The End of Net Neutrality

Sitel Group Staff - January 25, 2018

Is it an economic game-changer?

Are we heading toward a two-speed internet? The American Federal Communications Commission (FCC) has opened a doorway to this possibility.

On December 14, 2017, the FCC conducted the net neutrality vote – rescinding one of the web’s founding principles – neutrality. This repeal resulted in shockwaves through online businesses and web-based services on both sides of the Atlantic. And with valid reason: this could increase online discrimination, reduce freedom of expression and hinder competition between businesses on the web.

This founding principle of the internet, established by President Barack Obama’s administration in 2015, required internet service providers (ISPs) to comply with a regulatory framework or face subsequent penalties. In essence, net neutrality leveled the playing field by making all existing internet content equally accessible to everyone, without discrimination. Thus, ISPs were prohibited from streaming video from one service more quickly than from another. Additionally, they could not charge subscribers extra for faster access to YouTube or Netflix, for example.

In a 3-2 vote, the FCC approved a new regulation superseding the landmark rule of 2015 which was described as a “straightjacket” that was “bad for the internet ecosystem.” According to the FCC, this new regulation is a “lighter” framework aiming to “promote growth,” – an opportunity welcomed by American ISPs, longstanding opponents of net neutrality.

Two-speed internet

Because of their considerable investments in the existing network infrastructure, ISPs justify charging more for sites using more bandwidth and clogging up networks. They argue that experimenting with new offerings and charging users extra for higher-quality services would allow them to make the required investments, leading to greater innovation.

This, in turn, would allow ISPs to (in some ways) suppress innovative yet bandwidth-hungry companies such as Netflix, Facebook and even Google in the short term, while they develop services of their own.

And while ISPs argue this repeal simply allows the rest of the online world to play catch up with the giants of Silicon Valley, the Facebooks, Googles and Apples of the online world argue that repealing this principle they committedly endorsed, will lead to a two-speed internet.

Moreover, these companies fear this decision will lead to the creation of two separate internets which differ in terms of cost, speed and content. ISPs could start favoring the connection speeds of certain clients with more expensive subscriptions or privileging certain types of content over others. Subscribers who cannot pay the higher price may be stuck with a lower quality of service.

“For brands, this is a major challenge because the internet has become a fundamental channel in customer relations,” said Arnaud de Lacoste, Founder and Chief Marketing & Innovations Officer, Sitel Group. “If customers no longer have equal access to information, businesses will suffer in terms of visibility and proximity to their customers. They will be forced to revise their digital strategies.”

In economic terms, deregulation will also have an impact on businesses’ capacity to innovate and on freedom of expression in general, according to those supporting net neutrality. The end of neutrality jeopardizes free competition impacting smaller internet players most of all as they will either have unequal access or be forced to pay exorbitant fees to access high-performance channels.

Therefore, the next great online disruptor may never have the online visibility needed to become the next Netflix.

The United States: an isolated case or an example for other countries?

This net neutrality decision has caused a commotion in the U.S. as many see it as a politically charged decision.

The FCC is made up of two Democratic representatives and three Republicans including its head, Ajit Pai, each of whom were appointed by President Trump.

However, this could also have major consequences in Europe. In France, the head of the French Telecommunications Regulation Authority (Arcep), Sebastian Soriano, asserted that the United States’ decision would have no direct effect on Europe.

In 2016, the principle of net neutrality was preserved in European legislation. Challenging it would require the agreement of the European Council, Commission and Parliament, which significantly complicates the issue compared with the U.S. where the FCC holds sole power to decide.

For the time being, French startups wishing to compete with the American market may soon be treated unequally by American ISPs.

In general, the enforcement of net neutrality in Europe is already shaky and inconsistent. Member States are responsible for enforcing it, and the directives leave room for interpretation. Therefore, some exceptions persist in certain countries, such as zero rating (when a mobile carrier does not count web traffic for an application under limited plans).

European providers would like to align themselves with their American counterparts – and might take advantage of the arrival of 5G in 2020 to ask for such arrangements.

The development of new uses for the internet, such as the internet of things or self-driving cars, will likely call for adjustments to protect net neutrality in Europe.

Update:
In early March 2018, Washington became the first U.S. state to pass legislation mandating net neutrality after the FCC’s December vote to end the net neutrality rule. And, several states are following suit. Montana, New Jersey, New York, Oregon and Montana are among the states that have taken action to consider net neutrality legislation.


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