On Monday, November 10, 2014 President Obama threw down a surprisingly strong directive to the FCC to act on net neutrality. Naturally, Cable MSO‘s, telecom giants, lobbyist and politicians had opposing views all indicating that a grand battle over net neutrality is now in motion.

This post will explain why net neutrality is a legitimate concern to both Internet providers and consumers. However, it is very important to note that there is no right or wrong on the issue of net neutrality.

A Brief History of Net Neutrality

The concept of net neutrality has been evolving for many years as a result of a constant struggle between Internet service providers and Internet users.

In simple terms, Internet providers want to reap the rewards of innovation and investment in infrastructure. Consumers on the other hand, want Internet access that is equal for all and fear that Internet gatekeepers will interfere with free markets.

Net Neutrality Historical Timeline

  • October 2007: The issue was brought into public arena in 2007 after the FCC found that Comcast was interfering with BitTorrent uploads in violation of the FCC’s 2005 Internet Policy Statement. At that time, BitTorrent was responsible for about 35% of all Internet traffic. The FCC ordered Comcast to stop discriminating again BitTorrent traffic and have greater transparency for how it operates. Comcast appealed the order.
  • April 2010: Comcast appealed the FCC‘s order and won a partial victory because the United States Court of Appeals ruled that although Comcast did impede BitTorrent the FCC failed to prove it has statutory mandated responsibility.
  • December 2010: Not to be deterred, on December 2010, the FCC enacted a new set of rules known as the FCC Open Internet Order (or Net Neutrality Rules). These rules required high level transparency and prohibited blocking and unreasonable discrimination to protect Internet openness.
  • January 2014: A Verizon challenge to the FCC Open Internet Order was decided by the United States Court of Appeals for the District of Colombia Circuit. The ruling struck down the FCC rules. However, this was just a temporary victory and it did not address the concept of net neutrality.
  • November 2014: President Obama outlines his directive for the FCC (watch the video above).

The most critical aspect of the court rulings was that the court did not find that the rules were wrong or unjust; they only said that the FCC did not have the authority to regulate Internet service providers.

Since the ruling the government has wrestled with how to implement a policy of net neutrality. Part of the plan was to obtain public support and feedback. At the time of President Obama’s video almost 4 million comments had been submitted to the latest FCC proposal. The comments were overwhelmingly in support of net neutrality.

Current Net Neutrality Issues

The concept of net neutrality was founded by the thought that no cable or Internet service provider would unfairly control the content that the public has access to. That thought has been detailed by President Obama in his video to be:

  1. Cable MSOs have a legal obligation not to block or limit access to a website.
  2. Cable companies cannot decide which online stores you shop at or which streaming services you can use.
  3. Cable MSOs can’t let any company pay for priority over its competitors.

In order to obtain these objectives, President Obama’s solution is to reclassify Internet service under Title II (known as the Telecommunications Act). If this is accomplished then the FCC can set forth rules and regulations.

To no one’s surprise, Internet providers have reacted strongly. Although many of the reactions are defensive knee jerk and irrational comments such as those put forward by Senator Ted Cruz, the real issue was mentioned in Comcast’s statement.

“The internet has not just appeared by accident or gift — it has been built by companies like ours investing and building networks and infrastructure. The policy the White House is encouraging would jeopardize this engine for job creation and investment as well as the innovation cycle that the Internet has generated.”

Source: David L. Cohen, Executive Vice President and Chief Diversity Officer in Open Internet

What is Really at Stake in the Net Neutrality Debate?

Both sides have legitimate arguments but neither side has a definitive airtight case either for or against net neutrality. If we look at the facts one can see that the things at stake go far beyond profits and perceived rights of equal access.

Internet Provider Concerns

Cable MSOs and telecoms have spent billions developing the infrastructure to provide Internet services. This was developed under a capitalistic culture that says they should have the right to reap the rewards with some inherent controls on how to do so.

These companies also have the right to charge content providers if their content requires additional infrastructure to support them. Infrastructure is not in-free-structure.

Unless the country is going completely socialistic there should not be an issue with wanting to charge heavy users more for access. Broadband is a technology with data flow limitations and needs to be managed accordingly.

For example: Netflix and YouTube currently account for approximately 50% of data flowing on the Internet. However, broadband pipes are limited to how much data can flow at any given point in time. Without adequate infrastructure investment users of these services can clog the available bandwidth and affect the speeds for non-users.

Therefore it would be normal for an Internet service provider to charge more to a Netflix or YouTube type service. Without the ability to do so would result in bigger pipes not being built and ultimately poorer connectivity. The alternative of course would be to raise prices for everyone and not just the heavy users.

Government and Consumer Concerns

Opposing Internet providers is the government (represented by the FCC) which views the desire to charge some users more as the ability to charge for a fast lane (Obama Issue #3). There is validity to the government’s concern about charging for priority access (charging for a fast lane).

To permit the creation of a fast lane would undeniably result in larger companies finding a way to monopolizing what we see and the denial of access for smaller businesses and individuals to conduct business on the Internet as they have historically done.

There is also no doubt that creating a fast lane also opens the door for abuses in President Obama points 1 and 2. This is what is really scaring the public and is the reason for government involvement.

However, so far the FCC‘s perspective has completely ignored the cost of innovation and infrastructure needed to support the Internet. Similarly, cable MSOs and telecom giants are trying to downplay the issue of throttling and content control.

What will be the future of Net Neutrality?

You do not need to be a rocket scientist to understand that without a way to differentiate costs for heavy users, the cost of Internet access for every user will increase to meet bandwidth demand.

So what is really at stake? For cable MSOs and telecoms the answer is the right to control their own industry. Ultimately they cannot win this war for a couple of reasons:

  • The 4 million consumers that commented on the FCC’s proposal are only the tip of the iceberg. Being too adversarial will create a customer backlash that will increase the demand and development for alternative access.
  • The perspective of unfair competition has entered the playing field. The government will not go away if unfair competition is found, just ask Standard Oil and AT&T.

At stake for the government and consumers is the ideology of an equal access Internet available to all. However this too is not really obtainable. The Internet is a global entity, as such government regulation can only inhibit abuse but it is really just trading one domestic gatekeeper for another.

More importantly, the costs of supporting unlimited access are real, and someone needs to pay for the hardware, software and services associated with providing this connectivity. On this note, AT&T suspended fiber infrastructure spending pending the outcome of the debate.

In the final analysis, Internet providers can still control the outcome if they are willing to demonstrate that they are net neutral gatekeepers. This will require a new approach on how to manage their infrastructure and a self-imposed yet strict system of checks and balances. The question is can they do this in time?