Following Tuesday’s ruling that struck down key parts of the FCC’s net neutrality rules, we wanted to take a look at just what a loss of net neutrality would mean for businesses and consumers. After swamping our marketing team Skype discussion with the pros and cons of the ruling, Burton Hohman and I decided to put net neutrality on trial to help clear the air.
Burton kindly agreed to play Devil’s Advocate for our trial (if you squint, he looks a bit like Keanu Reeves). The opinions below are our own and do not necessarily reflect those of 352.
If you’re unsure of what net neutrality is, check out this quick primer before hearing our arguments.
Does an open internet matter?
Burton: Yes open internet matters. It is crucial that Americans maintain the ability to access the internet in a reasonable way at an affordable price. Despite what you may read, Tuesday’s ruling has done nothing to stop the internet.
Internet Service Providers (ISPs) such as Cox and Time Warner want you to be able to access the internet, and they want you to be able to use your favorite websites. If you weren’t able to access your favorite websites, you wouldn’t want to use the internet, if you didn’t want to use the internet ISPs wouldn’t make any money.
What Tuesday’s ruling has done is to allow ISPs to treat different websites and internet users differently to tailor the best possible internet experience. Before the ruling ISPs were required to treat every internet user exactly the same, now ISPs can set out a framework to tailor an internet experience to specific users types.
Why should mom’s who spend a few hours a day looking at pictures on Facebook be in the same group as twenty-five year olds who play Call of Duty Ghosts online for 30 hours a week? These two user groups require significantly different amounts and types of resources. The Facebook mom needs high upload speeds to add new pictures of her kid’s soccer match, while the gamer wants the lowest latency possible to insure a fluid gameplay experience.
Mike: You know another way to say “an open Internet”? Just: the Internet. While there are some legal restrictions on what content people can view and share, the beauty of the Internet is that everyone and everything is treated the same. Users are free to tailor their own experiences and to expand those experiences as they see fit without running into an ISP paywall in addition to the methods ISPs already use to control traffic, like bandwidth throttling and data caps.
The Internet has never been the fiber optics and wireless networks that form its backbone; it’s the people that connect, create and influence each other that give it life. Its users should remain free to connect how they see fit, not through a preset plan or subscription.
It’s hard to emphasize this enough, but net neutrality affects literally everyone who uses the Internet: consumers, businesses, and even just soccer moms browsing Facebook. It’s not “Obama’s Net Neutrality,” it’s not something that will just mean higher bills for Call of Duty players — it belongs to us all. Network neutrality was a founding principle of the Internet, not something that just happened to become important this decade.
Without it, we stand to lose a lot of what has made the Internet such a force for good (and for cat gifs): free expression, innovation, open competition and the ability to make your own choices regarding content and use. Rather than an Internet run by users and content creators, it creates one dictated by network owners – owners who often have a vested interest in disrupting the free flow of information.
Like Burton says, this is far from the end of the Internet, and I highly doubt that ISPs are going to do anything to torpedo the way most of us use the Internet. But it won’t be the Internet as we know it today.
Who wins and who loses in the new ruling?
Burton: If you were to browse through Reddit, Twitter or countless other websites it’d be easy to think that it will in fact be the American people who lose. And while they do post some valid concerns, in the long run I see this being a change for the best and actually improving the internet as a whole.
As a result of the ruling, ISPs now have the ability to treat sites differently and to control how many resources go to each site. While many argue that this would mean peak sites like Netflix and YouTube would see dips in performance, the opposite will happen. It goes back to the simple economic principle of supply and demand. ISP will now have the ability to shift resources to these high demand sites during peak hours.
What this also means is ISPs can now charge based on usage, and while this most likely will result in higher fees for heavy users, it opens the door for more basic internet to be available to more people.
Don’t start worrying about paying more for internet yet though, if plans like AT&T’s sponsored data program succeed then we could see companies like Netflix, Facebook and Hulu Plus working with ISPs to dedicate more resources to these services. This could result in internet costs being offset by content providers.
Mike: I think it’s too soon to call losers, since that will largely depend on how network providers react to the ruling (interestingly, Comcast is bound to the former net neutrality rules until 2018 under the conditions of its merger with NBCUniversal), but the clear winners are service providers.
Other than ISPs, who will be able to charge power users and shift resources to meet demand, I think the biggest winners are large content companies that have deep pockets and connections to network providers. I mentioned Comcast and NBC above, but think about sites like Deadspin or SBNation that have begun to challenge ESPN for quality sports coverage. Or Vimeo vs. YouTube. These sites have dedicated visitors, but what happens if they just can’t afford to pay for necessary bandwidth? Without net neutrality, small content producers can simply be priced out of the market
As for losers, I think that most of us will be losing – even if it seems like winning. Paying just for the content you use seems great. But guess what? You’re already doing that by paying your ISP for network access. Given the incredible lack of competition in most markets, there’s almost no incentive for ISPs to not charge you extra for content.
Will users have to pay more or less for internet?
Mike: The incredible thing about the Internet is that it is not a finite resource. Its infinite depths may be filled with more cat gifs and adult entertainment that anyone could possibly look, but anyone with Internet access can take a run at tracking it all down.
Of course, the more workaday web surfer is limited to checking their email account, a few favorite websites and the occasional Facebook binge. Even though the vast majority of the Internet is wasted on most users, the price of access gives you the capacity to reach any corner of the Internet you choose to visit.
Tuesday’s ruling gives ISPs the power to charge the price of admission, and then charge users to access content on the web. As a crude metaphor, it’s the county fair compared to a trip to Disney World – if your tickets to the fair were also $90 a pop.
Netflix provides one of the most obvious examples of how users will pay more without net neutrality. Netflix and YouTube account for more than half of downstream Internet traffic in North America. ISPs would have you believe that these traffic hogs are congesting networks and slowing data for everyone, but that’s untrue.
Without net neutrality, analysts predict Netflix will pay between $75 million and $100 million to ensure their content is delivered. So even if you don’t pay your ISP for access to Netflix, you’ll probably be paying Netflix an extra dollar or two each month.
But the real kicker is that Netflix will probably gladly pay that to ensure that smaller competitors can’t compete in the streaming space!
Burton: When shopping for clothes seeing something sized as one size fits all rarely brings a smile to your face. They tend to be either big enough for two of you or uncomfortably small, and in the end it ends up fitting almost no one. Prior to Tuesday’s ruling, that’s exactly how the internet worked.
The internet has a near infinite amount of information and services available, more than could ever be consumed in a single lifetime. Some tasks on the internet require more resources than others. Checking the menu of your favorite restaurant is a very simple task, but downloading software from a P2P client is significantly more difficult and requires more resources. At the moment, ISPs have to treat these activities the same, one size fits all.
Now chances are if you are reading this you are an above average internet user, you love how the system is set up because you are getting a great deal. No matter how much of the internet you use, how many files upload or movies you torrent you pay the same as someone just surfing the web for an hour or two a day. Unfortunately, that means the ISPs have to increase the price for all users in order to pay for the heaviest users, one size fits all.
For millions of Americans this means that they are unable to afford even the most basic internet service. Of the 60 million Americans without internet 28% of them (nearly 17 million) said that internet was too expensive. With an end to the FCC’s policy, ISPs would be able to provide a streamlined internet experience to millions more, fostering greater education and resources for those in need of it most.
Yes, this would result in internet plans increasing for the heaviest users, but that is a small price to pay to ensure that internet access is affordable to all Americans, because one size does not fit all.
What would tiered Internet mean for small businesses?
Burton: Many will argue that tiered internet plans will be the end of the internet, and that it would result in millions of small businesses shutting down. While these claims certainly make for great headlines, they simply aren’t true. The internet is permanently engrained in every aspect of our lives and with new trends in home automation soon we will never be able to live without it. With Tuesday’s ruling against the FCC’s regulation many jumped to say that people will now see dips in performance to high traffic sites like Netflix, YouTube or Amazon. However, I believe we are going to see the opposite.
ISPs no longer have to treat each website the same, what proponents of net neutrality would say is that ISPs will now degrade these popular website to save money and resources. On the flip-side this means that big websites like Amazon, Facebook and Google can now pay ISPs to give their sites more resources. As would be expected, large companies stand to gain a lot of money from these deals, but what about small businesses?
Large companies will now have an incentive to get directly involved in the improvement of ISPs, this means paying for new infrastructures and adding more resources to their networks. While these investments would obviously benefit the large business, small business will also benefit from the improved infrastructures.
Mike: I don’t think it’s likely that ISPs will instantly start blacklisting small businesses that don’t pay premium prices. Like consumers, businesses will have to pay more for their traffic to be treated equally across all networks – some will be able to afford it and some won’t. In fact, I don’t think local small businesses will be greatly affected in the short term.
Since most municipalities only have 1 or 2 internet providers, local small businesses will probably be on the hook for slightly higher fees to be seen on all local networks. The greatest threat is to small businesses that look to compete on a national stage or disrupt current markets.
The Internet has been the ultimate disruptive technology, and it has spawned countless startups built upon new disruptive technologies. These companies have succeeded partially due to the level playing field ensured by net neutrality.
While Netflix is now a big-time player, it’s hard to imagine it having the success it did without the protection of net neutrality. For instance, without net neutrality Comcast (which is also a content producer through NBC and Universal) would have had no reason to let Netflix traffic pass through its network. AT&T could have blocked early Skype calls to push its phone services, and Time Warner could nixed Twitter traffic once it started delivering news.
The Internet has always been a free testbed for innovation, but how many startups will be able to afford to pay for prioritization across a handful of telecom networks?
Will it cause more or less competition in ISPs?
Mike: Well, it’s hard to see how it could possibly cause less competition in ISPs, but I highly doubt we’ll see a boom in new providers. The fundamental error – be it willful or ignorant – in the net neutrality ruling is that American consumers have a choice in their internet service providers (ISPs). Nationally, the market appears competitive, but in reality most Americans have a choice only between whichever single cable company has a local monopoly and the phone company – which typically offers inferior service.
Indeed, it’s likely that consumers will only see decreased competition as cable companies continue to devour each other. Building network infrastructure is not inexpensive, which makes it difficult for any ISP to enter the market. The unfortunate reality is that most Americans will have no choice in their Internet provider, which means ISPs have no impetus to improve service.
Burton: Mike brings up one of the most unfortunate parts of the ruling, the fact that in many places Americans only have one choice of ISP. The ideas that I have talked about require there to be some incentive for ISPs to grow, and with this ruling there now is an incentive
Last year the Chief Technology Officer of Time Warner said that they had the ability to provide gigabit internet speeds to users, but that there wasn’t a demand for it. This statement brought about a frenzy of negative comments across different websites, but most of these comments were from heavy and above average internet users.
However, with Tuesday’s ruling these above average users will no longer be tied to the average internet user. ISPs could become more like airlines by providing first class service to the heaviest users while providing a more basic experience to the average user. Like airlines, first class service means better accommodations and also higher prices.
While the heaviest internet users will see an increase in price, they will also see an increase in services provided. And like with airlines, because ISPs can now provide a basic internet package you could see smaller companies entering the market. Allegiant Airlines is a low cost alternative for specific routes, while not a direct competitor to Delta, Allegiant acts as a low budget alternative for some flyers. New, small ISPs could now enter the market more easily to provide a budget internet service.
Should the Internet be more like our cable and cellular service?
Mike: One only has to look to recent fights between content providers and cable companies to see what a loss of net neutrality would mean for consumers. AMC went to war with DISH Network over the company’s Hopper DVR. Time Warner Cable and CBS battled over programming rates, blocking content for millions. DirecTV just dropped The Weather Channel over contract disputes.
Purchasing a cable or cellular plan comes with plenty of restrictions, some known and some unknown. You have 60 channels, but no movie channels. You have 1,000 any-time minutes and 2gb of data. With net neutrality, you only pay your ISP for access to the network, and they have limited control over what and how you look at.
“This industry blows. It’s just broken. It needs change.” – T-Mobile CEO John Legere.
If net neutrality is taken away, now you’ll pay your ISP for access to the network, and then pay for the content you access (either through tiered access or through higher prices from your favorite sites). While this clearly works for telecom companies, it’s hard not to think, “If it ain’t broke, don’t fix it.”
Last week, T-Mobile CEO John Legere said what he thinks of his competitors: “This industry blows. It’s just broken. It needs change.”
When was the last time you thought that the Internet was fundamentally broken, or needed change? Never, most likely. You’ve probably thought that about your cable provider or cellular carrier, but not the underlying framework of the Internet. And that’s because, right now, the Internet can work however we want it to.
Due to net neutrality, the Internet has remained free of such headaches, but it’s not hard to envision ISPs blocking traffic to Amazon or Bank of America over some petty dispute.
Burton: In the past few years the trend for Americans to ditch their cable and watch TV shows online has continued to increase. One of the main reasons for this is because people don’t want to pay for channels that they don’t watch. For example, why should someone with no interest in sports pay upwards of $100 a month to get cable when they could pay less than $10 a month to watch all their shows on Hulu Plus.
The only way to get cable is to pay for every channel, even the ones you don’t watch. That’s actually how the internet is set up right now. Currently internet subscribers have to pay for access to the entire internet. While this idea sounds great, it actually results in users paying more than they need to.
The FCC’s Open Internet policy requires ISPs like Cox or Time Warner, to give their users access to all services on the internet whether they want them or not.
With the new ruling, it opens the door to give users the ability to stop paying for the services that they don’t use like P2P software or online gaming.
Should the government regulate the internet?
Mike: The last time the net neutrality argument was stirred up in 2010, a narrative emerged that net neutrality equated to government control of the Internet. While this false equivalence did plenty to confuse the issue, it has no basis in reality. Using FCC rules to ensure net neutrality isn’t government control – it would just be supporting the Internet as it has existed (and thrived) for decades.
That said, I don’t think the government should be in the business of crafting any legislation regarding the Internet. Congress has shown time and again that they have no idea how the Internet works, and the Internet moves far too quickly for any legislation to keep pace. But there is a public interest in ensuring open access to the Internet.
Despite what telecom company executives would want you to believe, they did not build their networks alone. Massive public investments have made today’s data infrastructure possible, and net neutrality ensures that the citizens of the web have fair access and use of those networks. An open internet assures a level playing field and a competitive marketplace, benefiting both consumers and creators.
Burton: In the past few months we have learned how the NSA has infiltrated nearly every corner of the internet, listening and recording everything. With more shocking revelations coming out on a regular basis many have questioned just how the NSA was able to get this much power to begin with. Many argue, as Mike pointed out, that many lawmakers simply don’t understand how the technology works.
I will point out that the FCC and the NSA are two completely separate entities and as far as we know don’t not work together in the slightest. That being said, I can’t help but feel troubled by the thought that the same government that built framework to spy on everything the internet has to offer is also the one that regulates it.
Mike’s Closing Argument: It’s important to realize that Tuesday’s ruling is just the first step in what will (hopefully) be a long battle for the future of the Internet. And, given previous rulings from the court and the weak-willed leadership of the FCC, it is not a surprising ruling.
There has been a lot of irresponsible and incorrect journalism surrounding the ruling, but net neutrality is not dead. This was a major win for providers like Verizon and AT&T, but the fight is not over. The FCC can change its rules, and even appeal the ruling. And you can do your part by contacting your ISP, contacting your Congressperson and just getting informed.
The Internet has been an unprecedented platform for economic innovation, social good and democratized information, but without net neutrality it cedes control of the Internet from users and content creators to the network gatekeepers.
The bottom line is that striking down net neutrality is ultimately good for one group: telecom companies and ISPs. Any benefit to users is illusory and likely to be fleeting.
Burton’s Closing Argument: Over last few decades the internet has evolved into an integral part of the world’s culture, and the thought of losing it upsets many – rightfully so. Tuesday’s ruling isn’t going to shutdown the internet, but it will change the way we pay for it. I want to leave you with an analogy on how to think of the internet. Imagine an endless stretch of highway (the internet) and every few miles there is an exit (a website) and there are cars (users) driving down the highway getting on and off at different exits.
Originally this highway was just a dirt road with only a few exits and instead of cars there were horse drawn carriages. Well overtime this dirt road has turned into a 6 lane highway with different cars driving at different speeds and millions of more exits. However, high speed sports cars still have to share the road with a few left over carriages, and certain exits have traffic jams miles long. It just don’t make sense to have fast and slow cars on the same road, and why wouldn’t you build bigger exits for busier stops? Also wouldn’t the sport car drivers want to be able to pay more to have an express lane to skip the rest of the traffic?
I think it’s inevitable that we will one day see tiered internet pricing. Instead of fighting the inevitable why not try to work with ISPs to make a plans that we can all benefit from.
Agree? Disagree? Lost in confusion? Let us know in the comments below.
Image credit: Natalia Balcerska