Net Neutrality – Under Threat?

Any revolutionary technology creates waves in our lives at the inception, but as time progresses finer details become points of intense debate. Mobile phones revolutionized our lives by practically bringing the world together but these days several critiques of the device point out to adverse facts and figures. Internet is another such innovation.

This article is an attempt to analyze the economic impact of Net neutrality. Net neutrality is the concept of providing identical internet access to two users provided they pay equal amount to avail the facility. Broadband internet is one source of providing internet access to users. This domain has wide coverage and large user base. Internet Service Providers (ISPs) of broadband connection are attempting to legalize the preferential treatment for different data types being exchanged through the internet. For example, ISPs use their last mile distribution network to discriminate between Peer to Peer (P2P) transfers and have taken steps to slow the speed of such transfers. The issue has gained prominence in the last 10 years and has resulted in formation of two major camps of companies both for and against the notion of Net Neutrality. High profile advocates of Net Neutrality include companies like Microsoft, Yahoo, Amazon and Ebay. These companies are pitched directly against the might of big hardware and cable and telecommunication companies like AT&T, Verizon, USTA and Cable.

Theories and arguments have been flying from both camps to prove their points but no consensus could be reached even in the US House of Commons. . Proponents of network discrimination say that network neutrality principles may contribute to the “commoditization” of last-mile broadband facilities, which will in turn discourage investments in establishing new network and adding capacity to the existing networks. This claim is countered by the proponents of network neutrality. They state that network discrimination results in patents in technology which results in inferior goods and thus kills innovation. A discriminated network results in increased R & D costs. This deters smaller firms to utilize the existing resources to find new methods of hardware production. Users have to remain content with what has been offered. In such situation, innovation depends totally on the companies having rights to these patents or which are strong economically.

Another point of concern which has been raised over net neutrality is that it results in misuse of installed capacity. P2P transfers and online video streaming websites like YouTube use a large chunk of bandwidth. According to findings, such transactions alone result in more data transfer in a month than combined data transfer of world’s radio and television in a year. Using network diversity, the aim is to allocate lesser bandwidth to such transactions. But it is again said that many protocols and content could only be developed because of the freedom of internet. Thus discriminating on this basis may kill innovation in the software industry.

It is said that neutral net resulted in fair competition and thus led to development of the whole system. The revolution called INTERNET is only successful because of the availability of unbiased network. But it is also argued that today large organizations use their might to employ additional servers to their advantage by providing faster and enhanced interfaces which the new websites are not able to develop.

Establishing a new broadband network involves large capital investments which have to be borne by the ISP. These ISP argue that a tiered charging structure lets them cover such costs effectively. But then such costs can be effectively covered by reaching economies of scale. Large consumer base automatically results in superior revenues. It is also believed that the differential treatment will result in increased costs for the consumer which is bad for the market as well as for the society.

So far only companies directly related to internet have been active in the debate. But with the increasing use of IT in every sector of the economy, any decision on Net Neutrality will have a direct impact on all businesses dependent on internet. Today companies aggressively use virtualization networks, softwares as applications and cloud computing solutions to be more cost effective. Business fuctions like Customer Relationship Management and Supply Chain Management extensively use IT to increase the efficieny of their opertaions. Any decision to control internet will have direct implications on there businesses as well.

Thus a mixed opinion prevails on this sensitive issue. Several solutions have been provided till date. The most notable of them all is recently suggested by two giants Verizon and Google. This proposal is based on discriminating on the basis of Quality of Service (QoS). Though a unique attempt, it has failed to gain popularity. Initial response from the Web community has largely been negative. This proposal is mainly seen an attempt to provide more authority to the government agencies. At the same time it also has few loopholes which the existing service providers can utilize to increase benefits. The new proposal involves giving limited rights to the broadband connection provider to provide enhanced speed at a higher price and does not involve discriminating on the basis of protocols. This proposal also says that service providers have to provide all type of contents which do not cause “meaningful harm”. But there still is ambiguity over the definition of “meaningful harm”. Overall, the proposal claims to protect the internet democracy but may result in creation of parallel internet worlds, one slower than the other. It is claimed that if this proposal is implemented, it will bring transparency to the system as ISP will have to disclose their operation parameters. It will also ensure better network management by preventing congestion and harmful traffic thus resulting in better quality of surfing. But it may make the companies providing the internet stronger and result in increased costs for the users. Thus it is because of the ambiguity of the proposal, masses are apprehensive about the idea of giving up the freedom they have enjoyed till now. Time will unfold the next episode in this saga. Till then let us enjoy the availability of the free internet.{t}

An electrical engineer by choice, Arjit, has worked in RIL and later, moved on to pursue his MBA from IIFT, Kolkata. He spends his time idolizing the Arsenal team and prefers solving logical puzzles in his free time. An explorer by nature, his favorite hobby is checking out new places and then sketching them out.