What will happen now that net neutrality is gone? We asked the experts [Interesting]


This article was published by Quartz and curated by Closer Spot. Be sure to check out other Closer Spot news and advice to help you win more business.

A man watches the sunrise on New Year's Day at Gaviota Azul beach in Cancun January 1, 2014.
The Federal Communications Commission (FCC) voted last week to repeal net neutrality rules. What comes next is either faster, expanded internet access, or a dystopian internet ruled by quasi-monopolists. Or, more likely, somewhere in between.

Quartz polled more than 20 academics, broadband companies, industry analysts, and non-profits to get their predictions for what the future will bring. Almost everyone agreed the full effects will take years to appear after the Dec. 14 party-line vote led by chairman Ajit Pai, a Republican, to overturn the 2015 Open Internet Order, which codified net neutrality rules and asserted the FCC’s legal authority to regulate telecoms as common carriers under Title II.

The vote effectively negated the FCC’s authority and three core net neutrality principles formally adopted under President George W. Bush: the freedom to access any lawful internet content, the freedom to use any online service or application, and a competitive market for network providers, content and service providers. In its place, the FCC will let telecoms commit to voluntary principles, which must be disclosed to subscribers, and then leave enforcement up to the Federal Trade Commission (FTC). The new rules will go into effect in the coming weeks.

At the moment, the public is deeply opposed to the decision (pdf). The strongest defense of the repeal has been mounted by Republican stalwarts in Congress; big broadband providers such as Verizon and Comcast; and industry trade representatives such as US Telecom. Their argument is that more flexibility will convince telecoms to invest in faster, more equitable internet access.

“Broadband providers will have stronger incentives to build networks, especially in unserved areas, and to upgrade networks to gigabit speeds and 5G,” wrote Pai in a public statement promoting the repeal (pdf). “This means there will be more competition among broadband providers. It also means more ways that startups and tech giants alike can deliver applications and content to more users. In short, it’s a freer and more open Internet.”

US Telecom echoed this sentiment arguing that the changes, if any, will be virtually indistinguishable from today’s internet. “Broadband providers support net neutrality protection such as no blocking or throttling and will continue to do so which means that consumers won’t see any difference online,” a USTelecom spokeswoman wrote by email on Dec. 15. “The internet is the same today as it was yesterday. We expect there will be legal challenges to this decision which could last well into 2018. And we expect that this decision will lead to more network investment in the coming years.”

Most analysts, activists and researchers vehemently disagree. While some predicted some benefits—lower-priced plans for basic service and more innovation around the internet of things—most said the average customer should expect to pay more. Given the extreme concentration in the broadband market (no competition at all exists for more than 56 million households with wired 25MB broadband connections), investment in underserved areas appears unlikely. Customers who want to ditch their ISP due to degraded service and blocked content will have limited options.
To understand the net neutrality fight, you need to know it is, in part, a brutal proxy war between incumbent telecoms (Verizon, Comcast and AT&T), and their upstart rivals on the west coast (Google, Facebook and Netflix). The battle is over billions in advertising and subscriber dollars.
Telecoms are desperate to avoid becoming “dumb pipes” that transport billions of dollars of lucrative content supplied by others (three of the four major wireless carriers saw lower revenues this year). Look to Verizon’s purchase of Yahoo or AT&T’s stalled effort to acquire Time Warner (the Justice Department is suing to block it) as a preview of attempts by legacy infrastructure companies to escape this fate. Content companies, for their part, are stepping up their multi-billion dollar infrastructure spending spree to own their delivery channels: Netflix has an in-house delivery network and pays ISPs for better service; Microsoft and Facebook just funded the Atlantic Ocean’s highest capacity submarine cable, and Google’s cables already connect the US to South America and Asia. Net neutrality rules are the backdrop against which this fight will be waged.

We’ve broken down and given context for some of the main arguments below. Interviewees for the story included:
  • Karyn Smith, general counsel for Twilio, a cloud communications platform
  • Ryan Singel, a fellow at the Center for Internet and Society at Stanford Law School
  • David Faber, a professor of internet studies at Carnegie Mellon University
  • Dirk Morris, the founder of network management software firm Untangle
  • Denelle Dixon, Mozilla’s chief legal and business officer
  • Henry Su, a former trial attorney for the FTC, now a partner at Constantine Cannon law firm
  • Michael Weissman of the Gfast Council, an industry group promoting high-speed fiber broadband
  • Colin Petrie-Norris, CEO of content service provider Xumo
  • Charles Palmer of FTI Consulting
  • US Telecom, spokeswoman
  • AT&T, spokesperson
  • Chris Hart, counsel for law firm Foley Hoag
  • Althea Erickson’s, head of advocacy and impact at Etsy
  • Phillip Berenbroick, senior policy counsel at Public Knowledge
  • Matt Wood, policy director at Free Press

Content will be blocked and throttled

Telecoms are now free to decide what content to block or slow down. While economists suggest ISPs should deliver the maximum variety of content to its users, the lack of competition (and case studies such as Netflix) suggests telecoms will prioritize paid content over the rest.

That was the experience of communications firm Twilio, according to general counsel Karyn Smith. Text messages, which are not protected by net neutrality, are a good predictor. “Customers should expect their Internet experiences to mirror what we at Twilio have seen for a number of years,” she writes by email. “First, customers can expect to see content they are trying to access blocked by their provider.” Twilio told the FCC more than 100 million lawful messages are blocked each year without notice or explanation. “Second, customers can expect to see content they are trying to access dramatically slowed down,” she writes. “Providers may choose to slow certain types of traffic—such as videos, photos or other data rich media—that take more bandwidth….All of these behaviors are examples of anti-competitive behavior that kill innovation and the companies driving it.”

Telecoms have already given signs they will do this. In a 2013 court case over net neutrality, Verizon told a federal judge that it had the right to prevent users from accessing any website or online service if content providers did not pay fees to the telecom. This payment, no matter the amount, does not count as blocking since it was an “information service.” The court agreed with Verizon, and noted that the FCC had to regulate telecoms as a common carrier under Title II if it wished to assert this power (you can hear the full hearing here). This eventually helped prompt the 2015 FCC decision to classify telecoms as common carriers.

With the Dec. 14 repeal, Comcast and others will be able to charge content companies to exorbitant fees without, technically, blocking. This fundamentally changes how the internet works, argues Ryan Singel, a fellow at the Center for Internet and Society at Stanford Law School. Any website or service may now have to pay ISPs to load, reducing the number and variety of free services. Expect telecoms to exploit this power extracting maximum fees and deterring new entrants.

Resolve these cases of throttling or blocking will be a mess, says Johannes Bauer, an economist and information technology researcher at Michigan State University. “It is not clear how these cases will be resolved, as neither the FCC nor the FTC is left with robust instruments to address such scenarios effectively,” he writes.

Not much will change right away. But just wait.

US rules on “network neutrality” have flipped six times in the last decade. The FCC, under a future administration, could reclassify telecoms as utilities yet again. That gave some experts pause about how much immediate impact the rule change will have.

“I don’t expect much to happen,” said David Faber, a professor of internet studies at Carnegie Mellon University, citing the pending lawsuits against the FCC, political uncertainty, and public pressure to punish bad behavior of corporations. “If you’re a big company, you don’t want to set strategy that can be reversed in three years.”

But others said that change is already happening behind the scenes. “It’s important to understand that this rollback isn’t a light switch,” writes Denelle Dixon, Mozilla’s chief legal and business officer. “People won’t feel the disappearance of the free and open internet instantly, but soon enough they will.”

Changes cited are on the backend of the vast US telecommunications network: big streaming services may look better, or load quicker, while newer ones outside “preferred partner” programs will sputter. Costs from payments extracted by ISPs will be passed along to subscribers. Fewer startups will launch faced with added costs and special treatment for large incumbents. These changes lay months or years in the future, and be nearly invisible to the end users, but they will reshape the fundamental nature of the system.

Paid “fast lanes” and internet tolls

Since the FCC has stopped treating the internet as a utility such as electricity, water or phone, telecoms can now discriminate against who receives standard service, writes Dirk Morris, the founder of network management software firm Untangle. Treating quality internet service like a luxury may be fine for some applications such as email, but he argues it will inflict the most harm on people and small businesses with limited resources. On the other hand, those that do pay will receive premium speeds and quality (Comcast’s own content or Netflix is unlikely to suffer).

Paid fast lanes mean companies (and individuals) will have to choose between degraded service or paying fees. Fast lanes (more of a concept than a physical reality) privilege companies that pay ISPs over the ones the do not. One analogy of how this works, argues Twilio, are “shortcodes” offered by wireless carriers which offer a short number for mass-texting. The tiered systems means the cost for a shortcodes is about 500 times more than regular phone numbers in exchange for guaranteed delivery. If the same situation applies to broadband, that cost will be passed along to customers and smaller businesses.

Small businesses and startups will struggle to compete

The argument for paid prioritization is that companies that need fast connections pay for them, and those that don’t can survive on slower or less reliable service. While net neutrality rules already allow telecoms to carve out packages for specialized application such as health care, repeal advocates argued the rules were too constrictive.

Mozilla argues this prioritization will ice out startups and small businesses. “Without net neutrality, big internet service providers can choose which services and content load quickly, and which move at a glacial pace,” writes Dixon. “That means the big guys can afford to buy their way in, while the little guys don’t stand a chance.”

This model undermines the way the internet has supported so many new companies, worries Henry Su, a former trial attorney for the FTC, now a partner at Constantine Cannon law firm. “So much of the vitality and disruptiveness we’re seeing in our current economy comes from the fact that startup companies are able to design business models that leverage reliable, high-speed internet connections,” he writes by email. “If these ‘fast lanes’ become reserved for well-heeled incumbents that can afford to pay for access, we may well see a significant drop in the number and variety of startup companies that enter and challenge the establishment.”

Higher broadband costs, cheaper basic plans and tighter data caps

Prepare for a Cambrian explosion in pricing plans and data caps. “I anticipate the emergence of lower-priced basic tiers (e.g. basic Internet access) with the option to add a music package, a video package for an extra charge,” writes Bauer at Michigan State University. “At the same time, there will be upward pressure on the price of unlimited broadband access.” The ability for telecoms to impose caps, and charge for more types of plans, will likely push up prices overall.
“That’s actually a good thing for consumers,” argues Michael Weissman of the Gfast Council, an industry group promoting high-speed fiber broadband. More differentiated services, with both lower-price and higher-price options, gives customers what they want.

But without a competitive market, prices may be artificially high. Telecoms will try to create caps (or “zero rating” which allows some companies to stream data without counting against a cap) that push customers into more expensive packages. Neither is it clear ISP’s will embrace lower-cost plans when they can profit by raising prices on existing customers. Today, subsidized internet connections under the FCC’s Lifeline program (now suspended) have attracted hardly any commercial participants from existing telecoms.

What’s the answer? Competition. Alternatives are only likely to come after mobile technology catches up with landline speeds, writes Colin Petrie-Norris, CEO of content service provider Xumo. “Mobile companies and even broadcast TV companies using new radio over-the-air technology will give consumers more choice,” he argues.

Splintering of the internet

A patchwork of regulatory regimes and gated content access threatens to balkanize the internet, argues Morris of Untangle. By building content into paid packages (similar to cable television), whole swaths of the population unable to pay may never see much of the internet now accessed through plans regulated by connection speed or data.

That could fracture the global digital commons, writes Charles Palmer of FTI Consulting. “The FCC ruling may be the catalyst for the ‘splinternet’ thanks to an increasingly uneven application of regulatory regimes across multiple regions, where the only real beneficiaries will be lawyers,” he argues. State lawmakers in California and Washington are already floating legislation to counter the FCC’s new rules (paywall).

Telecom censorship

Free speech advocates are up in arms that ISPs may discriminate against legal, but politically unpopular content. Since ISPs control users’ entire access to the internet, they should not be able to decide what content and services users see, argue critics.

This isn’t new. Tim Wu’s seminal 2003 paper (pdf) on net neutrality found that terms of service of all top 16 DSL and cable providers allowed them to block any content deemed “offensive” or “immoral.” Political pressure has already led to service providers removing content. The Obama Administration reportedly pressured Facebook to ban private gun sales on the platform that were being done without background checks.

Although that case involves illegal transactions, Singel sees this as a threat across the political spectrum. “We could easily see an Administration or members of Congress push for blocking of legal but politically unpopular sites,” writes Singel. “If trolls and activists will work the refs at Twitter, MSNBC and Facebook to get their ideological opponents banned, why not do the same at ISPs?” That means sites that are still on the internet could become unavailable to many users.

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