What happens to net neutrality when the cost & revenue lines for a Telco converge?


 

There has been a lot of debate about net neutrality in the wake of the Google Verizon agreement. Its an interesting debate where essentially you have a collision of a corporate profit drive with what seems to be a utopian goal of ‘equality’ of access. This equality in turn drives creativity, innovation and healthy competition.

 

It seems all of this debate is based on the a couple of assumptions. That the internet is ubiquitously available and that by paying your ISP, you can access anything as the internet as it is kind of one big flat, interconnected network.

 

But what if the internet wasn’t there? What then for net neutrality?

 

Absurd assumption you say? Well hang on a second, lets look at some facts from the OECD.

  • We know that over time, there has been a massive increase in internet traffic

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  • We know that over time, consumers have gotten faster access to the internet
  • We know that over time, the consumer price of accessing the internet has fallen.

 

What is never talked about is that this increase in both the speed and amount of data traversing the networks costs money, lots of it. Telco’s [disclosure I work for an ICT company that is owned by a telco] are essentially in an arms race. Continually updating their networks to deliver greater speeds, deal with more data (especially video) at the same time as they receive less revenues. They have to do this (as @simonwardly admirably points out in his cloud video) because to not do this will put them at a competitive disadvantage. So almost without conscious thought, the entire industry is competing itself out of existence.

 

It doesn’t take a great economist to identify that this is a major problem in the making. For those that think that this is grandstanding, have a think about why AT&T pulled their all you can eat iPhone data plans. Someone did some simple modelling and showed that their costs were fast approaching their revenues. (below is an example)

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This is happening across the board too. That’s why telco’s are shaping traffic, and investing in CDN’s. These are all ‘tricks’ to manage network load and hence investment, and just reinforce the point fact that the two curves are converging.

 

So in this world context, just how important is net neutrality when the counter factual is no net? 

 

Doesn’t it make sense that the Telco’s would somehow try to make a commercially sensible play that would monetise all of this data traversing the networks? Given their commercial circumstances shouldn’t they?  

 

I’d also assert that this position needs to be addressed quickly too given the explosive growth in cloud computing which is only going to add to the workload of the internet.  Cloud computing is going to add another dynamic to challenge the net neutrality paradigm. For instance as a business consumer, would I be ok with a tiered internet if it meant that me, accessing my cloud solution that enables me to create economic value, get a internet experience that is not degraded by the bloke next door who is buying music or porn? Hell yes! I acknowledge that this a big generalisation, but with a fully neutral, contended internet service, that is exactly what is happening today…

 

So, I’m not against the principles of net neutrality, they are laudable. All i’m suggesting in the scheme of things, these principles might do more longer term harm than good.

 

 

 

 

 

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