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The importance of net neutrality in today’s digital world

02 Feb 2018

Article by Steve Singer, ANZ Country Manager, Talend

Net neutrality’s been off most people’s radar screens since 2015 when the US Federal Communications Commission declared it would be protected.

Now, however, it appears that protection is being wound back, and growing numbers of people are not happy.

Net neutrality permits internet service providers and telecom companies to manage all internet traffic equally. As a result, they can charge an Internet user based on the gigabytes they use and their connection speed. 

However, they cannot charge differently for the type of content being downloaded.

The recent US Federal Communications Commission now enables providers to discriminate different types of traffic. Internet service providers can potentially choose to block certain internet traffic and access to certain websites or charge premium rates to view it. 

This will mean all internet traffic will no longer be treated equally, handing greater control to large players and disadvantaging small businesses and new entrants.

While not immediately applicable to Australia, we might actually see more changes in how internet traffic is charged here.  

At the same time, Australian companies whose services are hosted in the US may be challenged with new pricing structures which may then impact local customers. 

Indeed, many web users and tech companies consider changes as an attack on a basic guiding principle of the internet.

They believe that net neutrality, which protects the unrestricted flow of data, fuels innovation. Altering the rules may not only hinder the next great digital native company, but an entire range of existing companies that are navigating their own digital transformations.

The growing power of data

The amount of data in the world continues to grow exponentially with the total size of the digital universe doubling every two years. At the same time, the business world is full of unrelenting technical innovation.

The cloud market, estimated to be worth around $US 246 trillion, is anticipated to grow to $US 383 trillion by 2020. Then there is the Internet of Things (IoT) where there are expected to be around 20 billion connected devices in use by 2020.

Add advances such as 5G mobile networks, that promise data speeds of about 25 gigabits per second, and things get even more interesting.

To effectively manage all this data, it will be necessary to build new high-capacity networks. This investment needs to be supported by telecom operators and, in some countries, achieved through assistance from governments.

At the moment, telco operators network builds are financed by their private and business customers through monthly subscriptions.

However, with a cloud now hanging over net neutrality, operators could demand a new taxation from players in the digital economy based on the consumption of data by their users.  

Could this prove an unexpected new source of revenue for them and a tax on users?

A shift in business models

If this was to happen, it means the FCC's decision to scrap net neutrality could end up having a significant impact on companies that have made the internet and cloud platforms an integral part of their operations by questioning their very business models.

At the same time, the consequences could have an impact on all organisations that depend on the free flow of data to support their activities.

This will inevitably have a huge impact on the future digital transformation of businesses.

The impact of changing the rules

Concerns are being raised about what the impact will be for companies if the net neutrality rules are changed. Who will end up paying any additional costs that are levied? Will cloud providers be taxed by the telco operators?

What’s most likely is that any additional cost burdens will be placed squarely on the backs of customers.

By changing the rules and thus allowing broadband service providers to restrict or give priority to companies that have subscribed to an additional premium service, the types of use cases and the amount of data that could be delivered are limited.

This type of change to the rules would have an impact on both participants in a data transfer - the sender and the recipient.

In the past, cloud vendors have demonstrated a willingness to make their solutions accessible while absorbing their investment costs until critical mass is achieved. But how long will this strategy last before the impact of higher operational costs results in a hike in user charges?

Protecting innovation

In a constantly evolving business world, any changes to net neutrality will have widespread ramifications.

Take the trend of multi-cloud infrastructures, where multiple cloud computing services are used to create a single heterogeneous architecture.

Changes to net neutrality would require companies to exercise due diligence to ensure that the cost of transferring large volumes of data between clouds doesn’t outweigh the value it provides to the business.

Such innovation and the digital transformations it supports will be the biggest areas for potential negative impact if changes are made to net neutrality.

This will definitely be something to watch for.