Net neutrality creates murky Internet waters for consumers

On May 15th, 2014, the Federal Communications Commission issued proposed rules which seek to preserve the Internet as “a vital platform for innovation, economic growth and free expression in America.” As was widely noted in the press, the measures contained strong regulations which were designed to address public and private concerns about net neutrality, a cause célèbre that ended up becoming a White House directive in November 2014.

However, when considering the market impacts of net neutrality, it’s pretty clear that certain aspects of this central tenet of Internet ideology could in fact harm Internet innovation by ensuring that network traffic management never gets any better than its current status. Everyone is excited about Internet-connected products today. The danger with net neutrality is that, if applied incorrectly, we could end up with over-crowded and ill-managed Internet services that nobody wants to use.

Proponents of net neutrality have noble goals for ensuring open Internet access for all and the issue has already prompted a pretty rare political moment. Some of our readers may be familiar with the comedic segment on net neutrality from HBO’s Last Week Tonight with John Oliver; the 13-minute tirade is believed to have been the impetus for more than 45,000 public comments filed with the FCC over net neutrality in the day after the show aired. We ourselves have written on the subject of net neutrality here on IPWatchdog. The more idealistic voices on the pro-net neutrality side are clear in their desire to protect full access to Internet data and are firm in their belief that preserving an open Internet will benefit the world through closer social contact and easy access to information. Some have even gone as far as to develop a net neutrality video game where players control an avatar which runs through a digital world while trying to prevent an Internet service provider (ISP) from stealing all of their bandwidth.

However, these ideals could be accused of missing some aspects important to this debate, or at least they don’t account well for certain realities. Any American who filed a public comment with the FCC during the net neutrality comment period might be a little upset to know that the data throttling which strong net neutrality was supposed to stop is still happening. If current net neutrality rules are left as they are, that situation could easily get worse.

[Internet-Things]

Anyone who has used Netflix or HBO Go has likely experienced a form of throttling in being unable to access a popular title that thousands or perhaps even millions of people are trying to watch at the same time. As we’ve reported in other posts on IPWatchdog, one in three American households have Netflix and one in ten has two video-on-demand (VOD) services. As of May 2014, Netflix alone accounted for one-third of all Internet traffic. When even a small fraction of Netflix users are attempting to access the same program, issues with network traffic arise and ISPs are forced to consider traffic priority concerns, so de facto data throttling occurs even with net neutrality in place. Essentially, the issue with the enforcement of net neutrality seems to be that a completely free and open Internet without any network traffic problems would be possible with free, unlimited Internet bandwidth that just existed and for which no one had to pay. But bandwidth costs money to develop, so those developers are going to charge money for consumers to use it.

How many people would be upset if the Internet subscription which they already pay came with access to Netflix and HBO Go, especially if there was somehow a cost savings on the overall price of all three? Likely, not many people. But that’s something that cannot be legally realized under the current net neutrality rules put in place by the FCC.

It’s pretty telling that many of the major corporate names which had supported net neutrality have not been able to tread the path for which they themselves fought. Netflix, for instance, raised a lot of ire in recent weeks when it negotiated a sponsored data agreement with two Australian ISPs. Those sponsored data agreements, which ensure that a certain amount of bandwidth is devoted to Netflix customers, was accused of running afoul of the very precepts of net neutrality for which the company lobbied here at home.

From an innovation standpoint, if Netflix isn’t forced to pay for the bandwidth that it takes up, Netflix has no incentive to innovate a solution to the bandwidth problem that it has created for itself. Google has also been a net neutrality proponent and has said that the reclassification of broadband as a Title II telecommunications utility will not stop the company from making major investments into Google Fiber, a broadband network system the company plans to develop. However, Google Fiber’s vice president for access services, Milo Medin, made comments in a speech given at the most recent Comptel Plus Business Expo which pointed out that the FCC’s Open Internet order might protect Internet openness but doesn’t address the problem of scarce bandwidth. Federal oversight of telecommunication companies, Medin argues, will not simply be able to make more Internet bandwidth appear out of nowhere. It will, however, allow Netflix to continue streaming hours upon hours of entertainment to millions of users, itself becoming the kind of media behemoth that net neutrality was supposed to quash, not feed.

Facebook’s is another corporation whose words and actions on net neutrality do not seem to be aligned. To reach consumers in areas of the developing world, Facebook has lead an initiative known as Internet.org to bring Internet services to the two-thirds of our world that don’t have Internet access. To do so, they’ve engaged in a practice known as “zero-rating” in places like India. Zero-rating involves offering a data-based digital service to consumers for free. As some Indian app developers who have pulled their programs from the Internet.org platform have noted, the free Internet service creates an unfair advantage for some apps and flies in the face of net neutrality. Those developers allege that Facebook has set up its own “fast lane” of sorts by enabling certain apps on a free platform. We don’t have free Internet here in America, we never did and yet the industry was already fairly innovative before major FCC involvement.

As a sidenote, India may be a country to watch in the coming months to see how a different government handles the net neutrality debate. A major telecom company there, Airtel, has been targeted by net neutrality activists for its Airtel Zero service which offers its subscribers free access to certain apps, like Flipkart. As this Bloomberg View article points out, while regulatory oversight to prevent unfair collusion between companies will always be necessary, allowing an ISP to negotiate a priority deal with a digital service is not mutually exclusive with the idea of a free and open Internet for everyone who pays for a connection.

Issues of bandwidth scarcity will likely only become exacerbated by the coming Internet of Things, the concept that everyday devices like toothbrushes and tennis rackets will be Internet-connected for consumer data analysis services; the number of “things” that are connected to the Internet likely reached 8.7 billion in 2012 and is expected to hit 50 billion by 2050. To successfully commercialize these products, a company must be able to guarantee to its customers that the product will work whenever they want or need it. No one likes to wait for streaming video to buffer. So it would seem that net neutrality wouldn’t be as useful to American consumers as a system that preserves the right of an individual to access every digital resource that is freely available through the Internet while allowing businesses the right to develop and sell new services to the people and other businesses who are willing to pay for it.

Netflix and the rest of the anti-ISP crowd did a good job of painting themselves as the underdogs in a major battle, but they are not the underdogs when they have a subscriber base bigger than most of the ISPs targeted by net neutrality activists. Maybe we should instead consider Netflix and Facebook as those providers of Internet services who stand to gain the most by leaving things exactly as they are, squeezing out the minor startups who cannot gain traction in a crowded Internet space.

The rhetoric on this subject has been pretty dire at times. It’s definitely given some great material to John Oliver, the face that launched 45,000 FCC public comments. It’s also given us a chance to re-evaluate what net neutrality means in practice when you can’t march 50 billion devices down the same constricted Internet hallway at the same time. Someone’s going to have to wait. It’ll likely be those who can afford to wait.