Net neutrality and business models

May 1st, 2014 by · 4 Comments

This article was authored by Jouko Ahvenainen, and was originally posted on

The Federal Communications Commission is releasing a new net neutrality proposal in the US. It is FCC’s third attempt to regulate net neutrality, after a court turned down the previous version in January. Net neutrality means a concept, how internet traffic should be treated equally and whether it’s possible to prefer some traffic based on certain criteria. For example, some media companies would be interested in securing priority to their traffic to guarantee seamless live streaming. Comcast and Netflix have made this kind of agreement, although Netflix has commented it was almost forced to do so.

FCC has told that it wants to guarantee a free and open internet. At the same time they plan that broadband companies could have ‘special lanes’ for faster connections and services. Under the new proposal ISP’s would have to disclose how they treat internet traffic and what are the terms and conditions in offering these special lanes. It would also require ISP’s to work “in a commercially reasonable manner”.

The broadband companies, like Comcast and Verizon, are interested in getting content companies to pay for the special lanes. At the same time content companies, like Google, Apple and Amazon might be also willing to pay in order to offer better quality of service. But many other parties like smaller companies and consumer groups see this as a threat to a free and equal Internet. Big companies could dominate internet business by buying better network lanes in order to offer better services to consumers. How could a startup challenge Netflix or Google anymore?

Brazil took a different approach, when it just approved a “Bill of Rights” for the digital age. It basically forbids ISP’s to sell preferential access to companies. The European Parliament accepted a “net neutrality” bill earlier in April. The bill on “net neutrality” will force internet providers to treat all traffic the same, regardless of its source. Many parties, including startups, consumer groups, online freedom activists and e.g. World Wide Web’s inventor, Tim Berners-Lee, have welcomed the Brazil and EU bills.

European telecom carriers have been worried about the new bill. They see the European Carriers will see reducing revenue compared to carriers in the US and Asia. Some parties argue that content companies could develop better IP-based services, if they could buy fast lanes. And if these companies take a lot of capacity away from the networks, should they also pay special fees? A totally equal internet can anyway be an illusion and consumers might pay hidden costs, if ISP’s cannot pass them on openly to companies.

This is definitely a complex issue, and many questions arise about equality and fairness. I wrote earlier that carriers and states might be forced to re-think network infrastructure funding models (see Infrastructure vs carrier investments). When TV, movie rental, calls, games and high-frequency trading are and become more onto Internet networks, they will take a lot of capacity. Who and how should these services be paid? Is it reasonable that online streaming must have higher priority than an email? How should investments in new and faster networks be funded? The same issues will pop up in mobile networks as well, and consumers might also be happy to pay special price for limitless data for movies or games (see The future of carriers revenue).

The net neutrality discussion is a political fairness and equality discussion. The Internet is a necessary part of any persons or company’s infrastructure. At the same time it is important that decision makers also understand the facts of carrier and content business, and the technical needs and investments required for offering services to consumers and companies. It is easy to make general statements about equality, but much harder to really open the cost structure and pricing of the actual services. It would be good if all parties could work together to analyze and calculate the technical needs, cost structures and impact on Internet users. Only in that way we can really find solutions that are best for consumers, businesses and governments in both the short and long term.

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Categories: Government Regulations · Internet Traffic · Other Posts

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4 Comments So Far

  • JPW? says:

    “How should investments in new and faster networks be funded?”

    The same way it always has been; subscriber revenue and, in this country, massive government subsidies. Not from extorting companies who depend on a functioning internet for their business model.

    • Aynon says:

      HA – shrinking revenue and bankrupt countries who can’t afford to build infrastructure over pay for all the retirees and unemployed. i’m sure that’ll work out just fine

      • Nope says:

        I dream of a world where oligopolies can maximize corporate profits by selectively extorting content creators and screwing their end customers without encumbrance.

    • Cost Causation Lover says:

      JPW? Amen to that!!!!

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