Net Neutrality - Making sense of the debate
Monday, October 13, 2014
Net Neutrality and Public Sphere
Monday, October 6, 2014
The economics of net neutrality
Here is the link if you can't view the video
When discussing the effect of removing, or taking a strong stand against net neutrality, the first effect would be on the economy. Both proponents for net neutrality and those who are not both acknowledge that there would be an economic impact with net neutrality. The question would be who would it affect, perhaps disproportionately, and how would it affect them. There are three parties that are affected – the Internet service providers (ISPs), consumers and content-makers or companies in general.
Economic impact on Internet service providers
Those who do not support net neutrality are usually internet service providers (ISPs). There’re interesting arguments from those that do not support net-neutrality, and usually they are economically based. The arguments that come out from the net neutrality debate largely stem from the USA, especially relevant right now because of the decision by Federal Communications Commission (FCC) based in the USA classifying ISPs as information providers, not as telecommunications, which meant that they were fundamentally different and hence the FCC would not be able to regulate the ISPs the same way as they do with phone companies. As content providers, then, ISPs do not have to be neutral to the data they provide.
The USA is very much inclined to believe in the idea of the free market and competition keeping prices low – hence the assumption the FCC made for deciding not to regulate ISPs like telecommunication companies was that high competition would keep the internet neutral and prices low [1]. ISPs like Verizon[2] and Singtel [3] feel that net neutrality chokes their revenue potential.
There have been arguments for the ISPs’ case. Other than the argument from individual ISPs that there is no reason why they have to let OTT (over-the-top) content be for ‘free’, and should instead monetize it, there is also the argument, that the previous FCC ruling had been similar to, was that net neutrality stifles competition, and thus in the end, less drive to creativity [4].
Basically what ISPs wish to do is to differentiate between the types of data that is transmitted. If a service cannot afford to pay for faster speed , then less people will be able to access this website and their content. Let’s take for example the app WhatsApp, an internet based phone-to-phone direct messaging service. If they were not able to pay to access the same speed that Google Hangouts can afford, then messages from users via WhatsApp wouldn’t be able to reach each other as fast as with Gchat messages. This means that users would either move to other services, or else WhatsApp would charge users with more than the current USD 1.99 a year that they do.
However this claim of competition & creativity being stifled is at the level of the hardware – the competition to drive down the cost of installing and maintaining the equipment such as data lines and other hardware. There is little actual incentive for competition to take place at this level, even if there was a forced anti-monopolisation regulation, since virtual duopolies could just grow up in that place.
Instead, under a net-neutral environment, competition takes place on the network level [5], between services without having to purchase or set up a physical network. This is what consumers assume they are paying for.
Economic impact on consumers
The previous section had already touched on how while net neutrality would benefit ISPs, they would affect consumers.
Consumers actually do not realise that ISPs actually are paid twice to provide internet service. Content makers and other similar companies – i.e. those that make websites and content like Netflix or youtube – are charged bandwidth based on predicated users by the ISPs. In turn, consumers – people who surf the internet, get access to youtube, etc – are charged by the ISPs to have internet at home, such as broadband, or dial-up, or data bundles on their mobile phones [6]. The impact of removing net neutrality would therefore remove the control of what consumers see on the internet, and put it into the hands of the ISPs, and those that can afford to pay for higher bandwidth, as well as potentially charging users more for services like cable television.
Economic impact on Companies
Besides the economic impact of net neutrality on consumers, there is economic impacts at the company levels. The current ruling in the USA has already scared away venture capitalists from start-ups that require high speed broadband [7], which would impact the internet based companies that used to be able to be started up with relatively little investment. There would thus be less competition in the long run.
Economically, net neutrality has a huge impact. In the USA, this is currently being played out – the internet providers are considered content providers and thus are not regulated to provide neutral services like telecommunications. Contrasted to Singapore, where the Info-Communications Development Authority (IDA) had issued what seems to be the strongest pro-net neutrality statement [8]. Striking down net neutrality would have disproportionate impacts on consumers and new start-ups that now no longer would be able to reach consumers at the same speed as those supported by ISPs.
References
[1] Peter Kafka, “What’s Net Neutrality? What Happened to Net Neutrality Yesterday? What Happens Next? A Q&A for the Rest of Us,” Recode, last modified January 15, 2014, http://recode.net/2014/01/15/whats-net-neutrality-what-happened-to-net-neutrality-yesterday-what-happens-next-a-qa-for-the-rest-of-us/.
[2] Zajac, Andrew and Shields, Todd, "Verizon Wins Net Neutrality Court Ruling Against FCC," Bloomberg, last modified Janurary 15, 2014, http://www.bloomberg.com/news/2014-01-14/verizon-wins-net-neutrality-court-ruling-against-fcc.html
[3] Ramli, David, “SingTel chief calls for right to charge OTT challengers Skype and WhatsApp,” Financial Review, last modified February 26, 2014, http://www.afr.com/p/technology/singtel_chief_calls_whatsapp_right_maynJrPUvegKvHV5wgNFGJ .
[4] Hahn, R. W., & Wallsten, S. (2006). The economics of net neutrality. The Economists' Voice, 3(6). https://server1.tepper.cmu.edu/ecommerce/Economics%20of%20Net%20Neutrality.pdf
[5] Nicholas Economides, “The Economics of Networks,” International Journal of Industrial Organization 14 (1996): 675–99, http://www.stern.nyu.edu/networks/Economides_Economics_of_Networks.pdf
[7] Neagle, C., “Net neutrality ruling scaring VCs away from investing in certain startups; One VC firm has said it will 'stay away from' companies that may require high-performance networks, which ISPs may soon make more expensive,” Network World, last modified May 7, 2014. http://www.networkworld.com/article/2176684/lan-wan/net-neutrality-ruling-scaring-vcs-away-from-investing-in-certain-startups.html
[8] “Decision issued by the Info-Communications Development Authority of Singapore,” ida.gov.sg, last modified June 16, 2011, http://www.ida.gov.sg/~/media/Files/PCDG/Consultations/20101111_Neteutrality/NetNeutralityExplanatoryMemo.pdf.
Friday, September 19, 2014
The debate called 'Net Neutrality' - An Introduction
- Better understand the two sides of the debate and try and reach a conclusion on which side of the debate is better placed in the current situation.
- Explore net neutrality beyond its framework to see whether net neutrality in its current situation is reality or an illusion.
- Examine whether net neutrality is essential for a information and media literate society.
[1] Wu, T. (2003). Network Neutrality, Broadband Discrimination. Journal On Telecommunications & High Technology Law, 2(1), 141-175.
[2] Ammori, M. (2014). The Case for Net Neutrality. Foreign Affairs, 93(4), 62-73.
[3] Guo, H., Cheng, H., & Bandyopadhyay, S. (2013). Broadband Network Management and the Net Neutrality Debate. Production & Operations Management, 22(5), 1287-1298.
[4] Federal Communications Commission. (2010). In the Matter of Preserving the Open Internet Broadband Industry Practices. Report and Order, 25.
[5] Cherry, Barbara A. (2006). Misusing network neutrality to eliminate common carriage threatens free speech and the postal system. Northern Kentucky Law Review, 483, 482-511.
[6] Ganley, P., & Allgrove, B. (2006). Net neutrality: A user's guide. Computer Law & Security Review, 22(6), 454-463.
[7] HBO. (2014). Last Week Tonight with John Oliver: Net Neutrality (HBO). Last Week Tonight with John Oliver. Retrieved from https://www.youtube.com/watch?v=fpbOEoRrHyU