Historically, Internet Service Providers (ISPs) have been have been able to provide their services without any real regulation targeted specifically towards the conduct of this business. This situation is about to change. The Federal Communications Commission (FCC) has decided that the broadband Internet will be regulated going forward (link) under the umbrella of Title II of the Telecommunications Act. The concept is called Net Neutrality. The ISPs will not be allowed to manage their Internet resource in such a manner as to discriminate against users, whether they are companies that use the Internet or consumers. This is huge! You might wonder why this is happening and what all the fuss is all about. Let me give you my own take on this.
For the past several years the growth of the Internet has been primarily driven by the Internet Service Providers who happened to have access to customers because they have traditionally provided other services to such customers such as cable TV and voice services. This service might have been provided via a traditional landline connection to the home, or through a mobile phone connection using a wireless cellular network. There have been a few exceptions, but the big players today not surprisingly happen to be companies like Verizon, AT&T, Comcast, etc.. In the case of services to the home, these companies started out by taking advantage of existing infrastructure, and then building on this infrastructure (coax or copper-based) or moving to new infrastructures (such as fiber optics) as the demand for greater levels of service grew. The growth in the mobile area on the other is being spurred on by new technologies from the ground up, including use of new wireless bandwidth resources that have been assigned for this purpose, and development of advanced transmission technologies that are able to support higher speed data service (as opposed to voice service) requirements more effectively.
In the early years, the applications that drove the use of the Internet were fairly simple, starting out with basic point-to-point requirements across the network infrastructure (think e-mail), and gradually evolving towards more client-server type interactions. The amount of data being transferred across the internet kept increasing as this was happening. The primary flow of data that came with functions like browsing were primarily unidirectional – to the home. The data movement patterns became less uniform in a certain sense from the early day. But the type of applications running in the home have also further evolved significantly in the last few years, with applications that involve significant downloads of data from the home to network servers, and also significant peer-to-peer traffic. People can now even stream videos from devices like smartphones to others, something that was unthinkable a few years ago. The traffic patterns in the network are a constantly changing story because of the innovation that is going on.
New kinds of applications are also increasing the traffic in the Internet further in many different ways. Video streaming services such as Netflix dominate bandwidth usage to the consumer these days. (link)
These days, Internet traffic is not necessarily driven by the customer. You have data that is being pushed to people who even do not know that something like this is going on. Then there is advertising data that is being pushed to customers based on data that is being collected about you on network connected devices that monitor your Internet behavior. Then you have routers on the networks that are intercepting data traffic and taking actions based on what is being seen – such action including sending of additional data to the customer. In many cases, the Internet Service Providers are themselves affecting the amount of traffic in the system. When customers interact with vendors across the Internet, such interaction can initiate further communication between these vendors and one or more third parties that will now form a part of the transactions that are going on. And then we have the data traffic from illegal or semi-illegal goings-on on the Internet where entities, unknown to end-users, bury software in their computers, that will generate traffic to and from these computers without the user’s knowledge. (Such is the danger of always being connected to the Internet.)
And all of this is only a viewpoint only from the consumer applications. All networking for commercial interactions also use the same resource that the consumer applications are sharing.
Essentially, the Internet is the Wild West out there in terms of the nature of the data traffic. This was the promise of the Internet and I am not sure if it will also become its bane. I am not certain exactly how the ISPs keep a handle on the traffic on the network links today. Innovations in Internet applications happen constantly and each one of these has the potential to change the nature of the traffic on the network and the manner in which ISPs manage their bandwidth resource. In such a happy circumstance of innovation, one has to ask why anybody would think there is a need for regulation. There is a need to look at all of this from a different angle.
First of all, here is something going on in the global picture that might be shocking to some people. The US is far behind some other countries when in come to the Internet. If one were to just look at the average speed of Internet connectivity available to customers, several countries in Asia appear at the top of the list while the US is nowhere near the top. Also, according to one study of Internet penetration done in 2013 the US ranked 29th in the world, with a penetration rate of 84.2 percent (link).
What is probably happening is that in a completely market driven environment the ISPs are selectively focusing their efforts and attention to where they can get the most bang for their buck. At the end of the day they have to make money for the stockholders. It turns out that there are still underserved and unserved areas in the US as far as mainstream broadband Internet access is concerned, and it would appear that this situation is not about to change on its own. The other aspect to consider is that the Internet can no longer be considered a luxury for the common man. It is becoming a basic necessity just like any other public utility. Our lifestyles have changed significantly during the last few years, and it will continue to change because of the Internet. It is not just the new applications that are made available on the Internet that move us in this direction. More and more of the traditional service providers are trying to adjust their operations so that more and more of their interactions with the customer happen through the Internet. In fact, people who do not keep up with this rapid change in the way business is done are in danger of being left behind. It is now beginning to make sense to consider the Internet as a basic necessity. This is a point at which government has to begin playing a role in what is going on so that people are able to get what they need. This aspect of the development and use of the Internet has already been recognized by more forward looking countries. Governments have taken a more active role in helping shape the development of this resource.
The ISPs have also become smart to the game and have determined that there might be additional money to be made by not just charging the customers, but by also selling vendors that use their networks access to these networks. If they do so, they will be able to influence and control the experience of the customer to services from these vendors directly. This is already happening (link)! The ISPs can now have control over how businesses that use the Internet may succeed and fail, and ISPs may themselves even try to get into the business of providing such services to customers while giving themselves an advantage (e.g., Comcast might stream NBC programs with better Quality of Service (QoS) simply to give Netflix, HBO, ESPN or ABC a bad name). Companies like Google and Netflix support Net Neutrality while those like AT&T and Verizon do not.
But the tricky part about regulating the Internet is that it is still an evolving mess. Any regulation that is put into place has to be done with a light hand. If not done properly, this can basically stifle the industry. There has to be room for the Internet to continue on a path of development. ISPs will need to continue to improve on their networks to support new capacities and capabilities that are yet to be determined, and applications and traffic patterns that continue to evolve. There should really be no issue if network capacities are always beyond the data loads being carried. But there does come a point where traffic needs to be managed, either when there are temporary bursts of traffic due to the nature of the applications running across the networks, or if the networks are themselves not properly sized to support all the traffic that is allowed to connect into it. The ISPs should be free to manage the data flow, even slowing it down as needed in order to manage the bottlenecks, but they must do it in a way that is fair. But how does one define what is fair? Should one type of traffic fundamentally have priority over others or is all traffic equal? For example, is Netflix streaming more important than regular data transmitted to a browser (e.g., a Skype session), and, if so, what speed of Netflix streaming must be allowed. Do different kinds of browser traffic have different priorities? One has to try to find a way to find non-specific and generic answers to such questions like this. It can become quite messy and dirty if one tries to solve each of the problems individually by jumping into the weeds in each case. If the FCC thinks it already knows the answer, they are fooling themselves. Hopefully they will keep an open mind and make sure they have some intelligent and experienced people working on this. Regulators need to have insight about the global implications while dealing with the specifics of each element of regulation carefully. And they have to do all of this even while they are being harangued by the lobbyists from various factions of the industry who have their own differing interests at heart.
Some say that regulation will stifle innovation. My take is different. I believe that it will shape the nature of the innovation rather than stifle it. It might even shape it in a very significant way. It could impact the businesses that end up being successful in the industry. And what is wrong with that? The truth of the matter is that a lot of the technological innovation in industries like this happens today because of the rules that the industry lives by, not necessarily all related to improving service to the customer, and sometimes because of regulation. The entertainment production and distribution system is a prime example of such an environment. As an example, a fundamental element in the conduct of the entertainment distribution business is copyright protection. Rules of the game come from the both the government and the industry in this regard. Many unique systems are in place from the perspective of content protection, not necessarily all for the benefit of the customer. Regulation does not necessarily drive away all innovation, sometimes it creates opportunities.
Will regulation lead to more cost to a customer? Will regulation be such that ISPs and users of the Internet are able to continue to innovate and grow their businesses and provide an adequate and fair level of service to their customers? I think we do not need to be afraid in this regard, but only time will tell if I am right or wrong.