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Money News

What is Net Neutrality and Why Is Everyone Freaking Out About It?

December 04, 2017

  • Net neutrality is essentially a set of federal regulations that require Internet service providers to treat all information that flows over their networks the same way.
  • Smaller companies might have to pay more to get their content and services delivered to consumers; Consumers also might have to pay more to get faster speeds for downloads.
  • New rules might allow Internet service providers to block some legitimate content altogether.
6 min read

Net Neutrality has been in the news a lot lately. But what is it exactly, and why are big names in technology, media and other industries (as well as American citizens who use the Internet) up in arms about it?

On December 14, the Federal Communications Commission (FCC), the government agency that regulates radio, telephone, TV and cable communications, will vote on a proposal to get rid of net neutrality. The vote could change the way you access content from the web, and how much you pay to get it.

The debate over net neutrality is one of the most complex discussions happening in the public sphere and among businesses currently. It requires a bit of a dive into the way information and content in our increasingly digital age gets delivered to consumers.

We’ll break it down for you:

What is net neutrality?

Net neutrality, a phrase coined by Columbia Law School professor Timothy Wu in 2003, is the principle that says all data that flows over the Internet–composed of computer networks that operate invisibly in the background every time you look at Facebook from your smartphone or watch Netflix shows from your desktop computer, for example–must be treated the same way.

The networks are operated by companies often referred to as Internet service providers, or ISPs, and they include companies such as AT&T, Comcast, Verizon, and Time Warner.

Current net neutrality regulations say these ISPs can’t play favorites, for example by prioritizing their own programming by delivering it more quickly to consumers. They also can’t block or slow down downloads of legitimate content, even if it competes with a similar product they may have. It’s all about equal access.

Fast lanes, slow lanes

Experts have been talking about how the Internet could be carved into “fast lanes” and “slow lanes” to describe how data could be delivered to you in the future, without net neutrality. Without this set of regulations, network providers could simply prioritize their own programming over content from competing companies, and they’d do that by delivering it at faster speeds.

Consequently, competitors would have to pay more money to network providers to make sure their content is delivered at equivalent speeds.

Essentially, without net neutrality, experts say big providers (such as Comcast and Time Warner) could monopolize what content consumers see online, and how quickly they can view it. While these companies are likely to profit from the rule changes, smaller companies and consumers may have to pay more.

In response to these concerns, the heads of some of the big ISPs have said they don’t plan to make any changes if net neutrality is overturned, and that they’d be upfront about any alterations in the future.

“We do not and will not block, throttle, or discriminate against lawful content — and we will be transparent with our customers about these policies,” a Comcast representative told the New York Times in November.

Essentially, without net neutrality, experts say big providers (such as Comcast and Time Warner) could monopolize what content consumers see online, and how quickly they can view it.

Who controls what we search, watch and consume online?

Many of the companies that control access to the web are also some of the largest companies in the U.S., and some of the biggest content creators around.

Cable provider Comcast, for example, which has some $80 billion in annual revenue in 2016, also owns NBCUniversal. In addition to television shows and prominent news programs and websites such as CNBC and MSNBC, it also owns Universal Pictures and it has a big stake in streaming media company Hulu.

Now think about the streaming media company Netflix, which had annual revenue of about $3 billion in 2016. It competes with Comcast, with offerings that include original shows, movies, and other programming.

Here’s where it gets complicated.

Comcast is also one of the largest cable providers in the U.S.–millions of consumers depend on it to get online. Yet many of its customers also subscribe to Netflix, a tiny company in comparison, and use Comcast to stream Netflix’s content. Without net neutrality rules, Comcast–which is also said to be creating its own streaming content subsidiary–could favor its own programing over Netflix. And they’d potentially do that by delivering its own products at faster speeds to customers.

In order to compete, Netflix might have to pay Comcast additional money to have its own content delivered at comparable speeds, according to experts.

Cable provider Time Warner could do the same thing, and so too could Verizon and AT&T. So Netflix could potentially wind up paying each provider additional fees, just to stream its programs at speeds comparable to today, which could potentially take a bite out of the company’s profits.

And we’re not just talking about Netflix–any smaller company that has a competing product or service could be forced to pay more to access consumers, according to reports.

Economic impact on tech sector

While large companies such as Google and Amazon, which depend on the Internet to distribute their products and services, have deep pockets and could pay for access, smaller companies might have trouble with the new plan, according to the New York Times.

In fact, many big companies today–Google and Facebook, for example–got their start because an open Internet structure allowed them to distribute their products and services at little or no cost.

With a more restrictive Internet, any startup that relies on the Internet–for example to stream video or audio files to consumers–is likely to feel the pinch, which could hamper innovation. But it’s not just startups that have to worry.

How net neutrality affects you

Consumers are likely to have to pay more money for their cable and Internet. One of the things that’s being debated is a kind of menu, where you’d pay for the speed of access you want, as well as levels of content, and limits on data.

Faster download speeds and more robust content could wind up costing more–meaning affluent consumers would get better products and services than people with less money. That’s not allowed under current law.

Finally, under the proposed new rules, companies could conceivably block some legitimate content they disapprove of, according to reports. That’s not allowed today.

Some background

Net neutrality was officially established in 2010 by the FCC, through something called the Open Internet Order. That prevented Internet service providers from blocking or slowing the content of providers–such as Netflix or Amazon–when they accessed their networks. It also prohibited ISPs from charging consumers for faster downloads.

That order was overturned in 2014 by U.S. Court of Appeals for the D.C. Circuit, following a challenge by Verizon. The court ruled in favor of Verizon, saying that the FCC couldn’t enforce its previous order, unless it reclassified Internet Service Providers (ISPs) as common carriers, essentially public utilities, equivalent to telephone providers–which are heavily regulated.

Following a lengthy public debate where nearly four million consumers weighed in, the FCC in 2015 decided to classify ISPs as public utilities, and essentially maintained earlier net neutrality rules, with some exceptions.

Current regulations dealing with net neutrality, formulated under the Obama administration, have been in place for two years. The FCC under the Trump Administration has announced its intention to undo the Obama-era regulations, claiming net neutrality stifles competition and innovation of the larger companies. It plans to put ISPs on an honor system, requiring them to be transparent with consumers about their practices. It would also put the Federal Trade Commission–which lacks the FCC’s tougher rule-making power–in charge of consumer complaints about unfair and deceptive practices by ISPs.

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

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