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Net Neutrality: “Free To” Or “Free From”?

by User Not Found | Feb 09, 2015

If I tried to appear sophisticated and philosophical, I would invoke the “Four Freedoms” speech by Franklin D. Roosevelt more than 70 years ago into the current multi-sided debate on how the Internet should be regulated (or not) and whether net neutrality is desired.  The often charged debate has been raging on between the regulators (in particular the FCC in the US and the European Commission), the content and service providers, the content delivery networks (fixed and mobile) and consumer groups.  The reason I think FDR is relevant relates to choices the parties make, or what different groups mean by “keep the Internet free”.  In a nutshell:

·         As a consumer, do I value more the freedom to choose or do I prefer to get the content and services free of charge? 

·         As a content and service provider, do I prefer to compete with everyone on an equal footing and win the consumers with my superior service or content, or would I rather pay the channels (in whatever way) to get an advantage over the competition?

·         As an operator, if I have my own content to deliver over my own pipes, can I treat it more favourably, in other words, free from being regulated, or do I have to treat it equally as content from competing suppliers delivered through the same pipes?

·         As a regulator, do I put equity above efficiency, or the other way round?

 The fundamental reason that there is no sign of the debate coming to an end in the near future despite the FCC has declared its position and a ruling date has been set for the end of February is that there are strong arguments on both sides.

In this blog post I’m attempting to highlight the pros and cons of net neutrality for different stakeholders in the mobile context and I’ll state where I stand at the end.

For service providers e.g. OTT music stream service, net neutrality would guarantee the new comers or fringe players an equal opportunity to the content delivery networks’ bandwidth to reach consumers, therefore a more friendly environment towards the less established players.  On the other hand, if I were a market leader, with cash to spend, I would prefer the possibility to buy my preferential treatment from the delivery networks, e.g. mobile operators, to reach consumers with priority, therefore to attract either more paying subscribers to increase my income from subscription fee, or more non-paying users to improve my appeal to advertisers, or both. Or if I have a strong consumer-pulling brand, the networks may choose to sponsor my service with free data traffic.

For mobile carriers, especially for those without a backbone network, net neutrality would be more negative than positive.  A most burning case is mobile video, for example Netflix.  Without the legal capability to charge premium on heavy traffic services like this, the volume of data going through the network would continue to go disproportionately higherthan the value they generate, as has been apparent in the past, and is not seen to change in the near future.  In terms of competition, aggressive measures like “zero rating”  promoted in T-Mobile USA’s Music Freedom and “sponsored data” promoted by AT&T,would run afoul with net neutrality regimes.  On the other hand, to a certain degree, the mobile only carriers would also be protected by the overall net neutrality regime, in the sense that the backbone networks who also have mobile business would be restricted in their capability to charge discriminating rates on those renting the fixed transmission networks.

Ultimately, for consumers, in a market without worry about net neutrality, the most popular content and services would be delivered to me in guaranteed “Quality of Service”.  If I’m lucky, the data I consume on these content and services may even be free, either the services pay for them, or my operator is kind enough to give them to me, I don’t mind.  However, in such a market, how could I be sure that I would not miss out on the next Netflix or the next Spotify, because they don’t have the money to pay preferred delivery, therefore the quality I see or hear would be inferior? Or they are not “opted in” by my operator because they don’t yet have the clout to pull more subscribers, so the data incurred when I consume them would be charged to me?  What if I’m not a fan of the most popular services to start with?

Now my coming-out moment: as an analyst I can see both sides of the argument by all parties.  As a consumer though, I’m rooted for net neutrality.  In other words, I believe the freedom to choose is more important to me than the freedom from payment. 

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