Welcome back to this series on net neutrality. If you're not caught up, feel free to take a look at the following articles, which tackle:
ISPs have been regarded as big, fat, dumb pipes. The bigger and dumber, the better. And ISPs aren't happy with that. And we're in a position where established oligarchies can exploit wide-ranging rent-seeking behaviors to protect their market dominance.
So, what kinds of things can we really compete over in the ISP space? Bandwidth? Latency? Content access? Privacy? really, that's about it. Today, we have unlimited content access — and we used to have some level of privacy. The end of net neutrality regulations gives companies the ability to provide slower, limited internet access with no privacy, which I'm personally not paying for. So who are they going to charge? Content providers of course.
So it's pretty clear that ISPs are going to begin charging content providers for access to their networks. Comcast, in fact, actually does this today, charging Netflix for access to their infrastructure. In exchange, Netflix is hosted on the X1 system, of course, making Netflix content available to all Comcast subscribers. From my perspective, this honestly makes sense for a company like Netflix; streaming high-quality video uses a fair amount of bandwidth. But extending this model to Facebook or Google? Or Reddit? Or BBC Online? This just rent-seeking behavior. The bandwidth required for these sites is negligible.
And I don't see how it won't happen.
So the Facebooks and Googles are paying for fast-lane access (or access in general) to the networks run by the Comcasts and AT&Ts.
Well, I expect we'll see a couple of things. We'll see companies emerge that broker access to various ISPs, for example. Say you're an internet startup and you want the best experience possible for your customers. You'll contact one of these brokers, and they will arrange for your traffic to have the best performance possible in all ISPs in your targeted market. I expect this kind of thing will be bundled so that companies can select, say, the European market bundle, or the Americas Bundle, or the Chinese Bundle, or some combination thereof. Will it increase barriers to market entry for these startups? Absolutely. But it remains to be seen if those barriers will be significant.
We'll also see costs rise for internet advertising in general. Again, I'm not sure how much, but I just don't see Google or Facebook charging for access to their apps. Their revenue is advertising-centric, and that's where prices will increase. I expect this will not result in an increase in overall prices passed to the consumer; the price increases will be so broadly applied that they will have little impact on specific products, at least for most companies.
Companies that use membership models will likely need to increase prices to consumers. That will depend on the specific products sold by those companies of course. SAS/API-based companies with little bandwidth requirements will not be excessively impacted I would think; companies with media- and bandwidth-intense products will need to pay more.
So really, this is not ISPs targeting consumers, but rather ISPs targeting Silicon Valley. The AT&Ts and Comcasts and Centurylinks of the world want a share of the pie. And really, why shouldn't they? They have had to invest in network upgrades over the years to support customer demand for the kinds of products the Valley has been churning out. Why shouldn't the content providers pay for some of this?
Yes, this is a money grab by ISPs. But not from consumers. From media-heavy content producers.