The Repeal of Net Neutrality: What Could Go Wrong?

Given various forms of bluster coming from the United States government these days, people can be forgiven for losing track of issues at play in Washington. Here’s one that, IMHO, could affect the world more than most: the repeal of net neutrality laws.

You might be thinking: what’s the big deal? The U.S. didn’t always have net neutrality laws, and it has muddled through just fine. Besides, how would this affect Canadians?

Market factors influencing net neutrality

If you ARE thinking this, let’s set the ground rules for what this means to you.

  1. Your Internet Service Provider (ISP) has this as its prime directive: to maximize profits.
  2. Their profit maximization directive can conflict with the customer experience.
  3. The major ISPs are also the major players in Canada’s mobile phone market.
  4. They are the companies who keep mobile phone rates markedly higher than what you would pay elsewhere in the world.
  5. The Canadian Radio-Television and Communications (CRTC) commission has largely skirted the issue of net neutrality to date, mainly because Canada has net neutrality laws in place – for now.

So what potential moves could ISPs make that would improve their profits and hurt Internet service?

Consider TV

Many people boast about cutting the (cable TV) cord and watching all their TV over the Internet. These people may not take into account the fact that the cable companies have long since established a presence in the ISP market. And these companies are nothing if not adaptable.

Let’s zero in on sports, Live sports may be the main reason people stick with cable. Fans who want to keep up with their favourite teams – and this is a huge market – could easily gravitate to the provider who offers the best access.

The behemoth sports conglomerate Maple Leafs Sports and Entertainment (MLSE) is owned by Canada’s two largest ISPs, both of whom also deliver TV services. That conglomerate offers live sports packages to let fans watch MLSE team games over the Internet. What if you buy a package but you use a competitor ISP to watch those events? Will the video and audio quality “be as good as” what you’d get if you bought your Internet services from one of the two ISPs that own MLSE?

What about your favourite cloud-based services?

These run the gamut from entertainment (Netflix) to productivity (Google Docs, MS Office) to utilities (backup, security) and so forth. Remember: that cloud service you rely on every day boils down to a set of servers someplace that you access via – you guessed it – the Internet. And while ISPs can make money from end users, they may also decide major service providers could stand to pay for better access to markets.

“In the U.S., ISPs can align themselves with certain service providers and give them preferential treatment,” says Kevin Lo, managing director of Froese Forensic Partners (and a gearhead like me). Lo muses about whether ISP customers would experience better speeds if they used partner services – or “throttled” speeds if they use a competitor.

To my knowledge, such abuses have yet to happen in Canada. But the relationships that could trigger such abuses have materialized here. For years:

  • Bell aligned its Sympatico Internet services with Microsoft
  • Rogers partnered with Yahoo

Lo has noticed one recent sea change. “Netflix used to be one of the main proponents for net neutrality,” he says. “Recently, they have been quiet on the topic.” He has heard theories that since Netflix has reached critical mass, it can now afford to pay ISPs for better access to its markets. That isn’t the case for all of its competitors, either current or future. Any “better access” charges could serve as a barrier to entry to the streaming market. That barrier would protect Netflix and its market share, presuming ISPs charge the same “gatekeeper fees” to all such high-bandwidth services.

The Internet of Things

Several years after this term was first uttered, it still sounds futuristic and difficult to understand. The “things” we connected to the Internet used to be limited, by and large, to computers. Today, your car, your thermostat, your fitness tracker, your camera, a plethora of medical devices, and other digitally-enhanced things also communicate via the Internet.

Do car companies need to partner with ISPs to ensure Internet communications between vehicles and infrastructure happen properly? Do you need to shop for the right pacemaker according to the dominant mobile network in your area?

Now that you’ve started to contemplate this woefully incomplete list, let’s return to the question: Does the Internet need a gatekeeper? Because without net neutrality, there is no gatekeeper.

Typical network provider responses

There may be plausible business cases for “traffic shaping” and if they engage in the practice, you can expect to hear them from Canadian ISPs and mobile network operators. Here are some of the most popular:

  • Canada is a huge, sparsely-populated country. That implies overhead costs on network buildouts are higher per customer than they would be in more densely populated countries.
  • Several years ago, BitTorrent was a huge topic. ISPs did “traffic shaping” to cut back usage for heavy BitTorrent users. Their reason? All that BitTorrent usage degraded the Internet experience of other customers.

Reductio ad absurdum

Do you buy these arguments? If you do, watch this video. It shows a logical conclusion the ISPs, too, could reach.

Conclusions

If you pay your water bill, you expect water to flow each time you turn on your tap. Water pressure does not decrease if you use an “unapproved” shower head.

If you pay your electric bill, you expect the lights to go on when you flip a switch. Electricity does not flicker if we watch a certain make of TV.

With net neutrality laws, the Internet remained a utility. Without these laws, there is no guarantee Internet access will remain reliably and predictably priced.

For now, ISPs seem to be watching the market and biding their time. There’s no overt guarantee they will increase their profit margins by needlessly making the Internet more expensive to use (cough). But if they do that in the United States, Canadians can expect consequences of such actions to flow north of the border. You can read more about some of those consequences here.

For now, the rest of society can only do what the ISPs are doing – watch the market. But where ISPs may be licking their lips, Internet-reliant citizens (i.e. the rest of us) ought to be trembling.

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