I was floored today as I read the joint statement from Google and Verizon expressing their collective views on the Net Neutrality debate which is ongoing in the US. I think everyone should be paying attention to how this one works out because it will impact the internet at its very core – the free and unimpeded exchange of content, and thus ideas. This will affect startups in a very profound way potentially.
The concept of Net Neutrality is very misunderstood by a large number of people, including some professional commentators who talk and write about it an awful lot. They tend to view this as an American issue (that’s their frame of reference) and they liken it back to the messy telephone deregulation and break up of the Baby Bells. That’s unfortunately misguided as Net Neutrality is much more important than that.
Whether we like it or not, the US is the heart of the internet. I don’t mean that in some ridiculous emotive sense, but I mean from a physiological perspective. The underlying services that drive the internet, the circulatory system of the thing, are really very US centric. We can debate that another time, but that’s not what’s in play here – who runs DNS and stuff is an esoteric issue for geeks and jingoistic academics to debate. The US is the main source of internet content and traffic for the vast majority of the world (the blood) and it runs through pipes and routers (the heart muscle) owned by a few small number of carriers. To carry out the analogy, Net Neutrality is a bit like the heart muscle deciding on where blood will go in the body based on which organ its going to and what those organs are willing to give back in return. Imagine if that’s how our heart worked?
Effectively companies like Verizon who own large parts of the underlying infrastructure (along with Comcast and even Time Warner) are putting forward an argument that a select few content providers are dominating the traffic on the internet and those companies are relatively paying very little for that service. This argument is absolutely true, companies like Google and Facebook produce most of the internet traffic in the US. What is left out of that argument is that this content take up is driven largely by the customers who are all paying a fair, market driven price for their internet connection. So that argument doesn’t hold much water.
What’s really at play here is much bigger…
Companies like Time Warner and Comcast are now in the infrastructure business, the delivery business AND the content business. What they want to do primarily is prioritise their own properties across the networks so that they get a higher level of service and ipso facto, their competitors get a lower quality of service – so for example, if you’re a Comcast subscriber for cable and internet and you want to stream NHL Hockey over Versus (on the Comcast Cable Network) they will ensure more bandwidth, availability and performance to Versus than say YouTube or Ustream.tv might get.
It gets a bit more sinister than that…
The carriers will then be able to go to companies and charge them a premium to be on the “Tier 1″ internet as opposed to the “General Public” internet. That’s where it gets ugly for startups. If you’re a small company trying to do something innovative a throttled and tiered internet is going to kill your user experience. Add to this that most startups wouldn’t be able to afford to pay the fees for “premium” service and you can now see how the carriers get to pick the winners and stack the deck.
It gets even more crazy when you start looking internationally. Carriers do peering agreements to exchange traffic with each other internationally. So imagine a scenario where Telstra has a peering arrangement with AT&T, but AT&T and Comcast don’t have back-to-back agreements and they each de-prioritise the other’s traffic. Now you have no idea what kind of service we’re going to get internationally. If a website you’re looking for is a Comcast customer, you could get terrible performance from here in Australia. More importantly for international competition, imagine if you’re an Australian business selling to American customers and your customer is on Comcast – they are going to get low grade service domestically which has nothing to do with you. That’s a killer and is why Net Neutrality is an international issue.
The other piece of this puzzle which came out this morning is from Verizon. They are quite happy to give in on “wireline” Net Neutrality, but they believe that for the US wireless networks to progress, then “wireless” access must not be subject to Net Neutrality. How convenient for Verizon! They don’t own a major content provider like Comcast and Time Warner do, so wireline isn’t such a big deal for them – there’s no extra money in it. However, in the “wireless” space, by being able to create “special categories of service” they will be able to roll out their 4G network and charge premiums for certain types of traffic.
More disgustingly, Google threw us all under the bus. As the biggest provider of content on the internet, having Net Neutrality on wireline suits them to the ground AND by opening up wireless services to premium grade capabilities gives them a potential revenue model they can create with wireless carriers for things like YouTube – you sign up for a Verizon 4G plan, pay the “Premium” and YouTube comes faster AND doesn’t count against your plan caps. Whatever happened to “Do no evil”? This is about as evil as I’ve seen.
Again, for startups, this is a diabolical situation. All of the companies out there producing mobile apps and functionality will be put in jeopardy. You could create a service like Flipboard only to find that it is unbearably slow because Verizon have decided to make it low priority, “General Public” internet type traffic as opposed to the shiny Google competitor product which is “Premium Service”.
Competition depends on a level playing field. What Google and Verizon have done is release a joint statement that feathers their own respective nests, tilts the playing field in their favour and puts the entire internet as we know it at risk. It is scary to see terms like “General Public” and “Premium Services” placed in front of the word Internet. What those two companies are pitching is a multi-level internet that allows them to set the rules of racing – I would prefer the single, capital “I” Internet that we currently have.
Worst of all, the whole joint statement was filled with the cheek to basically tell the US government how the FCC should be run. Who on earth do these companies think they are? President Obama campaigned as a strong supporter of Net Neutrality, it is now time for him to stand up and run the country for everyone’s good.
