Net Neutrality — Not a Serious Issue Outside America

btphotosbduk/BDUK Broadband/Wikimedia Commons

Most countries do not have to fear internet quality problems in the same way as the USA.

Back in 1996, broadband was classified as a content service and not a telecom service. Therefore, telephone companies (telcos) could create a two speed internet service. One would be for service providers who pay the premium to get priority and higher speeds, and another for those who pay less to be relegated to the slow speed internet lane.

Because of the lack of regulatory protection in relation to broadband, in 2016, the US under President Obama and the Federal Communications Commission (FCC) Chairman, Tom Wheeler created a bandage solution in the form of net neutrality. This was aimed at protecting consumers against telcos exploiting this ‘content’ situation. However, FCC members voted in December 2017 to repeal these protections. This is currently challenged in the courts.

The incumbents are against net neutrality as it would stop them from exploiting the generous content status that they have. This allows them to stop any serious retail broadband competition as they do not have to make broadband capacity available on a wholesale basis.

The situation in all of the other developed economies is totally different. Broadband is part of the telecoms regulatory regime and this has created a well-functioning competitive retail market. Australia for example has over 50 providers.

Competition, not bandage solutions (such as net neutrality), is the solution to the American problem. If there is sufficient competition, the incumbents cannot misuse their dominant position to create a two tier broadband system. Net neutrality is a rather blunt tool. Providers should be able to create the best possible broadband configuration for the services that they want to develop. Net neutrality rules would make that more difficult.

Even if in more competitive markets incumbents were able to create a two-tiered access system deemed to be anti-competitive, the regulator could step in and stop them.

If broadband is again to be outside the protection of the US regulator, the big telcos could exploit the fast lane/slow lane internet system.

It is clear that under President Trump there is little interest in providing the regulator with the powers to intervene in such situations.

For many years, there has been a serious ‘conflict of interest’ within US politics whereby the major incumbents at telcos that call themselves Internet service provider (ISPs) have given senators and congressmen incentives to protect their interests. Over $100 million is annually spent on lobbying. The politicians are given this money for things like community projects. Voting against the interest of the incumbents will see an end to such hand-outs.

While it is important for all countries to keep a close eye on anti-competitive behaviour, better functioning competitive markets make it highly unlikely that such misuse of market power is possible in developed economies anywhere outside America.

One of the reasons used to get rid of the regulations is that they hamper competition. In being one of the least regulated telecoms markets in the world, the US has dropped on the international broadband ladder. From being in the top three or five twenty years ago, they now feature at around position fifteen, depending on what is measured by whom, so that argument does not cut it. On the other hand, countries where broadband is treated as telecoms are in at least fifteen cases providing better broadband services than are available in the US.

The financial market in the US has had a subdued reaction to the announcement. Telecoms regulation is such a hot political potato and the markets do not see the current ruling as a final solution. It is highly likely that under the next administration new regulations will be introduced. This uncertainty is not stimulating the much needed investments that are needed in the American telecoms market.

Global Seven News

Paul Budde