Commentary: 7 Surprising Things About the End of Net Neutrality
On Thursday, the U.S. Federal Communications Commission (FCC) will almost
certainly repeal the American net neutrality rules that went into effect in
Net neutrality is somewhat of a misnomer—a better descriptor is “content
agnostic.” What net neutrality implies is that Internet Service Providers
(ISPs) in the U.S.—cable companies and telcos like Comcast (cmcsa, -2.30%) and
Verizon (vz, -0.51%)—must treat all content equally, regardless of what it is
or who owns it. For example, AT&T (t, -0.18%) is not currently allowed to
provide its subscribers faster access to DirecTV, which it owns, and slower
access to Netflix (nflx, +1.11%), which it does not own. The end of net
neutrality would, in theory, allow ISPs to charge more/less for, or slow
down/speed up, different types of content.
Removing net neutrality has generated a huge amount of media coverage in the
U.S., mostly casting the debate in terms of an epic story of victims and
The victims are American consumers and businesses. As certain content is priced
out of reach, the story goes, the Internet will become less rich, small
enterprises will suffer, public schools and universities will see their
Internet connections slow to a crawl, the best minds will leave the country in
frustration, and everyone will pay more for Spotify and Netflix.
The villains are the ISPs, long reviled for high prices, poor service, and
aggressive retention tactics. The ISPs lobbied the government hard for this
change, and stand to benefit the most at the expense of long-suffering
subscribers. Networking and infrastructure companies are also likely to gain,
as the rule change will require upgrades to networking hardware and software.
This is a gripping narrative, but how much of it is actually true? Will the end
of net neutrality really make a big difference to the average Internet user? We
First, it is worth pointing out that net neutrality rules are quite new—the law
was only enacted in mid-2015—although the concept has been around since the
1990s. Prior to 2015, there was no net neutrality and, well, the Internet
worked just fine for most people. Occasionally, an ISP was caught slowing down
(throttling) certain sites, but public pressure or legal action tended to keep
the ISP honest. There is little reason to believe that a future with no net
neutrality regulation will be very different from the past.
Second, the issue with net neutrality is multi-speed Internet service, not web
censorship. An ISP might be frustrated that Netflix consumes 35% of its
bandwidth at peak hours, but it cannot legally block it, with or without net
neutrality. Even with no net neutrality, the most that an ISP could do would be
to slow down access to Netflix, and charge people for higher speeds. In
reality, this is not likely to happen—the public backlash would be too severe.
More likely, the ISPs would discriminate by offering their own preferred
content faster and cheaper. Ironically, this is already happening under net
neutrality regulation: AT&T, for example, offers DirecTV access as a “zero
rating” product, i.e. it does not count toward data caps.
Third, the end of net neutrality rules will lead to a closer link between cost
and consumption. While net neutrality may be conceptually appealing, it is not
equitable. Is it fair that a few super-users are allowed to clog up networks by
downloading movies, playing data-hungry online games, and not paying more for
it? Why shouldn’t ISPs be allowed to price data according to volume, type, or
Fourth, ISPs could use any extra revenue generated from high-bandwidth users to
subsidize the cost to regular users or improve network infrastructure. If they
start to charge more for content, then there will be a lot of pressure from
subscribers and regulators to improve service levels in return.
Fifth, the practical difference for most subscribers will be minimal. Most ISPs
already charge higher prices for higher speeds, or bundle less attractive
services (like TV channels you never watch) with more attractive ones (faster
Internet access). The only difference without net neutrality would be that slow
speeds could affect some sites more than other sites.
Sixth, net neutrality, however intuitively appealing, is a form of government
control. History has taught us that government control and intervention often
inhibits progress and innovation. If ISPs are less regulated, one might imagine
companies springing up that would provide better, faster, and cheaper service,
thus promoting innovation.
Finally, ISPs are unlikely to make any quick moves to change the status quo.
Legal challenges to the removal of net neutrality are likely, mid-term
elections are coming in 2018, and public opinion of ISPs is already low. Most
large ISPs have also pledged not to make any dramatic moves in the event that
net neutrality is repealed.
Net neutrality is an attractive concept, and its removal might instinctively
rub you the wrong way, but that doesn’t mean it should be kept in its current
form. Reed Hastings, CEO of Netflix, has stated that net neutrality is “not our
primary battle at this point.” If he is not worried, why should the rest of us
Michael Wade is director of the Global Center for Digital Business
Transformation at IMD. Heidi Gautschi is a research associate at Global Center
for Digital Business Transformation at IMD.