How ending net neutrality could affect consumers and the Net

  1. Republican majority on FCC board ensures measures will pass
  2. Little to prevent ISPs from favoring certain websites over others
  3. Internet pioneers warn of 'imminent threat'
  4. Large companies are not immune from negative effects

When browsing the internet, you can currently load an article from InfoWars, an alternative political site with roughly 32 million visitors in October, at the same speed as you can load a piece of analysis from the New York Times website, which had 408 million visitors in the same month.  

All lawful web traffic must be treated equally – this is the basis of “net neutrality”.

‘The electric grid does not care if you plug in a toaster, an iron, or a computer’ – Tim Wu

The term was first used in the 2000s, and adopted by the man credited with establishing the World Wide Web, Tim Berners-Lee, as expressed in this article reprinted by the World Wide Web Foundation. (See also WikiTribune interview with Berners-Lee.) The idea is to keep the flow of information as free and open as possible, similar to how electricity is distributed. Internet access is regarded as a utility in some countries, a human right in others such as France and Estonia. 

“The electric grid does not care if you plug in a toaster, an iron, or a computer,” Professor Tim Wu, the American lawyer who coined the term net neutrality, wrote in a frequently-asked questions blog post.

How the U.S. government ensures the principle of net neutrality, if at all, is at the center of a heated debate in the United States. (See WikiTribune community explainer by Eric Fershtman.)

In a late move against the potential loss of net neutrality some of the pioneers of the early internet – including Berners-Lee — have written to U.S. lawmakers warning of an “imminent threat” (The Verge) to the principles underlying the communications network.

No longer neutral

This debate intensified when the Federal Communications Commission (FCC) announced it will vote on repealing federal regulations that protect net neutrality on December 14. With a Republican Party majority on the FCC board, the agency will almost certainly reverse an 2015 Obama Administration policy that classified broadband internet as a Title II “telecommunication service,” deeming it a public utility.

Instead, the current FCC board is expected to reclassify broadband internet as a Title I “informational service,” a change that will result in far less government regulation for internet service providers (ISPs). These ISPs are companies like Verizon and AT&T that own the infrastructure that connects consumers to the internet. In general it is those communications companies who favor being able to charge different rates for different content distributed across their wires — particularly high-volumes of video as the Internet takes over from traditional cable and terrestrial television.

The FCC decision essentially deregulates how ISPs can treat web traffic. By repealing the internet’s Title II status, there is little preventing ISPs from favoring certain websites over others, even blocking lawful sites completely, all of which is a violation of the concept of net neutrality. Tim Wu has written about possible legal challenges to the regulatory change, noting that “government agencies are not free to abruptly reverse longstanding rules on which many have relied without a good reason, such as a change in factual circumstances”.

To what extent consumers will be affected by this decision depends on how far ISPs are willing to exert their new-found power. FCC chairman Ajit Pai, a former lawyer for telecoms company Verizon, sees the concern over Title II repeal as hysteria. “For decades before 2015, we had a free and open Internet [Pai’s emphasis].  Indeed, the free and open Internet developed and flourished under light-touch regulation,” he said in an official statement.

Ajit Pai, chairman of the
Federal Communications Commission, who has questioned the concept of net neutrality.

Several ISP industry leaders insist that consumers will not see any changes to their internet experience once Title II is repealed. David Watson, the CEO of Comcast, the largest ISP in the U.S., wrote in a blog post that “Comcast will continue to support net neutrality protections for our customers.”

Giant tech companies, small startups, digital rights groups and civil liberty advocates are skeptical of these reassurances, and are campaigning against the FCC decision. Their concerns can be boiled down to a lack of trust in ISPs as gatekeepers of the internet.

They point to past ISP behavior as an indication of what consumers can expect once FCC regulations are relaxed next week. The example of Netflix and Comcast is commonly cited.

Small sites can’t afford to play

Comcast customers were able to stream Netflix content at a far better rate after the video streaming platform agreed to pay Comcast an undisclosed amount in January 2014.

Many net neutrality advocates see this backroom deal between Netflix and Comcast as a prelude to ISPs creating a tiered internet, according to analysis from the Washington Post. Large web services, like Netflix, can afford to pay a premium for “fast lane” service, while a start-up video site may be stuck with subpar internet that consumers are less likely to use.

Washington Post constructed this graphic based off of Netflix data on streaming speed (Original article no longer available).

The prospect of a tiered internet has clear implications for small online companies: they would struggle to pay the price that ISPs charge for a high-speed connection, whatever that amount may be. Amanda Lotz, professor of communication studies at the University of Michigan, is also concerned with how non-profit entities would cope without net neutrality rules.

“If we truly move to a fast and slow lane system, what happens to things like government, education?” Knox told WikiTribune.

Large online companies are obviously less vulnerable in this scenario, but not immune. Even with access to more capital, companies that generate a lot of traffic such as Netflix and Spotify, could also struggle to absorb the cost of being in the fast lane.

Costs get passed down

The music streaming platform Spotify struggles to turn a profit (WSJ) on its content despite having 60 million subscribers. Its business model up to this point has been to grow the audience, whose members pay roughly $10 a month. If ISPs begin to charge for the traffic generated, or for fast-lane access, these streaming services might have to pass the costs onto their customers.

“Many of these companies have business models based on the belief that there was not going to be a cost to distribute content over the internet,” says Lotz, a supporter of Title II, who is skeptical that even large services can “simply absorb whatever cost they would need to be paying to be in those fast lanes”.

While no one knows how much ISPs plan to charge for a high-speed connection, Netflix reported in 2014 that Comcast’s extra “access costs” was 150 percent more than what the streaming platform already paid the ISP.  

Anti-net neutrality, pro-consumer?

While the purpose of net neutrality is to protect the public’s access to the internet, there are instances where weaker net neutrality rules could benefit the consumer. Critics of Title II status see the government regulation as preventing efficiency in the distribution of internet access.

Professor Daniel Lyons, an internet regulation expert at Boston College, supports Title II repeal in part because he believes not all web traffic demands high-speed internet.

“Certain apps have different susceptibility to congestion. If you’re streaming video, congestion is something that can adversely affect the consumer experience. Whereas, for email or web browsing, it doesn’t,” Lyons told WikiTribune.

Net neutrality advocates, however, reject any plan that discriminates web traffic, instead treating the flow of information as a “dumb pipe.” They argue that ISPs have abused this power for their own financial benefit before, and that the FCC was unable to legally enforce all of the principle of net neutrality until Title II was implemented.

The 2014 federal case, Verizon vs. FCC, spurred the Obama Administration to push for broadband internet to be given Title II status. The appeals court ruled that “the Commission had failed to cite any statutory authority that would justify its order compelling a broadband provider to adhere to open network management practices.”

Only one game in town

Whatever ISPs decide to do once Title II is repealed, the majority of consumers in the United States would have to live with the results.

Roughly 62 percent of U.S. residents must choose from two ISPs at most, for even the slowest of internet connections, 3 megabits per second. But living in an area with two options for high-speed internet is a privilege, according to data from the consulting firm Economists Incorporated. Forty-one percent of Americans have one or zero ISPs available in their area for a standard 25 Mbps connection.

U.S. household access to different internet carriers. Graph provided by Economists Incorporated, a consulting organization, using FCC 2016 data.

The issue of monopolies and duopolies was controversial in the U.S. well before the Trump Administration. Former FCC chairman Tim Wheeler, who implemented Title II status under the Obama Administration, cited lack of competition at the venture capital conference where he released the above chart.

“Competition drives deployment and network innovation,” said Wheeler at the 1776 organization in 2014 before describing the discrepancy in access “…three-quarters of American homes have no competitive choice for the essential infrastructure for 21st century economics and democracy.”

Current FCC chairman Pai has repeatedly cited the dearth of ISPs, especially in rural and low-income areas, as a reason for repealing Title II, which “reduced investment” in the industry.

“When businesses cut back on capital expenditures, the areas that provide the most marginal returns on investment are the first to go. And in the case of broadband, that means low-income rural and urban neighborhoods,” said Pai in a prepared speech.

Whether Title II implementation harmed investment is difficult to gauge, since each ISP reports different number. Free Press, a pro-Title II organization, released a report that found that no ISPs reported loss of capital to their investors. For example, Comcast’s executive vice president Mike Cavanagh acknowledged to investors in 2016 that “I think in terms of what actually happens… it’s the fear of what Title II could have meant, more than what it actually did mean.”

There is little evidence, however, that repealing Title II ISP market will generate competition for consumers. In fact, Pai reversed a mandate that forced Charter to build fiber optic cable for 1 million homes that already had access to another ISP. Instead, Pai ruled that Charter should focus on providing internet access to residences with zero options.

“[ISPs] could build infrastructure in areas to compete, but they’re not going to do that, because the existing advantage of the ISPs and having little to no competition is far more valuable,” Professor Lotz told WikiTribune.

What are known as “overbuild provisions” are largely avoided by ISPs because it remains more profitable to be the first company to reach a territory, rather than the second or third. When Comcast and Time Warner Cable began merger talks, Comcast authored a memo to the FCC that read “Comcast and TWC have never had plans to expand into each other’s territory and overbuild each other. Indeed, no incumbent cable operator ever has.”

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