UK: Internet Access: Fair Game?

Last Updated: 30 June 2014
Article by Richard Kazibwe

'Network neutrality' – providing fair access to the Internet, regardless of the type of content – has long generated plenty of debate and controversy.

A recent FCC ruling however allows Internet Service Providers (ISPs) to charge premiums to data-heavy content providers (such as Netflix and YouTube) to deliver their data at higher speeds, provided they meet a new standard of "commercial reasonableness".

This came after the FCC lost a court ruling to Verizon that challenged the requirement to treat all Internet traffic as equal.

Across the pond however, this issue remains slightly less divisive, with the European Parliament last month agreeing proposals to ensure net-neutrality is preserved. Ed Richards (CEO of Ofcom) however has expressed concern about this regulation and said in a public letter that " well-intentioned but over-prescriptive and detailed legislation may deliver the opposite of the intended effect".

But what does it mean for the business and consumer landscape? And what are the opportunity costs for implementing net-neutrality? In order to begin answering these questions, we need to understand who the 'winners' and 'losers' are in a world devoid of net neutrality:

The winners

  • ISPs will be able to generate additional revenues by offering enhanced data speeds at premium rates, also known as prioritised delivery of services. It's worth noting that costs related to service prioritisation are minimal as the ability to offer varying quality of service (QoS) levels has been in existence for a long time, and is currently used for a number of applications such as traffic filtering and deep packet inspection (DPI) - the ability to read the data part of IP packets to determine more information about the type of data it contains.
  • Content Providers who are willing to pay a premium for service prioritisation (such as Netflix in the US) will benefit from guaranteed, enhanced data speeds which can deliver improved customer experience, giving them a competitive advantage over smaller organisations that can't afford to subscribe to premium services.
  • Consumers could benefit from better quality of service for heavier applications and content, such as video and gaming, which would improve their overall user experience.
  • For regulator/antitrust authorities this would lead to increased competition and hence more options for the consumer.

The losers

  • If not adequately regulated, there is an inherent risk that ISPs could 'coerce' content providers into upgrading to premium delivery by degrading the quality of their standard offering. Hence data-heavy content providers (such as Skype, Google and Netflix) could incur increased charges.
  • Smaller businesses that can't afford to pay for premium content delivery could lose out to the bigger players that are able to pay.
  • For consumers, this service offering could come at an increased price if content providers pass the additional costs on to their customers.
  • For regulator/antitrust authorities, unless comprehensively designed, policing this new law could prove costly as ISPs will invariably have some level of discretion over quality of service settings and the type of commercial offerings they make available to content providers and consumers.

We can therefore start to see that whereas ISPs would be victors, the impact on content providers, consumers and regulators will be decided by how well this type of policy is implemented.

The verdict

The ability to offer prioritised content delivery could introduce a whole host of new opportunities and business models for ISPs and content owners, such as generating revenue for the ISPs or service differentiating for the content providers. The ISPs will always be a winner in these scenarios, but the sustainability of the model will principally be determined by how well it is structured to ensure optimum benefits for the content providers and consumers.

It is also worth noting that prioritised delivery of content is not an entirely new concept. Due to the limited nature of spectrum in mobile communications, mobile operators and equipment manufacturers have long used various techniques to improve efficiency of spectrum usage by offering various levels of quantity and quality of service. Learnings can therefore be extracted from these applications in order to fine-tune new laws on content prioritisation.

The regulators have an important role to play in ensuring that they do not unreasonably restrict technological development and stifle competition by imposing prescriptive laws. Conversely, they need to ensure that access to the Internet – an important catalyst for technological and business growth – is properly regulated

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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