Which Types of Businesses Will Be Affected by Net Neutrality (And How)

Updated: April 20, 2010

One of the hottest tech topics in recent years has been "net neutrality." Roughly speaking, net neutrality is the notion that Internet Service Providers (ISPs) should treat and price all incoming and outgoing data the same. Proponents of net neutrality fear that without it, we would get, as Copyblogger's Brian Clark puts it, "a tiered Internet, where those who pay (beyond basic hosting and Internet service) get preferential speed and access." Not everyone agrees, of course. Raymond Niles of The Objective Standard opines that should net neutrality become law, "an ISP's customers will suffer slower speeds so that other customers can use disproportionate capacity for which they are not paying their share." One thing is clear: the presence or absence of net neutrality laws profoundly affects all sorts of businesses in one direction or another. Several important examples are explored below.

Internet Service Providers

The businesses most obviously affected by the presence or absence of net neutrality are ISPs. In many ways, it appears that net neutrality laws would hamper the financial success of ISPs. The driving force behind net neutrality, after all, is the imperative that all Internet activity - regardless of what different parties are willing to pay - be given equal priority on an ISP's network. The mere fact that there is a movement for net neutrality implies that some parties are, indeed, willing to pay more for greater priority and delivery of their data, be it streaming video, high-end processing or premium content. Raymond Niles writes that without the ability to "profit from providing special services to certain customers, such as smoothly streaming high-definition video feeds", the ISP's network is, as a direct result, "worth considerably less to them in terms of its profit potential." Furthermore, their incentive to expand and upgrade the network is arguably diminished. 4G Wireless Evolution's Gary Kim concurs, stating that much of the network neutrality debate "is about the distribution of cost, revenue and business advantage within the Internet ecosystem." Implicit in Kim's assessment is that the ability to discriminate among different types of traffic (which net neutrality opposes) is, in fact, a source of business advantage. Therefore, it seems likely that ISPs would suffer at least partially, in financial terms, from the passage of net neutrality laws. TheAtlantic.com reported that an April 6 appeals court ruling struck down proposed FCC net neutrality regulations. That being said, there is still a broad consensus of public support for net neutrality. ISPs that support and adopt net neutrality practices voluntarily could therefore benefit from political/regulatory good will, which could partially offset the financial losses involved.

Rich Media Providers

While ISPs stand to benefit from lack of net neutrality by being able to charge for higher network use, rich media providers are on the opposite end of that transaction. Companies like YouTube and Hulu, for whom high-end content is their bread and butter, can be charged more for the network resources they use. As Gary Kim explains, ISPs and search giants like Google " would like nothing better than to shift its business costs to other ecosystem providers" like rich media channels. File sharing providers (such as the many BitTorrent search engines and clients) are already seeing access to their services limited or more highly priced due to lack of net neutrality. John Callaham of BigDownload.com remarked on how the recent appeals court ruling upheld Comcast's 2008 move to block customers from downloading via BitTorrent back in 2008. P2P file sharing has, not coincidentally, been one of the major drains on ISP bandwidth during the 2000's.

Callaham extrapolates from the court's pro-Comcast ruling that "we could see ISPs try to enforce broadband caps" on other services, such as graphics-intensive online gaming. If such restrictions materialize, Callaham says, this could "affect how people download games as well as upcoming streaming game services." In another interesting twist, the Los Angeles Times Blog argues that net neutrality could be "a barrier to a smut-free Internet", as social conservatives apparently imagine that an unregulated Internet would make it easier for ISPs to censor pornography.

Social Media

Brian Clark's take on net neutrality centers around how it (or the lack of it) affects social media participants, such as bloggers. Within the last five years, blogging has gone from being merely a hobby to providing incomes for bloggers via advertising revenue and sponsorships. Unfortunately, Clark is not optimistic about what the appeal's court recent rejection of net neutrality regulation will mean for bloggers. Specifically, Clark states that the decision "sets a precedent for the cable companies to follow the tiered Internet approach soon to be established by AT&T" which, Clark holds, could result in higher prices and/or diminished quality of service for web publishers (and consumers in general.)

Consumers

How net neutrality affects consumers depends on which consumers are being discussed. If "consumers" means simply customers of ISPs in general, there is a strong case to be made that consumers will benefit from no net neutrality. If ISPs are free to throttle bandwidth-heavy applications and/or charge the highest consuming customers their fair share, prices charged to "normal" customers could concievably be lower than if we had mandatory, equal pricing of all Internet use. Prices could also be pushed down by greater overall competition among ISPs. Raymond Niles offers a practical example of what non-net neutrality might produce in terms of competition:

"A start-up ISP might compete against Comcast by configuring its fledgling network to favor Bit Torrent's peer-to-peer data packets, thereby earning it the business of serious movie downloaders without having to match or exceed Comcast in expensive infrastructure."

Consumers of rich media providers, on the other hand, could face higher prices in the absence of net neutrality. Since ISPs are now unrestricted in their ability to charge more for certain types of bandwidth use, a company charging fees to its subscribers for premium content would, in all likelihood, be compelled by economics to raise those fees, commensurate with their own higher bandwidth costs. Some, of course, fear that an unregulated Internet could give rise to collusive or monopolistic behavior. TheAtlantic, for example, raises the possibility of Comcast blocking its subscribers from seeing Verizon ads that happened to appear on various websites. As a solution, TheAtlantic suggests that beneficial, cost-effective bandwidth discrimination be allowed and that the government only "forbid those based on ends including payoffs, political gain, and anti-competitive behavior"

The Future

The appeals court's rejection of FCC net neutrality regulation is a major event in the history of this debate. And while the court decision emphatically struck down net neutrality in its current form, we have likely not seen the last of it. Bandwidth throttling, in particular, figures to be an ongoing target of criticism and protest from consumers, Internet advocacy groups and politicians, if the protests intensify. It also remains to be seen whether an unregulated Internet leads to such abusive practices as those discussed above. All things considered, net neutrality should remain a hot topic for the foreseeable future.

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