A Bad Week For Net Neutrality (And How The Markets Can Fix This)

IMAGE DISTRIBUTED FOR T-MOBILE - T-Mobile CEO John Legere introduces Binge On during the Un-carrier X press conference at the Shrine Auditorium on Tuesday, Nov. 10, 2015, in Los Angeles. Binge On allows T-Mobile customers to stream video for free without using their LTE data. (Jordan Strauss/AP Images for T-Mobile)

It’s been a bad week for “net neutrality,” and more broadly, the future of the open web. Early this week, Comcast’s new pricing scheme ruffled some feathers when an internal memo to customer service representative was leaked, essentially outlining the rhetorical cushioning behind the company’s “data cap” initiative. And if you haven’t heard the term “data cap” yet, there’s reason for that: the telecomm PR machine is trying to terminate the phrase.

The memo, leaked on Reddit, coaches customer service representative as such:

Do say: “Fairness and providing a more flexible policy to our customers.”

Don’t say: “The program is about congestion management.” (It is not.)

Customers in trial areas will see their home broadband data capped at 300GB, with a $30+ surcharge to unlock unlimited data. Sound familiar? This is the same strategic move cellphone providers made several years ago, when services like iMessage and FaceTime made it near impossible for them to make money off messaging plans and traditional telephone services. “Data caps” don’t sound nice, and as Comcast is quick to point out, it’s not really a “cap” so much as data threshold you’d be very unwise to cross.

The interesting point in the Comcast memo is that it suggests this decision has nothing to do with network capacity—which is shocking. Network capacity, after all, was the reason Comcast had earlier argued regulators should allow them to set up “a fast lane” for streaming services like Netflix which account for the majority of network traffic. (When things didn’t go Comcast’s way, the company proceeded throttled all traffic to Netflix until the video streaming provider agreed to start paying rent to the telecomm giant).

“Network capacity,” evidently, was the catchall for Comcast when exercising monopoly power over consumers and web services. The trouble with telecomm’s “fast lane,” according to many advocates of an open web, is that a “fast lane” means there’s a slow lane, and with that, the low cost of doing business on the web is bound to be driven up by rent-seeking telecomm policies.

The inflammatory bit of this is that consumers are bearing these costs twofold, covering Comcast’s rent-seeking on the business end while getting hit with overage charges as consumers. The commodification of data threatens to stifle business and begin rolling back the clock on 20 years of gains in internet accessibility.

And then, there is T Mobile. The self-declared “uncarrier” announced today that it is zero-rating certain types of data, while also quietly hiking up rates on unlimited plans. “Zero-rating” means that specific types of streaming services (see really big tiles above) will no longer count toward data totals—which is unsurprising given the Comcast memo’s revelation that wireless providers are not nearly as burdened by streaming as we’ve been led to believe.

It’s not clear how much these changes will hurt consumers, but they will certainly benefit big businesses—those in the position to negotiate zero-rating deals with T Mobile. And again, the open web (which is already dominated by a select few big services) will be hurt by policies which do not treat all data equally. This is bad for smaller businesses and upstarts, and in the long run, threatens to stymie innovation in the digital sector.

Why I’m Still Optimistic

Is there a solution? Several consumer advocates are already saying Google Fiber, the search giant’s high-speed internet service, can’t come quickly enough. I’d argue that Google—a company with an embedded interest in an affordable, open web—is in a fantastic position to inject some competition into the monopolistic world of telecomm.

In the long run, rent-seeking in the digital space can only be stopped by alternative business models which do not directly attempt to monetize network infrastructure. That’s a lot to ask of the telecomm gods, but I do believe that net neutrality is worth enough to a couple key players that there will be more intervention if the cost of doing business online begins to keep companies and consumers offline.

7 comments

  1. This issue is really interesting. One that I’ll admit I know very little about simply because I don’t yet pay for any of my own data. I thought you really highlighted these issues in a great way, attaching links to explain issues that I had no idea about… I think I clicked most of them (haha). Overall, this concept is scary to me. It is crazy that the open web, which we take so much for granted, may be a thing of the past. On the flip side, I am also concerned about relying on Google for yet another aspect of my life, but Google Fiber does seem like a logical solution to this problem since Google has a lot to gain from consumers using the open web. Awesome research

  2. Interesting. I confess I’m sort of split on the whole “net neutrality” thing. I don’t really want ISPs being able to throttle customers and say who and what they can visit. On the other hand, a disproportionately small number of businesses (i.e. Netflix) and individuals oftentimes abuse the neutrality provided. I don’t really have a problem letting ISPs apply different standards on the top 0.1% of users (or some similarly small percentage). I think its possible to solve the legitimate problem ISPs note without going down the slippery slope of censorship.

  3. I’ve always considered traditional ISP’s to be the scummiest companies around. Well before this memo got leaked, it was clear to number of people (myself included) that adding a new user to an ISP to use the internet comes at literally no extra cost to the ISP. The only real reason that companies like Verizon and TWC are able to dominate and essentially monopolize internet service is because they own the wired infrastructure that was put up decades ago when phones were going mainstream. It’s sad to see how they can legally take advantage of users like they do, so I too am extremely excited for Google Fiber to bring transparency to the world internet service.

  4. I seriously do not like Comcast much at all. This has been a big issue recently that I have been trying to keep up with as best as possible (though I am not great at understanding all the technical issues). What is important, as @ryanreede said above, is that the net neutrality debacle does not begin to become ISP’s simply taking advantage of their users. Honestly I hope that Google Fiber can become a great alternative to what is provided now, and will keep the internet open and “fast” for everyone.

  5. John, that infographic really puts into perspective how much data that video sharing/streaming sites like Netflix and Youtube generate in comparison to other sites. It does seem like they are “hogging’ the web to a large extent. While companies like Comcast do have such power, it also does feel like a privilege for consumers to have such open and cheap access to literally the entire wealth of human knowledge. Small price to pay.

    John, I am optimistic with you and @tylerbc15 that Fiber has the opportunity to reduce the monopolistic power of Comcast. This article: http://www.zdnet.com/article/google-fiber-are-gigabit-speeds-the-real-story-or-free-internet-access/ grants that the free,open internet access is just as important as the improved internet speeds provided by Google. Just need Boston to make the next round of approved cities!

  6. Excellent post! I agree, I think Google’s attempt to become a player in this space will help level the playing field. In addition, their pricing plan is simple; free internet or the fastest internet around. I am concerned about what net neutrality means for the consumer. We do ultimately have to pay for the service and the more options the more complex payment structures become and that could mean that more consumers will end up paying for something they didn’t really need. That is why I find Google’s payment plan to be the most logical for the consumer. I hope they continue to expand.

  7. Important post, John. I think the nature of Netflix puts it in such an interesting position with Comcast. They need their services to reach their customer, yet they compete directly with Xfinity OnDemand’s streaming service. And then there are questions like those that come from the infographic you shared: yes, Netflix is a traffic hog, but why are they that way? Because all of us “tune in” after class and work to decompress after a long day. Interested to see how the introduction of Google Fiber to the playing field will affect telecomm companies.

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