In 2018 the U.S. Federal Communications Commission (FCC) put into effect a new policy aimed at settling once and for all the question of whether restrictions on internet access should be allowed or prohibited. Yet that issue continues to be a hot topic of debate among consumers, businesses, carriers, over the top (OTT) providers and tech sector pundits.
The basic question is whether internet access should be available to all users on an equal basis (“net neutrality”), or if access providers should have the option of blocking or slowing some of the trafﬁc that ﬂows through their cables based on source, content, or the willingness of users to pay premium prices for higher levels of access.
In the past, the FCC took the position that regulating internet service providers (ISPs) to prohibit them from discriminating between different categories of users and trafﬁc was the best approach. In 2015 that view was codiﬁed in the FCC’s “Open Internet Order,” which afﬁrmed net neutrality as the internet’s regulatory framework. Under that ruling, internet broadband providers were categorized as Title II common carrier services, which gave the FCC authority to regulate them to ensure their adherence to net neutrality practices.
The FCC reverses course
With the advent of a new U.S. presidential administration in 2017, the FCC completely reversed its regulatory approach. The agency’s new chairman, Ajit Pai, pushed to reclassify internet broadband from a Title II common carrier service to a Title I information service. Despite receiving millions of public comments opposing the change, the FCC voted in 2017 to afﬁrm Pai’s “Restoring Internet Freedom” order. It was put into effect in June of 2018.
The effect of reclassifying internet broadband providers as information services rather than common carriers was to effectively eviscerate net neutrality by eliminating the obligation of ISPs to treat all customers and trafﬁc equally. Providers were now free to prioritize, meter, limit, or entirely block certain categories of trafﬁc based on factors such as high bandwidth requirements (streaming video, for example) or price. Under the new FCC rules, ISPs are only required to openly disclose their access policies so that consumers are aware of how their trafﬁc will be treated.
It’s not settled yet!
The FCC’s order sidelining net neutrality has been something less than universally popular. In fact, both legislative and court challenges to overturn it were immediately launched.
The Save the Internet Act (https://www.dailydot.com/debug/mike-doyle-net-neutrality-joe-biden/) was introduced into both chambers of Congress by net neutrality advocates (mostly Democrats) in 2019. It passed easily in the House, but was declared “dead on arrival” by the Republican majority leader in the Senate. Given that the bill
was co-sponsored by 46 Senate Democrats (https://www.markey.senate.gov/news/press-releases/senator- markey-leads-democratic-senators-in-demanding-vote-on-net-neutrality-legislation), it’s likely to be revived if Democrats achieve control of both houses of Congress.
In January of 2018, twenty-one states sued the FCC in an effort to reinstate net neutrality. In October of the following year a federal appeals court upheld the FCC’s authority to repeal its net neutrality rules. However, the court also declared that the FCC does not have authority to prohibit states from passing their own net neutrality rules. Several states have moved in that direction. California, for example, has passed a comprehensive net neutrality law (currently on hold due to legal challenges), while governors of other states, such as New York, New Jersey, and Hawaii, have issued executive orders prohibiting state agencies from doing business with broadband providers that fail to follow net neutrality principles.
The impact of the reclassification of internet broadband
The end of net neutrality may at ﬁrst seem to be a great opportunity for broadband providers and ISPs, many of whom lobbied hard for the change, to increase income by implementing differentiated pricing for different types of users and trafﬁc. But that may be an oversimpliﬁcation.
For example, the ﬁrst and most obvious impact of the demise of net neutrality will be that consumers and businesses will insist that ISPs provide comprehensive details of exactly what internet-based services they will slow or block, and which will receive preferential treatment. Access providers will ﬁnd that their blocking and favoring choices are constrained because consumers will shop around for the best bundle. And that in itself will encourage alternative service providers to join the game.
So, the end of net neutrality will provide opportunities for competitive differentiation. New entrants need not compete solely on price. Indeed, they may be able to charge a little more for genuinely unfettered access, while incumbents who implement serious levels of blocking and favoring will be obliged to reduce charges to compensate users.
Look out for another business opportunity here: secure virtual private network (VPN) services. VPNs encrypt a user’s data before it is transmitted, which can deny a carrier insight into the nature of the trafﬁc they are handling for a customer. That, in turn, can compromise an ISP’s ability to charge different rates for different types of content. With the demise of net neutrality, VPNs may well become more popular, more widely available, easier to use, and more difﬁcult to detect. Of course ISPs will respond by trying to differentiate between the “good” VPNs (those accessing a corporate LAN, for example) and “bad” VPNs (such as one being used to access a blocked or slowed edge provider). It’s not unlikely that smarter VPN-type services that masquerade as other services will also become available, and that ISPs will seek to detect and block them.
The end of net neutrality, then, should be a spur to creativity and innovation as users seek ways to get around blocking or slowing, and ISPs work to prevent them from doing so. Plus, new access providers with fresh perspectives will recognize the differentiation opportunity and ﬁnd new sources of investment to break into this emerging market.
The debate continues
The real-world effects of classifying the internet as an information service rather than as a common carrier will continue to be debated for years to come. The removal of net neutrality is unlikely to deliver the easy path to new proﬁts the broadband providers who lobbied so hard for it expected. For one thing, the ISPs themselves, who together provide not just access but also core internet transport, are hardly likely to be nicely aligned straight
away. How will revenues be apportioned when, for example, an access provider strikes a deal with a remote edge user for guaranteed preferred service quality? All intermediate ISPs along the path will have to cooperate in some way, and they will expect to be rewarded.
One thing we can conﬁdently expect is to see more innovation as billing vendors (like Kansys) help all these businesses manage the mesh of ﬁnancial transactions and settlements that will become more and more complex as the internet evolves.
If you’d like to learn how Kansys can help your business take full advantage of an ever-changing internet, please contact us.