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Net Neutrality - A Good Step Forward But There Is More to Come

The recent decision taken in the USA makes total sense. It has been ridiculous that the incumbent telecoms operators there could present themselves as ISPs and claim that broadband was a content service rather than telecoms infrastructure—by doing this successfully for 20 years, they have not been subject to a range of telecoms regulations. This in turn has stifled competition, innovation, good quality customer services and the development of fibre optic networks in the USA.

Within the net neutrality arrangements, the incumbent operators will now have to treat their broadband businesses in exactly the same way as, in the past, they had to provide other telecoms services such as telephony. In other words, they can’t discriminate by giving preference to their own content service, or on the basis of others paying them premium prices for premium services aimed at favouring certain services over others.

Europe has similar regulations in place, so this will now set the scene for a global approach to net neutrality. In general, however, net neutrality is less of an issue in countries with significant broadband competition, since competitors tend to keep each other honest.

Net neutrality doesn’t stop telecoms operators providing specific network management services for specific services, but they will need to pass the test that they are not discriminatory in nature; and in general they will be judged ex-post, so the scaremongers who are predicting that this will stifle the industry will be proved wrong. We will see such managed network services for, among others, healthcare, education, emergency services and financial transaction networks.

Under the leadership of its chairman and my good friend, Tom Wheeler, the FCC made this net neutrality decision last year, but everybody expected it would be challenged by the incumbent operators, and the expectation was that it would lead to a significant watering down of the proposed regulations.

Thus the net neutrality ruling came as a surprise, given that the American psyche is very much against government regulations. So the 2:1 ruling from the US Court of Appeals for the DC Circuit in favour of the FCC ruling came as a shock—positive for most, and negative for the incumbents.

The ruling is a win for those who favour an open internet environment rather than an internet based on providing services whereby the highest bidder for (content) services will be able to get the fastest delivery service.

It is by far the most important legacy that Tom Wheeler leaves behind when he gives way to the next FCC chairperson, who will be appointed once the new American government is in place in 2017.

As far back as in the 1990s we indicated that the competition would move from telecoms access to telecoms content, and we have seen many telcos buying themselves into movie, sport and other content markets—already offering these services on an exclusive basis, often linked to proprietary hardware needed to access such services.

The next logical step for these combined telco and content players would be to find ways to favour their own services above those from others, and a few such deals have been made over the last few years.

The recent ruling is one important element in ensuring that we are not going to get content monopolies. The next step will be to address the issue of the proprietary set-top boxes. Back in 1996 we warned against this. We said that if we needed all those different set-top boxes in order to gain access to the content we are interested, in we would soon need to reinforce our floors to deal with the pile of hardware needed. The FCC has already indicated that these proprietary boxes are hampering consumer choice and that they will address this issue next.

Interestingly, in that same year of 1996—now 20 years ago—the Australian Minister for Communications, Michael Lee, indicated that he would introduce regulation that would do exactly that—force the industry to create one open device that would allow consumers to access all of the different content services offered by the telecoms and pay TV providers. He then completely flipped over on that promise and subsequently allowed the operators of the set-top boxes to prevent others from offering their services over it.

It shows how powerful these companies are, as nothing has happened since.

The issue flared up again recently in Australia, when Optus snatched the English Premiers League broadcasting rights away from Foxtel, forcing football supporters to have at least two different subscriptions for their football interest.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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