Innovation and a Neutral Internet

08 February 2017

The debate on the role of net neutrality when it comes to innovation is subtle. Both pro and anti net-neutrality debates tend to involve innovation, but from different angles. Internet providers are usually anti-neutrality with the claim that a neutral Internet stops them from charging more to move data, which would (in theory) prevent them from investing more into their networks. Large companies such as Google tend to be for net neutrality, because a non-neutral Internet would likely cost them more. The likes of Google, Facebook, Netflix and other huge online services grew and for now continue to grow in a neutral Internet. However, so do Internet providers, which make far above what’s considered a “good” profit margin for a business.

Internet providers have already admitted that limits such as data caps have nothing to do with their network capacity. It is true that as high-bandwidth services like Netflix, Skype, and other streaming services are used by more people, more network capacity is required. However, the amount of data that is zero-rated - that is, it can be streamed without using up a data cap - makes it clear that capacity is not a huge concern. Companies like AT&T have rolled out streaming services for live TV quickly and without capacity problems (though not without other problems) on more than one occasion. Further, companies like Verizon are pushing landline customers to wireless rather than repairing copper cables, which speaks to how much spare capacity they seem to have available (certain wireless calls are routed over the Internet on some networks, including Verizon and AT&T).

Looking at where money given to Internet providers has gone in the past makes the idea that ISPs would reinvest larger profits back into their services questionable. Most ISPs are public companies who answer to their shareholders, who have financial stakes in their success. Most likely, at least a large part of an influx of funding would be distributed to shareholders. An influx of cash to Internet Service Providers has happened before where the government gave grants for network upgrades, and little to none of the funding actually went towards network improvements - though company executives had larger than usual bonuses for the years following. The idea that ISPs are in any sort of need of extra funding is questionable in and of itself due to the profit margins we’ve seen through their history. Most of the cost of running a network is in the geographic installation, rather than the day-to-day maintenance. Not to mention, ISP spending has actually fallen since 2007 (to 2014) per percentage of revenue.

Money that online services need to pay to ISPs for delivering their content is money that online services are unable to invest back into themselves. What this means for consumers is either higher costs for the same service, if online services choose to pass those costs on to their customers, or fewer improvements and fewer new features in the services they use. In a world where Internet service providers charged online services for bandwidth - which in reality, online services are already paying for, just not on the consumer ISP end - it’s far more expensive to build an online service. In the end, this is bad for consumers because it limits the competition that can develop when it comes to high-bandwidth services. Internet providers have used the argument that by charging high-bandwidth online services more for transporting their data, they can charge their customers less. In reality, customers are more likely to end up paying the same, if not more for their Internet when factoring in the cost of online services, even though their Internet connection could cost less.

The fact is, the vast majority of companies are not Internet service providers. While Internet service providers need to continue to invest in their networks in order to deliver content to their customers, there’s too great a risk in allowing them to become the gatekeepers to the Internet. The shipping company analogy - where service providers should be able to charge companies more for moving their data and companies will pay for it if they need it - breaks down here. Access to goods and services is important, but waiting an extra week for an online purchase is nothing more than an annoyance (and where it is, there is a local option). Access to information needs to be equal.

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