INSIGHT: Net neutrality – good in theory, but can it work in practice?

INSIGHT: Net neutrality – good in theory, but can it work in practice?

Cameron Beattie, Founder and CEO, Conversant, discusses the issue of net neutrality and its impact in New Zealand…

The passing of new net neutrality rules by the US Federal Communications Commission (FCC) last week has once again raised the argument about what these regulations actually mean for businesses.

On one side are those who equate net neutrality with an internet free from big corporate tomfoolery – essential to keeping it open and fair.

On the other, are those who believe it will add to the regulatory burden technology providers already face and in the process stifle innovation.

For instance, earlier this week Nokia CEO Rajeev Suri argued that certain futuristic technologies will need to be prioritised, saying technology like self-driving cars will be held back by a totally open system.

The debate over net neutrality erupted last May when FCC Chairman Tom Wheeler released a plan that would have allowed large carriers to charge companies for the right to "premium" access to their customers.

Naturally, as a smaller provider on online services, we wouldn’t want to see larger players get preferential treatment from carriers because they’re able to pay for the privilege.

Imagine if one of the large New Zealand telcos decides to penalise all VoIP traffic on its network. That would have a detrimental effect on all VoIP providers and users, Conversant included.

While larger service providers would be able to negotiate superior access terms and pay more for it, as a smaller provider we probably won’t be able to do that.

So on face of it laws or regulations that guarantee net neutrality, like those just passed by the FFC and European Parliament last year, are a good thing.

Clearly there are benefits to end users and all providers of online services from rules that prevent large service providers from blocking or stopping certain web services, slowing down content from specific websites, and speeding up some traffic in return for payments.

However, as someone who believes in market economics, I wonder if this approach takes into account the realities of economics.

The internet has always been, and will always be, far from neutral. The reason for this is simple – internet bandwidth is not an infinite resource that can be allocated equally. And if we can’t ration resources through economic measures then what is left?

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