This Industry Viewpoint was authored by Alan Levy, CEO of Skywire Networks
In recent weeks and months, the term “net neutrality” has appeared on the front pages of every major newspaper and magazine. As an owner and operator of Skywire Networks a NYC based Internet Service Provider (ISP) and the founder of BlogTalkRadio a podcasting, live-audio streaming platform, I have owned businesses that sit on opposite sides of the net neutrality debate.
First, I think there’s some lack of clarity about what net neutrality actually is, and why it is so important to everyday consumers. In essence, net neutrality is the principle that all ISPs need to treat all Internet data similarly. That means there can be no data discrimination allowed, and cannot charge different on a user/website/content type level.
For example, as reported, Netflix customers may consume 37% of the entire Internet. Today, a Netflix customer pays $11.99 a month whether or not they stream one hour of content a month or 100 hours of content a month. Netflix, of course, wants their customers to be happy, active consumers of their content and would prefer the active rather than the passive user.
While Netflix is ambivalent on the issue of consumption and continues to deposit the same $11.99 from their customer regardless of consumption, it is the ISP that is incurring the real cost of servicing the user that streams 100 hours a month. The ISP funds the connections and infrastructure necessary to facilitate the internet connections. Apart from the invested capital necessary to build the internet connection from the customer’s physical location all the way to the ISP’s main network at a far-flung data center, the consumption of internet is a real variable cost.
Apart from the increase in the ISP’s variable cost of providing access to the internet, the ISP also must be mindful how significant increases in consumption affect their network infrastructure and architecture. Networks are built and sized for expected levels of consumption. In an apartment building in New York City, the ISP installed cabling and, perhaps, fiber optics into the building, through the basement, and then through the building’s risers to each individual apartment. The building is connected to the ISP’s backbone, which is where the ISP connects to the internet.
What happens when most of the tenants in the building at night either stream the NFL on Amazon, watch YouTube Live, binge watch House of Cards on Netflix or spend hours on Facebook? The network slows down because it has been built to support only a certain amount of consumption. Under the existing net neutrality paradigm, two things will happen. Either the tenants will continue to suffer, or the ISP will make the decision to upgrade the network in order to accommodate the increase in usage. If the ISP chooses the latter, they have to absorb the costs themselves – which gives them much less incentive to upgrade the existing infrastructure.
The dominant internet players oft-referred to as FANG – Facebook, Amazon, Netflix and Google – are screaming from the rafters that all internet traffic should be created equal. In fact, over the summer, when new FCC Chairman Ajit Pai opened the net neutrality policy change for public comment, more than 22 million comments were submitted. Most of these were in favor of maintaining the existing net neutrality rules. FANG executives, not to mention every major media outlet and online news publication argued that the internet will cease to exist as we know it. I disagree.
A key argument made by those in favor of maintaining net neutrality, state that killing it would stifle innovation and hurt the small, relatively powerless web companies. I laugh when I hear this argument, simply because FANG is so large, so profitable, and so powerful that as soon as a new emerging platform develops, FANG doesn’t hesitate for a second to crush them. Actually, they wait until a new innovation gets a bit of traction and starts to scale and then assign 1000 engineers on a mission to crush that new, emerging start-up – but I digress.
The FANG companies aren’t nearly as concerned about stifling innovation, saving smaller internet firms, or the consumer being hurt, as they are about protecting their own quasi-monopolies. FANG is deeply concerned that the only way that they can reach their customers is via the customers’ ISP (i.e. Verizon, Comcast, AT&T, Charter, etc.). In the example I cited above, where the Netflix user, a Verizon FiOS customer for example, streamed 100 hours a month, Verizon will be able to throttle back the internet speed of such power users. If the internet connection is shared with a large apartment for example, all the tenants will suffer from the throttled speeds.
Slower speeds will motivate angry customers to tie up Netflix’s’ call centers (i.e. more costs) and perhaps even cancel their subscriptions. To take this one step further, if net neutrality is revoked or modified, Verizon can negotiate a deal with Netflix to create different tiers of consumption at different price points. If Netflix wants the user experience to be the same for all of their customers (as in “great”), then they will have to make a decision. They can either absorb the higher cost for the power user, or create different tiers of consumption. Which choice do you think they will make?
Net neutrality is a very complicated issue, and I’m very interested to see how it plays out in the months and years to come.
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Categories: Government Regulations · Industry Viewpoint · Internet Traffic
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The author of this article is biased towards the service provider. While the position of Netflix in the article is true, the Service Provider/ISP is depicted as a victim along with it’s customers. The REALITY is that the ISP sells, markets, and charges for 10mb, 100mb, and now Gigabit internet connectivity. Yet their networks at the core are unable to support what they have sold. It’s called oversubscription. It is done on absolutely every network and is smart. Especially since every user is not using the entire port speed at all times. HOWEVER, to blame a Software company like Netflix, Amazon, Hulu, or just plain peer to peer streaming for poor customer performance in ridiculous. People are actually using the bandwidth that they were under the impression that they purchased. Now that Comcast and all others must deliver, they simply cannot. It’s the same idea as getting kicked off of a plane even though you reserved the flight in advance and paid for it. Only to find that the airline overbooked. BUT… the airline does not charge customers or Orbitz/agents for booking flights that they couldn’t deliver on. Instead they offer incentives and bonuses to those that will except an alternate flight due to their failure to deliver. ISP’s could learn a little something on how to act. If you are for the removal of Net Neutrality, you are not well informed. Or, you ARE the ISP.
Just to play devil’s advocate. Let’s say we’re ok with the removal of Net Neutrality. Hey, that ISP is a for-profit business and has the right to offer whatever kind of service they want to. If you don’t like it, don’t buy it. And that’s fair. But, when you start becoming a utility by choice or not, you simply have to be accountable. What if you couldn’t pay your bills because your internet was down? What if you couldn’t communicate with your kids or parents that lived so far away? What if you bought a service over the Internet that was amazing, only to find that the ISP simply and at their leisure decided to throttle or de-prioritize that specific type of flow without notification or recourse?
Utility?
what happens if you use more electricity? you pay for it.
Never understood why this analogy is used.
Generally agree with some of the rest.
Here is some fun facts from “the internet” YahooFinance:
FANG – Revenue =$381.20 billion / EBIDTA =$127.02 billion / Employees = 227,466 / Cash $214.58 billion / Debt $124.53 billion
ATT/Comcast/CTL/VZ – Revenue $653.44 billion / EBIDTA = $127.17 billion / Employees = 615,400 / Cash $57.77 billion / Debt $372.74 billion
Add Microsoft and Amazon to FANG and its even bigger variance.
My conclusion is that perhaps between the two there is enough profit to keep the consumer out of the “who pays for it discussion?”
But what if the electric company said we are now going to monitor the specific uses of your electricity? And other folks electricity is more important than yours just because we say so, so you won’t be getting as much. You’ve had enough use of that microwave oven of yours. So no more microwave allowed. Does the LG, the Manufacturer now have to pay the power company? Or do you?
I agree the big boys will work out their own deals behind closed doors, but what about the rest?
The problem with those who love net neutrality is that they have a flawed premise. That premise is that Internet services are NECESSARY or an entitlement. It is not. It is a pervasive CONVENIENCE. Those networks, as the OP stated, were paid for by private companies. If they choose to throttle, then it’s their choice. Don’t like it? Don’t use them. For those that have no choice in ISP… I go back to my original statement. You will still function as a human being without it.
The reality is that market forces will keep things relatively OK and there is really no doom and gloom either way. So much FUD.
Well put sir. MAGA!
I agree that there are those misinformed folk that looks at the internet as “necessary” or an “entitlement” They are not There is no 3rd Entity known as the Internet. There is only ISP connected to ISP, peering with ISP who peers with ISP, etc. etc… All are businesses paying for and building their own networks. Well understood there. that doesn’t change the fact that If I pay for 100mb of Internet that I shouldn’t get it. Or, that certain types of Internet flows should be controlled, throttled, or discriminated against due to the lack of network capability or to, as an example bolster on demand services over 3rd party offerings.
To be more accurate, SOME of the networks were built with private money. SOME were built with public money – whether from USDA, RUS, FCC/USF, DARPA, DoD or other govt funds (state, fed or local). There are literally billions in govt dollars that go to build out networks and to keep ILECs afloat, so whose network is it????
Let’s cut to the heart of the matter. There’s a reason nobody likes the large ISPs i.e. AT&T, Verizon, Comcast, CenturyLink, TWT. They treat their customers and employees like garbage. Now give these megalomaniacal halfwits more power than they already have and there goes all the “competition”. Verizon bought Yahoo! That’s right Yahoo! Innovative genius! Xfinity…do I need to say any more? Uverse! Prison um no Prism! If your stomach isn’t churning now then you must have sign off to the dystopia. And two words for the author Yahoo! Radio. Move over BlogTalkRadio! 🙁
Not following half of this. But the first sentence is the “heart of the matter” in that it is why most of the ignorant are arguing for “neutrality” out of simple-minded class envy and their 6th grade economics lessons applied.
“I sure don’t like paying my big bill every month, it must be the fault of some big company. Don’t those megacorps have enough already??”
Which is of course NOT the point of net neutrality.
If you want to sound credible posting on an industry insider site, maybe don’t name drop a telecom company which ceased to exist 3 years ago.
Maybe landline ISPs aren’t well liked because if they execute flawlessly, end users barely notice that they exist. If an ISP gets noticed, something probably went wrong.
Unfortunately, building broadband networks is both time consuming and capital intensive. They are usually not public property, and when they are (ie, muni fiber), they generally don’t perform well financially.
Content providers would do well to remember that they would effectively cease to exist without ISPs.
“end users barely notice that they exist.”
THIS is why the net neutrality argument is a sham. A bunch of millenials just think that the internet is this magical “neutral” thing that is floating around giving them free porn and snapchat. The hundreds of billions spent by providers on their networks, if we are to buy the narrative, are fair game that they do not have a right to use as they choose. Here’s the same newsflash again: the internet is actually just a bunch of company networks and data that they CHOOSE to partially expose for you to look at. There is no magic or no “right” to use their network anymore than I have a right to use your home wifi as I am driving by.
Now queue someone saying I am a russian bot, or whatever.
Network providers, like all businesses, are licensed to operate and solicit/service a country’s citizens. They have no inherent “right” to operate with impunity and without oversight. Since the move away from NN protections, their acquisition of content creators looks wholly different and there now exists a real potential for conflicts of interest.
Data is all ones-and-zeros and to avoid unfair advantage and stifling of competition in the content realm, it should be passed on without hindrance or favor. That said, it makes perfect sense to set up data plans with two components: speed (rate at which data can be transmitted) and total usage. If you use more of something (e.g.: chronic video streamers) it is not unreasonable to have to pay more for it. Innovations will then focus on increasing efficiency and the consumption side of the equation vs. stamping out smaller content providers and consumer choice.
The inherent problem with that is the content providers (at least some of them) are the ones crying to the government that they should not have to pay that usage, and its inadequate to simply say the consumer covers it. So when Netflix blasts petabytes into Comcast and claims they are an equal peer even though Comcast isn’t sending them much, that’s total bullshit: netflix is using Comcast’s network infrastructure every bit as much as I am as a consumer of Comcast internet. Comcast has a right to come to a technical or monetary arrangement with Netflix on how to make it work, and if they don’t, de-peer and try something else.
The consumer can decide if that something else is acceptable or they want another service who will strike a deal with netflix, et al. Instead those content guys wrapped the term “neutrality” around it. a marketing campaign to save on opex that remains wildly successful in an age of comedy central news.
This NANOG back scratching thing is a hidden element of from everyday consumers that people are not appreciating (and in some cases taking advantage of), is the fundamental issue built into the myth of equal peers. It was true maybe 20 years ago on the Internet when it was emails and P2P and FTP from a PC sitting under your desk, but not anymore now that its a replacement to nearly all content and communication.
But “crossing the streams” of business cannot be allowed if there exists the ability to discriminate in this way. With the change away from Title II, the unholy amalgamation of network provider and content creator is a looming threat to the marketplace and consumers. With this new lay of the land, a Comcast/NBC Universal or AT&T/Time Warner and the like should not be allowed to exist. The potential for abuse is too strong. So while Title II was not a cure-all, the repeal of NN without creating something new that really fits the industry and problem in a modern way is an open door to trouble.
The price for services are going to go up in 2018. If you do not like it don’t use it so much. MAGA!
bebbers, the way you brandish that MAGA as a coded “sieg heil” speaks volumes. I’m sure Clayton Bigsby approves.
your idiocy at calling everyone hitler is almost as stupid as his.
Snowflake, grow up and get a pair, the internet is still on. Whats the big deal that you might have to pay more for services? Might want to buy stocks in the near future or are you too stupid to understand this concept?
Look jackass, election over and you lost! Get over it. MAGA!