November 19, 2014
Last week, President Obama advocated for net neutrality, publicly voicing his stance as the FCC considers whether to reclassify broadband as a telecom service (see FCC Offers New Solution for Net Neutrality).
This action would put the Internet under the jurisdiction of Title II of the 1996 Telecommunications Act, preventing Internet service providers from discriminating among customers for better service.
Opponents of net neutrality, on the other hand, maintain that broadband should not be run like a traditional telecom market (for example, think about how all phone calls connect at roughly the same speed). Instead, they say that carriers should be free to make deals with online content providers for faster or higher quality connections.
Furthermore, following the President’s speech, internet providers argued that enforcing net neutrality could have other ramifications, such as deterring companies from making capital investments in broadband (as a result of stronger regulations) – thus effectively “killing” the Internet. Another argument maintained that the FCC would have too much power to regulate prices and content companies, among other things.
Under further investigation, however, it seems that these allegations may have less weight than originally thought.
As specified in a Business week article*, there’s little doubt that Title II legal reclassification will trigger political and legal challenges throughout the industry.
However, there is little to no evidence that upholding net neutrality would significantly impact the economics of the Internet, owing largely to the fact that cable networks have never been regulated under Title II.*
What data exists shows that the telecom industry actually has historically invested in infrastructure during periods where it was subject to Title II regulation.
For example, Title II applied to DSL from 1996 to 2006. According to data from that time*, those years saw a spike in investment.
In addition, the FCC has thus far shown no plans to regulate prices and content companies. Instead, experts speculate that the new rules would most likely maintain the status quo — one that has worked out well for service providers such as Verizon ($54 billion in profit from 2010 to 2013), AT&T ($50 billion over that same period), and Comcast ($24 billion).*
Furthermore, regulation wouldn’t just restrict to infrastructure companies; it could also benefit them.
One benefit that telecom services receive, for example, is access to public rights of way – rights that providers like Verizon have expressed interest in receving as well:
In May, New Networks, a research firm critical of the telecommunications industry, published a report showing regulatory filings in which Verizon had argued to New York regulators that the infrastructure for its broadband network should be treated as a telecommunications service.
– Changing How the Internet Is Regulated Probably Won’t Kill It, Businessweek.
Net neutrality refers to the idea that online content and applications should be equally accessible, meaning that no websites or online services should be faster or slower as a result of special deals with internet service providers.
It’s been a hot topic for months now, especially once the American public realized the direct ramifications to its everyday internet usage. This summer alone, proponents of net neutrality voiced around 3.7 million complaints on the FCC website, demanding that the FCC protect net neutrality by banning special deals.
It basically boils down to this: should the FCC allow internet service providers to favor or block certain websites or online services, based on special deals with content companies?
* Brustein, Joshua. FCC’s Net Neutrality Decision May Also Affect Wireless Networks, Businessweek. Bloomberg, L.P.