The net effect
of net neutrality

Net neutrality protestPerhaps you heard: A couple of weeks ago the FCC under chairman Ajit Pai voted to repeal the 2015 regulations. 

It all started in 2008, when the people at Comcast noticed a curious thing. File-transfer giant BitTorrent was consuming more and more Internet bandwidth. More, it seemed, than Comcast cared for them to consume.

Comcast’s solution was to “throttle” BitTorrent’s and other large users’ bandwidth. That is to say, they slowed down their Internet speed.

When the practice came to light, the FCC slapped Comcast’s wrists. Or, rather, tried to. The rules were vague then, so Comcast emerged with wrists intact, albeit with a bit of mud on their face.

The BitTorrent case and others like it eventually led, in 2015, to the FCC’s lumping Internet Service Providers (ISPs) in with telecommunications service providers. ISPs could no longer, as NPR put it, “decide which websites load faster or slower, or charge websites or apps to load faster.” 

Except, that wasn’t exactly true. ISPs have been allowed to do exactly that, and that’s not necessarily a bad thing. Moreover, the conversation may be less about ending neutrality and more about revising the rules.

Net neutrality matters for financial institutions

Having worked in the banking industry since age 17, I’m well aware of the burdens that overzealous regulators can impose. With banks in particular, it seems whenever Washington feels a need to regulate, overkill is part of the mandate. So I tend to look favorably upon any suggestion of simplifying or doing away with rules.

But net neutrality has implications for the banking industry. I probably don’t need to point out that digital banking rather relies on a fast Internet. Without net neutrality, banks could end up paying extra to ensure speedy transactions, which doesn’t bode well for institutions not in eager pursuit of increased overhead.

Note that I said banks could end up paying extra. No one is entirely sure just what the repeal portends. As recently as November 22, @Comcast tweeted this promise:

We do not and will not block, throttle, or discriminate against lawful content. We will continue to make sure that our policies are clear and transparent for consumers, and we will not change our commitment to these principles.

That should reassure. Unless, like Ars Nova’s Jon Brodkin, you’re concerned about wording changes in Comcast’s stated positions over time, past abuses, and the fact that …

… Comcast has drawn a distinction between “paid prioritization” and “anti-competitive paid prioritization.” Paid prioritization should not be banned entirely, but “anti-competitive paid prioritization” should be limited, the company has argued.

Those who want to keep the current rules, and those who want to revise them

Besides the lion’s share of consumers, those who argue to keep net neutrality include the likes of Apple, Google, Mozilla, Amazon, Dropbox, Facebook, Microsoft, Netflix, Snap, and Spotify, to name a few. Here’s an excerpt from a statement by the nonprofit organization Mozilla:

Our position is clear: the end of net neutrality would only benefit Internet Service Providers (ISPs). That’s why we’ve led the charge on net neutrality for years to ensure everyone has access to the entire internet.

Apple had this to say in its Reply Comments to the FCC:

The result would be an internet with distorted competition where online providers are driven to reach deals with broadband providers or risk being stuck in the slow lane and losing customers due to lower quality service. Moreover, it could create artificial barriers to entry for new online services, making it harder for tomorrow’s innovations to attract investment and succeed. Worst of all, it could allow a broadband provider, not the consumer, to pick internet winners and losers, based on a broadband provider’s priorities rather than the quality of the service.

But let’s not be naive. Apple, Google, et al have shareholders to please, which means we shouldn’t assume they have only the public’s best interest at heart. Indeed, the issue is not as simple as they make it sound. These companies enjoy serious advantages under current regulations, so it’s no wonder they would want to maintain status quo. A recent post by science writer Brian Dunning points out that

… from an infrastructure perspective, there is no such thing as a “fair” Internet. The biggest content providers—Google, Facebook, Netflix, Akamai, Amazon, and others—are directly connected to Tier 1 networks, the highest-level networks over which data flows worldwide without having to go through anyone else’s routing, negotiation, or settlement. You and I don’t have that …

… Facebook is already enjoying “king of the hill” status as a Tier 1 service. Theirs is an easy position to take from where they sit.

Not surprisingly, ISPs are keenly interested in revising net neutrality rules. And they have their allies in the press. Writing for Forbes, Nelson Granados observes:

… the internet as a neutral platform for content providers and consumers has pretty much remained so during three regulatory regimes: One with no specific rules of anti-discriminatory behavior, one with explicit rules, and 2017 with an FCC that had no intention to enforce the rules. So there’s no major reason to fear a doomsday scenario going forward.

However, he adds, “That doesn’t mean there are no reasons to worry in the longer term.” He goes on to name a few, including “a more competitive environment in industries that could clog the internet pipes, like video streaming services.” Moreover,

… since 2015 ISPs have increased vertical integration into content (e.g., AT&T acquired DirecTV and Time Warner; Verizon acquired Yahoo and launched Go90) and they have natural incentives to favor their own content.

The net has never been neutral

“Unfettered access” may sound pleasing to some, but in fact it’s not possible. One of the problems in conversations about net neutrality is that the subject is too often treated as an all-or-nothing proposition. Workable solutions to managing the Internet are to be found between extremes on more than one continuum.

The Internet is a limited resource for which demand varies throughout the day. Without some form of “traffic shaping,” highest level users would utterly consume capacity, such that there would be no so-called free access at all. To wit, Dunning addresses the ins and outs of Internet traffic, taking into account not just ideological and economic factors but technical ones as well:

Let’s look at the basic example of Internet on a plane. You buy the service, and you find out that streaming video is blocked. No YouTube or Netflix on a plane. Why not? Because you would suck up all the bandwidth, and nobody else on the plane would be able to check their email or work on a Google doc. It’s necessary for the airline provider to impose this restriction to keep the service more useful for more people. It’s an example of an absolutely necessary fundamental violation of net neutrality.

The airline example is a microcosm of every other Internet environment. Your neighborhood broadband provider has to do this too. They generally do slow abusive users, peer-to-peer file sharing networks, denial of service attacks, even streaming video. It’s called traffic shaping. It’s done on a dynamic basis all day long, and it’s the basic principle for maintaining network quality of service. Your home broadband service would be terrible if your provider was not, right now, prioritizing some traffic, and delaying other traffic.

To Dunning’s point, The Palmer Group CEO Shelley Palmer writes in AdAge that what we’ve been calling net neutrality for the past two years hasn’t been all that neutral anyway:

Under net neutrality there were fast lanes and slow lanes, and a loophole called zero-rating which allowed services like T-Mobile’s “Binge On” to exempt certain streaming services from its data counts. There were other loopholes written into the rules where specific clauses included phrases such as, “Subject to reasonable network management,” which basically meant ISPs could throttle traffic if they thought they had to.

What the real debate needs to address

It’s important to avoid treating net neutrality as a choice between two extremes. No one wants absolutely free trade—the need for rules is understood—and no one who is informed on the subject wants absolute net neutrality. The debate should not be whether or not to have rules. It should center around what the rules should be, how far they should go, and who gets to make them.

Leave a Comment