Monday, 24 June 2013

Net neutrality; implications for digital businesses

This is a commentary on net neutrality, a current issue of significance between the internet service providers (ISP) and the large web companies that subsequently drew in the regulators.   It originated from the US in the mid-90’s but is now a global issue,  However it is much more intense in the US and Europe but I expect increased attention in Asia in a year or two as bandwidth consumption continues to rise sharply.  Because it is ‘regulatory’ in nature, it has ramifications across the entire online industry.  Because it has a cost element, it’ll ultimately affect consumers.  In Asia, many governments are still trying to bring down the cost of access so if the ISP (in Asia, the largest ISPs belong to incumbent telcos) attempt against net neutrality wins, it may make it so much harder.  It potentially raises costs.  For those who subscribe to the view that the economy is better off with the notion of an open internet, this issue is sacrilege!  On the other hand, the ISPs have a legitimate reason as usage is escalading, affecting costs.

This issue arose during the run-up when internet usage shot up and now continues with sites like YouTube and Facebook that not only attracted hordes of new users but increases the time spent online.  The ISPs have to increase capacity to catch up.  The adoption of smartphones made it worst.  They want those responsible, in their view, the popular websites and even the smartphone makers to bear some of the costs of the constant capacity upgrading.  The websites were obviously aghast.  Some ISPs, mostly from incumbent telcos have threatened to throttle or even block content from high usage sites.  Many did to some degree.  Critics countered that such actions would curtail innovation.  Many fear consumers will have to pay more.

The FCC (Federal Communications Commission), a regulator in the US stepped in, arguing that the internet is still a developing ecosystem and based on the principle of the open internet, decreed circa 2005 after a period of consultation, a regulation that networks must be neutral (thus net neutrality).  It means that all internet traffic be treated equally.  They probably also suspect that some ISPs may be opportunistic.  Many regulators around the world have followed the FCC to impose their variation of net neutrality on the industry.

Net neutrality is the principle that all data on the internet be treated equally. Normally directed at the internet service providers it means they should not discriminate or charge differently by user, content, service or site.  No discrimination means they cannot charge a user differently from another.  They cannot charge a different rate to carry different content ie. they cannot charge a voice service like Skype or a video site like Hulu different bandwidth fees.  They cannot discriminate against certain services or content by prioritizing or impeding access to any particular site through blocking or slowing bandwidth.  They cannot advantage their own service by treating competitors’ similar offerings differently.  So if an ISP allows subscribers an unlimited data plan for its own iptv service while levying a data cap plan meaning they pay more for another video streaming service, it is against net neutrality regulation.  They cannot block content (except banned content like child pornography) from any content provider.  So content such as Skype VOIP cannot be blocked, common in some Middle East countries. It is to prevent unfair discrimination by the ISPs.  It is the preservation of an open internet for content, important for the ecosystem with the argument that this egalitarian approach is the reason for the free flow of ideas and inventions and by association good for the economy.

In Asia, some countries allow ISPs to strike deals with content providers to deliver their content faster.  This is an interpretation of net neutrality which purest would surely rant about.  Unlike the US where politics gets in the way, in Asia, it tends to be more business-oriented.  As long as the general principle of the net neutrality is adhered to, as long as it benefits the consumers and it is within anti-competition rules, variations on its interpretation are allowed.  Some Asian telcos however simply ignore net neutrality or rather the fine details!

In the next post, I’ll explore if the telcos have a case.

©Chen Thet Ngian, (2012, 2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and with appropriate and specific direction to the original content.

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