A Conflict-of-Interest Ruling

The US Becomes Net-Neutral

Yesterday, the US Federal Communications Commission (FCC) voted to regulate Internet services, requiring service providers to take a non-discriminatory approach to the bits and bytes that flow back and forth through their pipes to subscribers. The US joins Brazil, Chile and the Netherlands in having so-called net neutrality laws, and the EU has similar regulatory proposal under consideration.

When the FCC’s ruling takes effect in a few months, users are unlikely to notice much of a difference. The real ramifications will come over time as households continue to shift away from traditional broadcast and telephony services. Most Internet service providers in the US offer video and voice to their subscribers, but the current service model has built-in conflicts of interest, with providers enabling their competitors.

Net-neutrality rulings aim to safeguard the inevitable: a shift away from legacy telecommunication models to services based on an opened Internet. These developments help future-proof telecom infrastructures for an all-IP environment as subscribers increasingly rely on services like Netflix, Skype, Spotify and YouTube: businesses that compete directly with the Internet service providers by enabling users to unsubscribe from other products. This is a particular advantage for data-heavy services. It’s worth noting that most online video and voice services are US-based, so the potential spread of net neutrality across other markets is of particular advantage to American companies like Facebook, Google and Netflix.

Cord cutters are among the key beneficiaries of net neutrality, but it could be argued that their effect is being subsidised by their casual-browsing neighbours. Tiered pricing is still a possibility under net neutrality, and subscribers can be offered thicker connectivity pipes for faster speeds, but the bits are to be given free reign. Partnerships between Internet service providers including mobile operators and content companies like Pandora and Spotify could come under scrutiny.

Broadband service providers are expected to contest the FCC’s decision, stating that the ruling has unknown long-term consequences. However, the march toward a naked broadband is unavoidable with rise of digital-native generations. Regulating Internet access in the same way as a utility will smooth the transition for data-centric economies, though limited broadband competition is the real culprit in many markets — particularly the US.

There are, of course, practical realities of neutrality in the age of connected things. Regulators need to recognise that some services might earn priority seating by virtue of potential beneficial dividends to society — we can point to the collection of live traffic data, which depends on low-latency mobile connections to function.

American consumers who expected to wake up to a faster connection after the FCC’s decision will be disappointed to learn that net neutrality is more of a ruling for the future. With all things being equal, the concept of walled gardens is being regulated to the past.

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