March 2, 2015

Net Neutrality

A few weeks ago, as part of our Business Government and Society class, we were given a case study on Net Neutrality. I must admit, I knew very little about this topic when I first read the case. In the 3 hours we were given to process the case into an action plan, I picked up quite a few points and learned quite a few things.

A few days ago, news came out of the United States that, in effect, protected the idea of net neutrality. This article from BBC lists the highlights and main points of the ruling by the Federal Communications Commission.

From what I gathered while I was reading through the case a few weeks back, there was significant lobbying done by the internet providers to allow them to charge content producers/distributors a fee to send information on either a "fast lane" or "slow lane". Fundamentally, consumers and content producers/distributors were up in arms with what appeared to be an attack on a fundamental right -- the right to access and send information equally. 

However, looking deeper into the situation, I came to the conclusion that the reason this was being pushed was that internet providers had to shoulder the majority of the investment in infrastructure to give consumers better and faster internet speeds but they were unable to capture any of the additional value they had created. Instead, content creators and distributors such as Netflix capitalized on faster speeds to give consumers more content. They were able to capture the value without having to invest in infrastructure. Of course, content creators and distributors had to invest in another type of infrastructure, things like production costs to improve the quality of content.

Internet providers were also saddled with having to deal with consumer backlash in the event that the internet service is slow or disrupted. But many will argue that this is a basic cost of doing business: you must keep your customers happy by providing good service (pre-purchase and post-purchase).

This is a topic that has spawned a huge debate that I am sure will not end with this ruling. I think that both internet providers and content creators must come together and do what is best for the consumer. The consumer after all is the one who pays the bills. No consumer = no business. I think the ideal scenario is that both parties help shoulder the huge cost of investment needed to improve infrastructure.

While this ruling is highly US-centric, it is not far fetched to think that many other countries will follow suit and look to protect net neutrality. The EU has actually been leaning more strongly toward net neutrality than the US prior to this US ruling.

This is something that is quite interesting and just another thing I learned while at IE Business School.

Link here to the original article from BBC