Consumers
ought to understand what opportunities and threats arise from an even more non-neutral
Internet. Expect existing trends to
become entrenched with new impacts.
Extended Trends
Better
Than Best Efforts Routing Options
The “good
old days” of absolute best efforts neutrality in the Internet cloud have long
since passed for better and for worse. I
haven’t heard any opposition to the use of proxy servers and “better than best
efforts” service options provided by companies such as Akamai. When consumers want access to “mission
critical” bits, e.g., a weekend mainlining on the entire second season of House
of Cards, they might even pay for higher quality of service when the
possibility of congestion and degraded service exists.
Expect retail
Internet Service Providers, operating the first and last mile broadband link, to
offer enhanced quality of service options for a price.
Squeezing
Even Higher Broadband Profit Margins
ISPs, affiliated
with incumbent ventures such as cable television companies, have come to
recognize that they are “first among equals” in the bundling of telephone, home
security, video and broadband. Cable
operators may want to offer lower margin video services to forestall cord
cutting, but the triple digit margins accrue from broadband.
Expect ISPs
to press for even higher broadband service rates through general rate increases
and additional tiering on the basis of transmission bit rate and download
allotments. Also expect a substantial
narrowing in the gap of download caps between wireline and wireless broadband
options. Currently wireline options have
soft caps in the 200-300 Gigabyte range while wireless carriers have hard caps
from 250 megabytes to 10 Gigabytes. Wireline
ISPs can squeeze out higher margins simply by forcing “bandwidth hogs” onto
more expensive tiers.
Options
for Avoiding Download Debits
Less
generous download allotments reduce the broadband subscription value
proposition, but I don’t see consumers pushing back. What competitive alternative do they
have? Yes 4G makes it possible for
wireless to compete, but their per-megabyte download cost well exceeds the
wireline rate even if the latter rates rise significantly. Satellite options
offer slower speeds at higher download costs, coupled with some latency (signal
delay) issues.
Expect ISPs
to “soften the blow” of stingy download caps with expanded opportunities for content
and service providers to pay in lieu of metering the download. This might come across as “pay to play,” but
heightened consumers sensitivity to a download cap means they are even less
likely to respond to additional commercial pitches that debit their download
allotment.
Developing Trends
New trends
will develop slowly, largely because of Comcast’s ambiguous concession commitment
to neutrality as a sweetener for securing approval of its NBC-Universal acquisition.
I don’t see extortion plays and deliberate dropping of
packets as a ploy to force migration by upstream content providers and downstream
end users to higher quality of service tiers.
However there will be instances where an ISP simply can’t contain its
instinct to push the envelope and squeeze that last dollar.
ISPs Demand More Incentives to
Upgrade
Expect ISPs
to leverage network upgrades in exchange for better interconnection terms with
content providers and their downstream Content Distribution Networks. Netflix might even secure the opportunity to
install servers on ISP premises, but at a price.
I expect Netflix and consumers to
lose the argument that ISPs are entitled only to retail broadband subscriber monthly
subscriptions and surcharge payments from upstream CDNs. If Netflix wants to reduce its CDN payments,
then it will have to pay ISPs directly.
More Interconnection
Compensation Disputes
One might consider increases in
peering/transit disputes as an extension of an existing trend. However, the frequency of disputes and the
complexity make this a developing trend.
A recent and probably temporary surge in broadband demand points to the
potential for consumers to experience degraded service. Depending on who frames the issue, congestion
recently occurred thanks to Netflix, the weather and a holiday: the House of
Cards second season in its entirety, home cocooning due to extraordinary cold
and snowy weather and Valentine’s Day.
So much for network robustness capable of handling peak demand. But of course consumers don’t know whom to
blame. Expect lots of finger pointing.
I hope carriers and content
suppliers won’t make excuses for reducing the value proposition of Internet
access, but it would not surprise me.
