As we start 2018, we see various states joining businesses and other stakeholders in looking to push back on the decision of the FCC's Ajit Pai to kill net neutrality. There have been countless studies showing that internet access, especially high-speed internet access, helps drive GDP growth and that the internet, by its nature, should be something that is consistent and treats all users the same without preferential treatment based on what traffic they are running or whether they pay more for that traffic. I'd suggest that hyperscalers, system and component vendors probably didn't want net neutrality to be eliminated. Now though, they will have to adapt to the change in different ways.
What the FCC change does is put more importance on networking. Not only will telco and cable service provider networks need to look more closely at traffic to determine how to handle and route it, we're also going to see more data center interconnect (DCI) projects from the hyperscalers in order to have more end-to-end control of their data. Both these trends will drive the need towards higher-end products. This will likely cause a modest positive increase in equipment spending for DCI projects. This increase may get lost in the overall DCI market, which is growing significantly, but it will be a factor to that growth.
From a business scenario, this will accelerate the move of enterprises to colocation providers, which is again a positive greenfield opportunity for networking vendors. There are very few enterprises building their own data centers any more. Instead, enterprises are either moving their workloads and applications to the cloud, or building private cloud networks that sit directly in colocation providers. By building in colocation facilities, enterprises will also avoid any change, as they will connect directly to the hyperscalers at those points, again avoiding the internet service provider (ISP) for most of their data center traffic. By sitting in a colocation facility, enterprises can remove the risk of future changes by the FCC for their data center traffic and also remove complexity that is not core to their business.
This likely leaves the consumer as most impacted. Most consumers have little choice on ISPs that provide high-speed internet. With 5G fixed mobile still a while out, the ability for the consumer to avoid the impact or switch providers is limited.
2018 will be an interesting year as we see the different players in this space plan and execute business strategies around the appeal of net neutrality. Will we see an ISP increase rates to the consumer for watching high-quality internet video like NetFlix and YouTube, or will we see hyperscalers play hardball and/or subsidize the consumer (more ads for sure). What is clear is that DCI spending will only go up, not only to avoid the impact of net neutrality, but also so that those hyperscalers can truly control their own end-to-end experience.