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What Verizon's FCC tethering settlement means to you (FAQ)

Verizon's recently announced deal with the FCC means subscribers can stop paying extra for Wi-Fi tethering. CNET's Marguerite Reardon aka Ask Maggie explains who benefits and who doesn't.

The Federal Communications and Verizon Wireless agreed to a $1.25 million settlement that will also allow Verizon subscribers to use their smartphones as Wi-Fi hotspots at no extra charge.

The agreement may save some Verizon Wireless subscribers $20 a month. But figuring out who exactly benefits isn't so straightforward. So we've put together this FAQ to help you understand what it means.

What did the FCC settle with Verizon Wireless?

On Tuesday the FCC and Verizon announced that they had agreed to settle a 10-month long investigation into Verizon's management of the 700 MHz wireless spectrum the carrier is using to build its 4G LTE network. The so-called open access rules state that licensees offering service on C Block of 700 MHz spectrum "shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice on the licensee's C Block network."

The FCC found Verizon had pressured Google to remove 11 apps from its app stores that allowed customers to use their smartphones to create mobile Wi-Fi hotspots for other devices.

Under the terms of its settlement with the FCC, Verizon will make a voluntary $1.25 million payment to the U.S. Treasury. The carrier has also notified Google that it no longer objects to the tethering apps. And the carrier also said that it will no longer charge customers using third party apps an additional fee for using their smartphones as wireless modems.

Did Verizon admit to violating the 700 MHz open access rules and blocking these apps?

Not exactly. The company seems to be chalking it all up to a misunderstanding between an employee and an app store operator. "Verizon Wireless has always allowed its customers to use the lawful applications of their choice on its networks," the company said in a statement. "And it did not block its customers from using third-party tethering applications. This consent decree puts behind us concerns related to an employee's communication with an app store operator about tethering applications, and allows us to focus on serving our customers."

Does this mean that Verizon will no longer charge for tethering?

On June 28, Verizon introduced new wireless service plans that include tethering in the base price of the plan. So for new customers, they will not be charged extra to use their phone as a Wi-Fi hotspot.

But Verizon still offers its older plans to existing customers. This means customers who want to subscribe to Verizon's Mobile Broadband Connect service for an additional $20 a month can still do so if they want. But if they'd like to download a third party app from the Google Play or some other application store that offers such an app, they can do that and avoid the $20.

Is there any reason why a Verizon subscriber would want to keep the Mobile Broadband Connect service?

There are some customers who may want to keep the Verizon tethering service, because Verizon offers additional data capacity for tethered devices. This means that for the extra $20 a month, you can get more data than say the 2GB of data you have just for your smartphone.

If you don't use Verizon's tethering service, and you can download a free or purchased app from a third party, which will use the bucket of data you have subscribed to for your smartphone. So if you a 2GB of data for your smartphone, you'll share that with the other devices that are tethered to your phone via Wi-Fi.

So to be clear, if I have one of Verizon's older tiered plans, will I have to pay $30 for tethering?

You can avoid the tethering fee by downloading a third party app from an application store. If you tether using Verizon's service, you will still be charged the $20 a month to access Mobile Broadband Connect. So you need to be proactive and find an app that you can use.

What if I have an old Verizon unlimited data plan? Can I download an app and avoid the $20 tethering fee too?

Unfortunately, the answer to this question is no. Verizon says that customers under the unlimited plan are required by the company's terms of service to pay an additional fee to tether their device.

If I have a 3G wireless device will I be able to tether for free or does this only apply to 4G devices that use the 700 MHz spectrum that has these conditions?

The short answer to your question is yes. But it is a little confusing, because the open access rules requiring Verizon to allow any device or app access to its network only applies to the 700 MHz C block spectrum that's being used to build Verizon's 4G LTE service. But Verizon says this is the policy for all of its services. "Customers on usage-based plans can use third-party apps to tether and pay according to data plans. They can still use Mobile Broadband Connect for $20 if that makes sense as part of their plan," the company said in a statement.

I am a subscriber to Verizon's Mobile Broadband Connect tethering service. Will I get a refund from Verizon now since Verizon violated its agreement with the government?

No. Verizon maintains that it did not block its customers from using third-party tethering applications. Therefore, it wasn't really breaking the rules.

"Customers could download tethering applications directly from the app developers' Web sites or from other sites on the Internet, including from the Android Market," a company spokeswoman said in an email. "Scores of third-party tethering applications have been available in the Android Market for customers to use."

Does the agreement between the FCC and Verizon on this issue have anything to do with the spectrum deal that is in front of the FCC right now? In other words, is Verizon trying to get in the FCC's good graces by agreeing to these terms?

The FCC is currently reviewing a plan for Verizon to buy 20 MHz of Advanced Wireless Service spectrum from a group of cable companies. But when I asked Verizon whether the two issues might be related, a spokeswoman emphatically said no. I also did a little checking with my sources at the FCC, and they concur. The people handling the investigation into the potential open access violations are not the same folks evaluating the deal.

Now that Verizon has changed its pricing plans, I understand that its tethering capability no longer requires an extra fee. But because of the way the plan is structured, it seems like the cost is still built into the service. Is this one way Verizon gets around violating the terms of service? In other words, aren't you still charging for tethering?

Here's Verizon's response to this question: "Our usage-based plans allow customers to pay for the data they need and use, including any tethering done through third party applications."

First of all, so long as Verizon doesn't actively block lawful apps from its network or devices, it's not violating the terms of the rules for open access. But clearly under the new pricing scheme, Verizon is building charges into its service for features that not all customers may want to use. For example, it's also offering unlimited voice and text messaging. If you only use 300 voice minutes per month and send few text messages, you're paying for a service that you don't need. The same is true for customers who won't use the the tethering feature.

Verizon said in its statement that it doesn't block or prohibit the use of any lawful application, but Verizon did ask Google to remove the Google Wallet application from the Galaxy Nexus. Will Verizon now be required to open its network up to this application now?

A Verizon spokeswoman says that the two issues are unrelated:

Google Wallet is different from other widely-available m-commerce services. Google Wallet does not simply access the operating system and basic hardware of our phones like thousands of other applications. Instead, in order to work as architected by Google, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in our phones. We are continuing our discussions with Google on this issue.