pay an extra $20 for tethering. Now that Verizon can't charge for tethering, it can still raise base rates in such a way that, as long as these customers aren't paying more than $20 more, these customers are unlikely to switch.

Further, there are some of the 90% of customers who valued tethering, but wouldn't pay $20 for it. They might tolerate a $5-$10 rise in base rates without switching. Then, there are others of the 90% who could also tolerate a $5-10 increase in base rates, and still others who would be lost at each level of increase.

The exact net effect will change based on how many customers fall into which ranges of price-tolerance behavior, but the fact that the base rates now provide an extra value, that some were willing to pay $20 for, strongly suggests some increase in base rates, greater than $0 and less than $20, would be the new profit-maximizing rate for Verizon. And thus everyone who doesn't want tethering at any price loses out.

Regulations which prevent differentiated pricing can often help the high-end customers -- in this case richer people with multiple devices -- by preventing their willingness-to-pay-more from subsidizing the overall service. They may not help the price-sensitive and more likely to be poor customers. Thus the cheering of this regulatory action on some boards (including here) should not be taken as a proof of net consumer benefit. Just that it benefits rich heavy-tethering users.

I agree with that analysis, but my read is that not all the dislike is only from people who stand to benefit (though that's a big part of it), but from a sort of intellectual/aesthetic dislike of markets that don't seem to be pricing commodities in a transparent/consistent way, and instead try to charge different people different prices for the identical product.

For example, your analysis could also apply to differentiated pricing of books. Some people are less price-sensitive, and would pay more if you could manage to charge them in a different tier: say, people buying books charged to their company, or to a university research grant. If you could do that, the base price for poorer people buying books might well be lower. But when Amazon experimented with per-user pricing based on analytics, people got really angry, as it seemed to be removing the idea that books have transparent prices.

Of course, there's often differentiated pricing by differentiating the products, even slightly: SaaS service tiers, limited edition books, hardcover v. softcover, etc. But when the identical product is being priced differently in an attempt to maximize profit in different demographics, it seems worse somehow, like a shopkeeper quoting you different prices based on how you dress (which does happen in countries with haggling-oriented pricing systems, but is contrary to the American expectation of advertised uniform prices).

I agree, there's a retaliatory impulse against those who seem to be arbitrarily price-discriminating... like norm-enforcers taking nothing rather than an unfair split in the ultimatum game. It explains some of the emotion around this issue. But if that effect were strong enough in this market, would it require the FCC to ban the tethering charge? (The FTC didn't have to ban Amazon's pricing experiments.)

Most people don't get that deep into it -- and if they do, there are so very many Apple and subscription-service pricing oddities they can also get worked up about.

Also, the ones most likely to apply a 'packets are packets' reasoning are the richer/sophisticated/multidevice/heavy-users, who also on another dimension are most willing to pay for the time-savings and OS-integration of an official solution.

As someone currently paying for Verizon/iOS tethering support, I do perceive a differentiation against an app-store or commodity-bandwidth offering, or using my own Apple Developer License to compile iProxy/iphone-socks-proxy. I get one-click activation, in the OS settings panel, along a path that Apple/Verizon have designed and support.

It's a good question, and somewhat hard to disentangle. My view is that there's a strong opinion from techies that "the tubes" should be a commodity/utility service, and therefore there's resistance to various kinds of provider control/segmentation of uses. Basically, this view holds that pipes should be treated as utility or common-carrier type provisioning.

Having that kind of view does correlate with being a heavier user, but I think also has an independent basis in technical/political ideals of what the internet should be, i.e. the correlation is due to a common underlying cause. I think it's probably not strong enough to dissuade that activity through market forces, though, because the percentage of users who have that technical knowledge and those technical ideals is quite small.

I'm one example, I think: I'm wary of both tethering charges and of some content providers' attempts to market-segment iPad content, and I own neither a smartphone nor an iPad, so it's not really based on saving me money.

(Offtopic edit: Huh, are you the same 'gojomo' from Bitzi? If so, I'm the 'delirium' that contributed some code to the Bitzi Bitcollider something like 10 years ago, to extract video metadata. Thought that handle sounded familiar.)

As a Verizon tethering subscriber, this decision will save me money... but I can separate the principle from my particular situation. Summed over all cases where a popular bit of price/service control is dictated by a federal agency, and also quite possibly in this particular case, the results are likely to be net-negative for consumers. So I'd rather regulators never intervene in this way. Their decisionmaking apparatus is unable to limit itself to the few reliably beneficial cases, instead intervening in many other cases that are just superficially attractive. On the other hand, if these sorts of differential pricing schemes get chiseled away over time by competition -- perhaps by giving other companies and technologies the marketing hook they need to make inroads, because after all packets are packets -- consumers win other benefits. Even if it takes more time than an 'FCC rescue'.

(I am the Bitzi gojomo! Seeing your comments here, I figured you were the same delirium... thanks for your contributions so many years ago!)

If a large enough percentage was paying the fee yes they can make it up but 10% I think you're off by a factor of 2-4, perhaps 10 when you consider the larger market they're trying to move to data plans to begin with.

When the minority is sufficiently small, the pennies you move the profit maximizing point by aren't enough to justify the groan factor you have to deal with, hence I doubt the rate changes. We'll see I guess.