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Victory for Internet freedom: Net Neutrality defeated

January 15th, 2014 at 06:23am

The US Government (and in particular the Obama administration) has suffered a major setback in an attempt to regulate the Internet and the way Internet Service Providers do business.

A federal appeals court on Tuesday struck down the Obama administration’s net-neutrality rules.

The D.C. Circuit Court of Appeals ruled that the Federal Communications Commission overstepped its authority by prohibiting Internet providers from blocking or discriminating against traffic to lawful websites.
The decision is blow to President Obama, who made net neutrality a campaign pledge in 2008, and erases one of the central accomplishments of former FCC Chairman Julius Genachowski, who pushed the “Open Internet” order.

The regulations were strongly backed by Internet companies like Google and Netflix, which fear that Internet providers will charge them more for the heavy use of their sites by customers.

On the winning side of the decision is Verizon, which filed the lawsuit, and other major telecom companies. They argued the rules created a huge regulatory burden while stifling innovation in the marketplace.

(h/t The Hill’s Kate Tummarello. Read more: http://thehill.com/blogs/hillicon-valley/technology/195360-court-strikes-down-net-neutrality-rules#ixzz2qOnJV9ik

The reason this is a big deal is that Net Neutrality effectively prevented service providers (both retail and wholesale) from favouring certain websites and services over others, or from offering special deals to certain websites. It was promoted as providing equal access to everyone, and to an extent it may have achieved that aim if allowed to run its course, but could only have done so at the expense of a lot of competition.

A few examples for you. Suppose Google decide to build a new data centre in Alaska and decide that building their own fibre network infrastructure there is unnecessary because there is a already plenty of fibre up there being run by three competing service providers. Google request that all three providers give them quotes to join the new data centre to the existing networks…all of them do and Google negotiate with them and eventually come to an agreement with two of the providers, one of whom will provide the bulk of the bandwidth at a cheaper rate and the other provide a bit less bandwidth at a cheaper rate, while both will have the capability (for an extra fee) to provide all of the bandwidth if the other fails. The third carrier will not have direct connectivity to Google’s new data centre but will instead use one or both of the other carriers, and will probably already have an agreement with one or both of the other carriers for network access (and if they don’t, they can route via an interstate network…it will just be slower).

Under Net Neutrality laws, it would technically be illegal for one of those providers to offer Yahoo a better or worse deal than was offered to Google. It would also be illegal for one of those providers to sign an exclusivity deal with Google whereby they would not offer their services to Yahoo and would receive an extra fee from Google as compensation, while Google would not seek out the services of other local providers…such a deal would not prevent customers of the service provider from accessing Yahoo or prevent customers of other service providers from accessing Google, but it would mean that customs of the provider with the exclusivity deal with Google would have ever-so-slightly faster access to Google, and other local providers would send extra traffic to this provider when their customers access Google as the local data centre would be faster to access than any of the interstate ones, and this would generate extra revenue for the provider with the exclusivity agreement.

Effectively Net Neutrality destroys competition which means there is no reason for prices to come down. It would also mean that, rather than having lots of redundant and cheap connectivity paths from your computer to any website via your ISP, there would be a lot fewer and more expensive paths. Speeds would also not increase as much as, without competition, there is no reason for service providers to provision services ahead of demand. You would end up with a slower, more expensive, and less reliable Internet connection, and less choices of provider.

The other argument which was often used in favour of Net Neutrality was this one, also from the article linked above:

Tim Wu, a professor at Columbia Law School, said [FCC Chairman Tom] Wheeler “has to act.”

He pointed to the court’s decision to strike down the no-blocking rule, which he said will require FCC action. “It’s just a completely different world” if Internet providers are able to keep users from accessing certain websites and services, like Netflix, Skype and YouTube, Wu said.

Let’s go back to my original example above. To recap, there are three wholesale fibre providers. Providers A and B have direct access to Google’s new data centre. Provider C does not, but connects via both A and B. A, B and C all also run their own retail ISP and other retail ISPs in the area use one, two, or all of the fibre providers to connect their customers to the Internet-at-large. In turn, A, B, and C all have their own agreements with interstate and international network providers which overlap to some extent.

In Professor Wu’s understanding of a world without Net Neutrality, Provider C could decide to block all access from their network to Google because Google didn’t give them a contract to provide connectivity for the new data centre. While this is true, it ignores all of the market forces at work on the Internet. Yes, Provider C could do this, but why would they when almost every one of their retails customers would leave them and go elsewhere, and absolutely any ISPs who solely rely on them would quickly sign up with either A or B to regain connectivity to Google. If Provider C also hosts websites, well those websites will be moved to another provider as soon as their owners realise that Google can’t see them any more.

Provider C could block Google, but they go out of business very quickly. Instead Provider C would be wise to either reach a better agreement to Provider A or Provider B for access to the local Google data centre, or with one of their interstate providers for better access to an interstate data centre, or even attract some other well-known websites to the local area under their own exclusivity arrangement. A lack of Net Neutrality laws promotes innovation among services providers and a desire to find a way to make their offering better than others.

Another problem with Net Neutrality is that it prevents niche providers from providing services to meet the specific needs of specific markets. For example, opt-in Internet filters for families who would like their ISP to block non-child friendly sites; these become illegal if implemented at the ISP level (although I’m sure the FCC would see fit to exempt such a thing). Also illegal would be an ISP specialising in pre-filtered Internet access for schools, child care centres, and summer camps…especially if it blocks Skype and the search engines and replaces them with their own VOIP and search facilities.

There is a little bit of wriggle room in the court’s ruling which allows the FCC to continue to regulate the behaviour of Internet Service Providers and perhaps even reintroduce smaller portions of bits of Net Neutrality, but for now the Internet is back to being a place of market freedom where competition makes things better for everyone.


Entry Filed under: IT News,Samuel's Editorials

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