The end of net neutrality: What will the impact be?

Carl Weinschenk
Jenga blocks

The single day in 2017 that will resonate into the future for the broadband industry is December 14. On that day, the US's Federal Communications Commission (FCC) voted to gut net neutrality. It did this by recategorizing broadband internet as an information service. In 2015, Barack Obama's FCC had classified it as a telecommunication service under Title I of the Telecommunications Act.

This is a huge change that will upend how ISPs are regulated. It is unclear, of course, how this all will hash out. But here are some possible impacts:

Investment will come faster and perhaps be greater

One of the rationales for the reclassification of ISPs is that investment suffered under the existing rules. That was spin. A theme of the news of the past year or so was the ramping up of telecom investments for a group of interrelated new technologies including 5G, the internet of things, software-defined networks and network functions virtualization. Investments also have been heavy in related but non-telecommunications technologies such as artificial intelligence and robotics.

In addition to the investments themselves, the new technologies suggest networks that are being fundamentally transformed to be more capable of supporting a new landscape of business and consumer offerings, most of which have not yet been dreamed up. Anyone who follows telecom knows that investment and growth are healthy.

That said, it is possible that the carriers, seeing a landscape characterized by less competition and a playing field that tilts in their favor, will invest more and do so quicker.

The ecosystem will have to adjust quickly

At the end of the day, the same awkward and inelegant situation will exist: Infrastructure owners will have tenants on their networks with whom they will be in competition. The terms and conditions of how that works will change, not disappear. The entire ecosystem - from vendors to programmers - will have to wait for the new rules and adjust to them. Those that do so quickest will thrive.

The big will get bigger

The new rules favor the established telecommunications companies. The next Facebook is far more likely to be owned by a giant media conglomerate. Once an entrepreneurial group develops a promising concept, the network owner can leverage its now far less fettered control of the network to either pressure the upstarts to play ball by joining them or mount a similar initiative that will be inherently advantaged.

The incumbent will boost the favored entry with preferential treatment on the network through such tools as zero rating, in which subscribers are not charged for content from entities owned by or working with the network owner. Those programs, which exist today, are likely to grow in a less regulated environment. There will be many other ways in which the network owner can push its entry ahead.

There will be a long period of uncertainty

In addition to the need to write new rules, there are lawsuits contesting the FCC's action. In addition, individual states can implement their version of net neutrality. On January 5, Nebraska became the first state to start the legislative process aimed at creating statewide net neutrality laws. It's interesting because Nebraska is a red state. It is a virtual certainty that other states, red and blue, will follow.

It is unclear how effective these efforts will be. The federal government likely would claim a federal preemption and the right to dictate telecommunications policy nationally. Even if such state rules were allowed, having multiple approaches to an endeavor that by its very nature crosses state lines seems likely to be cumbersome at best and quite possibly unworkable. Would, for instance, ISPs with footprints in multiple states be forced to comply with multiple sets of rules?

The decision by the Trump administration to end net neutrality rules and switch telecommunications enforcement from the FCC to the Federal Trade Commission was a monumental step. Like the sports writing assessing each baseball teams' strengths and weaknesses in the spring, it is possible to make predictions on how the future will unfold. It's also a given that many of the conclusions will be wrong. One thing is certain, however: Things never will be the same.

Related articles