Is Neutrality Necessary?

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Last month, the Federal Communications Commission (FCC), an independent regulatory agency in the United States, voted 3-2 to revoke net neutrality rules introduced in 2015. Such a decision was always on the horizon. The chairman of the Commission Ajit Pai wrote a letter to broadband providers and interest groups stating that he would address the net neutrality issue “as soon as possible.” A year later, Pai would fulfil his promise when the rules introduced in 2015 by the FCC were struck down.


Net neutrality is an issue which has been discussed and debated by economists, technologists and regulators for years in America. Similar rules have even seeped into Europe. This principle essentially refers to the idea of data being transported across the web by internet service providers (ISPs) in an impartial manner regardless of the kind of data or its size. It is sometimes referred to as ‘The First Amendment of the Internet’.


It has only recently that such a concept has become of particular prominence. This is because modern routers are capable of identifying the type of traffic coming through and prioritising certain streams over others. As such, the FCC was previously keen to implement regulations to prevent ISPs using these technologies to the detriment of the internet services market and consumers.


The now-rescinded net neutrality rules included in the 2015 Open Internet Rules and Order required American broadband providers to follow four obligations; no blocking, no throttling, no paid prioritisation and no unreasonable interference or unreasonable disadvantage standard for internet conduct. Such neutrality rules took a while to come into force. Ever since the FCC started its mission to put such regulations, they have been subject to fierce opposition and even addressed by the courts twice, when they were vacated both times.


Although, the courts did not reject the actual rules themselves, but merely the manner through which they were being enforced by the FCC. Even when the Commission eventually implemented them in 2015, after considerable political pressure from President Obama and others, many responded negatively and legal challenges were imminent.


But the FCC’s recent vote has ended the existence of neutrality rules in America, at least for now. In its place, Pai says the Commission will seek to implement lighter regulations which will allow ISPs to block, slow or charge more for certain content accessed by their customers. But ISPs will still be required to make any changes known to consumers. Federal Trade Commission’s will also be given the authority to protect consumers “against unfair, deceptive, and anticompetitive practices” by service providers.


For years ISPs, like Comcast and Verizon, have been arguing for less stringent rules to allow them to conduct more efficient network management and invest more in infrastructure. Pai reckoned that under net neutrality, investment by the largest ISPs in the US fell 5.6% between 2014 and 2016, at the cost of 75,000 to 100,000 jobs.


However, others have been more sceptical. Tech companies such as Facebook and Google were disappointed with the decision after urging the Commission not to rescind the rules. Eric Schneiderman, the New York Attorney General, plans to lead a multi-state legal suit challenging the decision, and some members of Congress are also gearing up to reverse the effect of the vote. Critics say that without net neutrality rules in place, consumers will be made to pay more for access to certain content online. Particularly where broadband providers enjoy regional monopolies, there are concerns that the lack of competition would lead to higher prices and lower investment.


There is also the worry that ISPs may favour its own internet applications by condemning rival ones to ‘slow lanes’, or even block such content altogether. However, such claims may be somewhat overstated. Any kind of anti-competitive behaviour is already not permitted under antitrust rules, and US regulators will be able to act when it happens. It is also unlikely that ISPs would exclude popular rival content, as if they attract more people to subscribe to their internet services this will increase sales.


In addition, allowing ISPs to charge more for certain content may actually benefit consumers in the long-run. If an internet provider is able to raise prices for access to Netflix, for instance, which provides content that is bandwidth-heavy, it could cut congestion as well as costs and pass on those savings to consumers in the form of lower prices. Any extra revenue generated could also go toward more investment to improve the quality of services.


Yet this could be countered by the argument that making tech companies pay more for consumers to access their content could potentially hamper innovation and choice. Bigger companies like Facebook and Google with deeper pockets may be able to cope with the higher charges, but smaller start-ups may not and could be priced out. But even under neutrality rules, ISPs would ideally charge higher uniform prices to compensate for the more bandwidth-hungry content which could end up being a burden on smaller firms still.


Some may say, however, that big tech companies are actually a greater threat to innovation than the absence of net neutrality rules. Today, data has become an immensely valuable resource, with the biggest tech companies able to swallow large swaths of it and utilise superior technologies and methods to provide better services, further enhancing their monopolies. If smaller firms do ever manage to penetrate through and prove competitive, precedent shows that they will likely be tempted by lucrative offers to join bigger companies. Thus, if one of the prominent pros of net neutrality is that it enables more competition, in reality this may not necessarily be the case.


Whatever one may think about the FCC’s latest decision, however, one thing it has done is bring the net neutrality debate back to the fore. The pending challenges against the vote could result in the rules being put back in place, or something similar. If they are re-introduced, lawmakers should seek to ensure the balance between preventing anti-competitive and unfair behaviour by ISPs and the efficiency of the internet services market. Ultimately, the vote will most likely start a new chapter in the net neutrality debate.

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