Here’s How The FCC’s Stance On Net Neutrality Will REALLY Impact Telecom

Image Credit: nrkbeta
Here’s How The FCC’s Stance On Net Neutrality Will REALLY Impact Telecom
Image Credit: nrkbeta

Image Credit: nrkbeta

In a landslide decision in February, the FCC reclassified the Internet as a public service, putting it under the umbrella of Title II regulations. Internet advocates around the world rejoiced: they had finally won a hard-fought legal battle over net neutrality. Cable and Internet providers, they said, would no longer be able to abuse their power to force companies to pay for fast-lane Internet.

The companies attempting to oppose the classification weren’t quite so pleased. They made the case that the ruling would stifle innovation, discouraging shareholders and venture firms from becoming involved in the industry. Further, they said, the regulations unleashed upon the net with the FCC’s ruling leaves the market open to stricter impositions down the line.

“The cable and telecom companies,” an article at Forbes argues “have expressed concerns that a highly regulated environment could deter their investments in broadband services. Critics of the regulations have also argued that the new rules could ultimately lead to price regulation.”

Proponents of net-neutrality point out that it’s less about regulating the ISPs and more about preserving the internet as it currently works. Net-neutrality aims to ensure that all data packets are treated equally: they aren’t throttled based on who the sender or intended receiver is.

Some organizations have attempted to obfuscate net-neutrality by arguing that it demands ISPs treat large data providers such as Netflix identically to small businesses, thus favoring large corporations over ma and pa shops, since large corporations transfer much more data.

Anyone in the data industry knows this isn’t the case; differing data transfer limits, with different prices, are a norm in the industry, and are unrelated to the concept of net-neutrality. Net-neutrality simply demands that ISPs base price points strictly on bandwidth, and that they shouldn’t care who is sending or receiving the data.

Nevertheless, it would be misleading to say that the reclassification changes nothing. ISPs haven’t attempted to throttle bandwidth for specific companies (at least not on a wide scale) until recently, but they were legally allowed to do so.

Fear, uncertainty, and doubt aside: how will telecom really be affected by all of this?

According to research firm Fitch Ratings, it’s probably going to just be business as usual – at least in the immediate future.

“Even if the rules were implemented immediately, there would be very little near-term effect on revenues or operating profits from existing services,” the firm explained in a press release. “If put firmly in place, however, Title II rules could ultimately change the way Internet traffic is managed as well as impact future revenue opportunities and business models.”

They’re not wrong about that, of course. Reclassifying the Internet as a public service – mandating that access to one website needs to be just as unrestricted as access to another – does rule out certain business models, such as “internet fast lanes,” which, while never previously implemented, could theoretically have been put in place before the reclassification. At the same time, it’s highly unlikely that this will cut into the existing profit margin of most organizations.

Strict free market advocates may have cause to oppose the reclassification for this reason, but they should bear in mind that the biggest telecom companies were built on subsidies and exclusive deals; they were never strictly free market entities.

As for the concern that the Title II rules could open the door for even harsher regulation, this is unfounded paranoia: a slippery slope argument born out of fear of further losses. At this moment, there is no indication that anyone, be it internet advocates or the FCC, wishes to further control anything. The only possible change we might foresee would be price caps – a restriction on how much one is able to charge for broadband service, but even the FCC is not currently considering this option.

The only aspect of the ruling which could be potentially damaging to telecommunications firms are changes the FCC is making to its regulation involving municipally-owned ISPs. Rules that once existed against the expansion of government broadband – particularly in rural areas – are null and void. Not only does that make for a more competitive market, it also means clients in less-trafficked regions could potentially have access to faster, better Internet.

I expect that we’ve not heard the last of the net neutrality debate. But for now, at least, it should be relatively clear that the space of possible future landscapes has changed – and your business needs to change with them.

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