A court in America made a ruling earlier this month that may affect our costs in using our internet.

If there were no rules, then the fear is that the Internet playing field would tilt in favour of large RSPs with deep pockets, resulting in the loss of an open Internet.
The court decision paves the way for Retail Service Providers (RSPs) to change their business pricing models in a way that will benefit some of their customers at the expense of others.

The changes, if not undone, will force one of two outcomes for users.  Either prices will rise because content providers like Netflix and YouTube will be charged fees to allow their content to be delivered over RSP networks. Or the RSPs will charge their customers fees for a priority status to ensure that video streams do not stutter when watched at peak viewing times.

The US court case was initiated by Verizon Telecommunications which sued the US Federal Communications Commission (FCC) on a point of law.  The court found that the FCC did not have the authority to establish its net neutrality laws, or ‘Open Interent Orders’.

Verizon has a lot of clout.  It is the world’s third largest telecommunications company, with a market capitalisation around 30 times Telecom NZ’s and close to New Zealand’s GDP (US$170 billion).

net-neutrality1Net neutrality rules provide for all Internet traffic to be treated the same by RSPs.  For example, downloading a web page must be given the same priority as streaming a video.

There are two sides to this net neutrality issue.

The anti-neutrality camp would feel aggrieved if the YouTube video they were watching stopped because someone was downloading a pirated video.  They believe that the Internet will be improved if some services had priority over others.  They will also support RSPs filtering out undesirable content, such as child pornography.

In one sense, we already prioritise some internet traffic. VOIP (Voice Over Internet Protocol) telephone services for example, ought not be degraded because of other’s downloading a video.  And RSPs already filter out what they regard as objectionable content.

Most people would agree that these two breaches of strict net neutrality provisions are reasonable.

The pro-neutrality camp would feel aggrieved if an RSP gave their own video product priority over a competing service.  They also deny the right for RSPs to filter content, arguing against the vagaries of an RSP deciding what is objectionable and what is acceptable.

Whether people agree with these two net neutrality provisions probably depends on whether or not they benefit from the removal the rules.  Those consumers who can afford to pay extra for continuous streaming video will likely be happy.

In the US, the rules were seen as the only barrier standing in the way of RSPs deciding what can and can’t be transmitted across their broadband networks.  Or who could and could not transmit content to a user.

If there were no rules, then the fear is that the Internet playing field would tilt in favour of large RSPs with deep pockets, resulting in the loss of an open Internet.

Given the market power of some RSPs, those fears are real enough.

But there is another powerful player in the Internet market: content suppliers like Netflix, Youtube (Google) and others.

Netflix are flexing their muscle to force RSPs to in effect pay to carry their video traffic. As argued in an article by Fred Campbell at CbitNetflix is attempting to leverage net neutrality regulations to gain an anticompetitive price advantage in the marketplace.

It is the balance of power between these two groups, content suppliers and RSPs, that will in the end, determine the price for our Internet services.  So no, US courts themselves are not determining our Internet costs.

Part 2 next week: Regulations needed where competition fails.