The global conversation on net neutrality is heating up, as the U.S. regulators decide the fate of the open Internet. The U.S. is the world’s technology powerhouse and anything it does is easily adopted by most parts of the world. If the World Wide Web has a switch, it is possibly in one room in America. So, the decision of Trump Administration on net neutrality will have real implications in the future of electronic commerce.
Net neutrality is the principle that Internet service providers and governments regulating most of the Internet must treat all data on the Internet the same, and not discriminate or charge differently by user, content, website, platform, application, type of attached equipment, or method of communication. For instance, under these principles, internet service providers are unable to intentionally block, slow down or charge money for specific websites and online content.
Yet, the concerns on net neutrality may be overblown. Certainly, we should be unhappy if a telecommunication provider slows down our internet connections to selected websites. But we should not be blindfolded to think that any company that does so will not bring severe consequences to its business, in this age of virality. Imagine the implication of slowing connection to Facebook in a college dorm, and all the students decide to cancel services with the telecom provider. The telcos have invested money to make sure their services are fast. It will be a tough call for them to reverse course to turn a 4G network to suddenly slow down to a 2G network just to get Facebook or Google to send them money.
Let us consider a scenario where MTN slows down Facebook or Google Search connections to Nigerians. And the telco goes ahead to ask Facebook or Google for money to normalize the speed of the connections. If neither Facebook nor Google agrees, then the decision will fall to users like us, because MTN has decided to make connections to Facebook and Google very slow. Personally, once I notice that MTN is slowing Facebook or Google connections, I will look for another telco. I do agree that I have to overcome switching costs. But in Nigeria, most people have multiple SIM cards; they just load the right sim card, abandoning the troublesome network. Yes, the switching cost is not really over-bearing.
The Case Against Net Neutrality
I wish the web is the way it is now but I also note that infrastructure is asset which must generate value for the owners. Facebook has its Likes, Google its Search algorithm, and telcos like MTN have their masts and infrastructure. These are private entities, not owned by government. It is free enterprise: every firm has rights to joggle to create value for stakeholders.
These companies have the rights to decide how to monetize their assets including how they meter traffic in their systems. After all, Facebook and Google have their businesses and governments should not help them to make more money. Net neutrality does not mean that only the ISPs (internet service providers) and telcos must lose. Let market forces drive this since it is not government that builds masts unlike roads. Governments have “net” neutrality on roads, making sure Honda and Bentley have the same access levels to roads. That is fine. But governments are not the ones keeping the communication equipments working. Private companies are invested and they should be allowed the free speech to monetize their assets.
Sure – all the telcos can band together to behave the same way. But I do promise you that it will not last more than 6 months for that vacuum to be filled. Someone will come up and offer a completely open Internet to subscribers. Any ISP or telco that thinks that it can slow traffic and retain customers will be shocked. In short, I do not see this as an issue because we live in a world of choices, unlike in the age of the old monopolies.
Yes, I understand the concern that big telcos may ask startups to pay, and if these small companies cannot pay, their websites will be lost in the deep blue sea, with none aware of them. That is a big concern but that will not happen. Customers are not stupid. Any telco or ISP that does that will be gone. If you see how these companies work hard to improve speed to keep customers, and you believe that they will even intentionally slow their networks to get money from big web companies, you have not paid attention.
The confusion with net neutrality is that telcos are not good on virality communications, and are against native web giants and masters of web communication. So they are losing the arguments in the public. The other side has Facebook, Twitter, Amazon, Microsoft and Google, who are masters of social media buzz. Twitter can make anything it wants to trend, even if the facts are not there. There are no ways companies like Verizon and Comcast can win because the web companies are confusing people as though they are defenders of small companies. They make arguments that small companies can be lost in the web if net neutrality is overturned. When did companies like Google and Facebook start supporting small companies to care that much? What is at stake is the ability for these web companies to keep pile of free cash in tax havens at the detriment of telcos. They want government to help them keep the status quo because it is working for them. I do think government needs to get out and let free markets decide.
Let Market Forces Decide This
I do wish that government does not need to get into this as I am afraid of Trump Administration. Trump can wake up the wrong way and cause problem for the ecosystems with his tweets. The web should not have been allowed to evolve in this way. Governments build roads and it should be openly free, but when a firm builds telecom infrastructures, I think it is fair to allow it to execute a business model that will work for for it. A world that fights for Apple, Facebook and Google when they have cash reserves that can buy all the big telcos is rigged.
Compare this to an investor in U.S. who thinks that his non-cash investment should be taxed at 15% when a janitor that works for him is taxable up to 39%. He thinks because he is reading business plans, his labour deserves special protection while the cleaner working for him does not get the same tax benefit. So, the boss pays tax at 15% while the workers pay up to 39%. Interestingly, the hedge funds and the Silicon Valley investors like this. Most funded the web companies!
The Trump government will kill Net Neutrality. The world will not fall apart. Markets will correct any anti-consumer stunts from ISPs and telcos. I am very confident of that. If Verizon slows my Google, I am sure T-Mobile may use that to win my business from Verizon. Period.
On December 14, the FCC will vote on whether or not to roll back Obama-era policies protecting a free and open internet. In fact, during yesterday’s announcement of the upcoming vote, the FCC neglected to mention the historic 22 million comments on the issue, the majority of which were opposed to its rollback.
The long story short on Net Neutrality is that it protects consumers and the internet from ISPs who might want to create internet ‘fast lanes’ for content or websites that they prefer or that pay them more.
Watch out, organizations will emerge to publish details of telcos which are slowing websites. You cannot sell me a service that says 25MB downlink/uplink, and you decide to slow it down based on the website I am visiting. If you do that, I will switch.
The inherent nature of the web, unbounded and unconstrained, will make it nearly hard for any telco to play any fast game without losing customers. A strategist that proposes that will have to get everyone in the industry to band together to execute such. That will be nearly impossible because of many consumer protection regulations in place.
If they kill net neutrality, the first feature update in browsers will be alerting you when your telco is slowing your traffic artificially. The companies have been investing billions of dollars to offer great products to customers. Now, we do think they will suddenly take a 4G speed to 2G because Google and Facebook have refused to pay? I do not think that will happen. The real problem here is constraining a private entity on how to monetize its assets, and I do hope Trump administration corrects that.
Markets can fix all the issues of net neutrality and no one will notice it. Anyone that tells you that the web is neutral has not signed up for a broadband service in America where they can sell 25MB/50MB depending on your choice. The only difference, I understand, is that the speed to all parts of the web through that network may not be uniform, without net neutrality. My argument is that any telco or ISP that thinks it can do that, at scale, could collapse over mass exodus of customers. This is the age of social media: the citizens have so much power. Net neutrality is not an issue to worry about. If they kill it, markets will correct all the issues within weeks.---
Click to join Tekedia Capital and build Next Africa with min of $10,000 co-investment in startups.