Life After Net Neutrality

For the past few months, in the United States, a fight has been brewing over how the pipes that control the Internet would be ruled. On one side, activists and large Internet companies felt that access to the Internet should be neutral and that all sites should be accessed in the same fashion. On the other side, large cable and phone companies have been arguing that they should have a chance to charge different rates for different types of services. The whole fight was embodied into a campaign called Net Neutrality and made its way into the American congress.

Today’s news that the Net Neutrality bill was defeated may create future problems for American internet businesses but will not kill the Internet, as some have claimed. Instead, it will probably dictate, in the long run, the death of the very proponents of a ban on net neutrality: phone and cable companies which have been trying to overreach in their attempt to fatten up their bottom line.

Looking at the stakes

At issue in this debate is how bandwidth is distributed and whether it should be metered in any fashion. At the current time, in the US, most people who get broadband pay a flat monthly service fee that gives them unlimited bandwidth at up to a certain speed. Under a new model many phone companies and cable companies are trying to popularize, this would change. Their view is that certain services, like phone service or video service, require more bandwidth and therefore should be charged in a different way. they would basically introduce new charges that would offer access to such service for a premium.

The fear from many is that such model would get them into the business of monitoring what type of services are available and being selective in what access they offer. For example, they could start offering access to certain sites at a premium fee but decline access to other sites or degrade the service in such a way that those other sites would not work well on most computers.

Short term impact

In the short run, few will feel the impact of the communication providers’ strategy. A few pockets here and there will start failing but, all and all, only new services will be affected. Where it gets interesting, however, is when new offerings start making their way onto the Internet.

At the current time, the US is already starting to lag in broadband penetration. This will become a bigger issue if the telecommunication providers have their way as they will probably start moderate increase in the basic price of broadband access. Some may consider this view alarmist but history tells us that basic rates on phone service have generally been increasing, which is interesting considering the complains about competition forcing companies to lower their rate. The same increase in rates has been true on the cable side of the equation, where rates of service are slowly moving up.

As price is one of the major levers in increasing broadband adoption, such rise in prices will only slow things down. Of course, it may not be a point of concern until one considers the global marketplace. Unlike the United States, other countries are rapidly moving to increase broadband adoption and the speed of broadband lines altogether. What that will result in is a greater capacity to create and develop next generation applications that they will then be able to resell to the rest of the world.

We’ve already witnessed the rise of foreign companies establishing themselves almost overnight as major player with the recent appearance of Skype, a company that was born outside the US borders and rapidly acquired a following that made it worth several billion dollars. This wealth generation happened outside of the US because broadband was cheaper and more accessible there. I’ve also recently seen offerings by a couple of non-US companies that may follow the same curve and I am getting concerned about the US ability to compete if bandwidth is not widespread, increasing in size and inexpensive enough for all.

Restrictions on broadband access and degraded (or uncompetitive speeds) may ultimately represent a major Achilles heel in the US ability to compete on the global stage.

Long Term Impact

But what if…

John Gilmore, prominent Internet activist, once said

The Net treats censorship as damage and routes around it.

Extending the approach, one could start wondering how the net would work around censorship at the source (which is basically what limited access could become).

Enters the concept of Mesh Networking. In a mesh network, computers can work in a peer to peer fashion to connect to each other. One could envision mesh networks being created out of thin air (using wireless Internet access card) without having to go onto the lines of the telco providers. Of course, the issue would still be in terms of traveling over long distances to ensure that sites that are located in far away locations are still accessible. This problem could be solved by some of the content providers themselves, who could enter in some form of social contracts amongst each others agreeing that they would carry each other traffic back and forth, bypassing some the last-mile telco providers in the process. Under such a model, Google’s data center would allow for amazon to use their bandwidth and vice -versa, Microsoft or Yahoo would allow each other similar rights of way and so on… As they all operate large facilities, they could cover a substantial portion of the US public and bypass the telcos all the same.

Under such a scenario, people would start abandoning the restrictive networks offered by phone and cable companies to access the more free and open network offered by the content providers. The result would be an eventual displacement of the telco providers in the long run and, due to probable resentment fostered in the process, an evaporation of any revenue from their other services as those would probably be tied to line access.

Conclusion

If Net Neutrality goes, US competitiveness will be affected negatively and will result in more new wealth being generated outside of the US than in the US. Furthermore, in the long run, an overreach could result in people abandoning the telcos altogether, if Mesh networks take off.

About the Author

Tristan Louis

Writing and working on the internet since 1993, I've launched 6 companies, of which 2 (internet.com and Earthweb) went public and two were sold (Net Quotient and MoveableMedia). My latest, Keepskor provides tools allowing anyone to develop mobile and connected TV games without writing a line of code. This is my personal site and all opinions here are mine.

  • Daniel

    You forgot to mention wireless as another avenue to bypass the phone/cable monopoly. Although most of the major carriers are telcoms, some are not (T-Mobile). Imagine a scenario, if you will, where they offer EvDO/wifi base-stations for homes. While speeds of such a solution do not compete with traditional broadband, that will only change over time.

    Leaving municipal WIFI aside (another possibility) couldn’t Google/Yahoo/MSFT enter into MVO agreement and operate it at as a loss leader? They may even be willing to subsidize T-Mobile for expanding their network or even buy it outright.

    The reality is that most people are used to the Net as it is and will not agree to any limitations. They will find a way around it.

  • http://lemi4.wordpress.com Lemi4 aka. fERDI:)

    >… could result in people abandoning the telcos altogether, if Mesh networks take off.

    Could the telcos in turn target mesh-networking infrastructure in retaliation? Or even mesh-networking related industries? And if the telcos can, are they crazy enough to try it?

    Should turn into an interesting business war, should it come to pass…