SWRM Labs Blog

The Net is Not Neutral

Dec 14, 2017 12:40:36 PM / by Robert Binning

Today, December 14, 2017, is being treated by many people as the last day for a “free internet,” since it is pretty clear that the FCC chairmen will rule 3:2 and overturn the Open Internet Ruling established in 2015 with its new “Restore Internet Freedom” Order.

The opinions of each of the five chairmen has been clear for months, if not years. The current Chairman, Ajit Pai, and Commissioner Michael O’Reilly each published lengthy dissenting statements as attachments to the 2015 Ruling, outlining their arguments as to why the FCC should not have enlarged its definition of basic (Title II) carrier services to include broadband internet access services.

The third Republican Commissioner, Brendan Carr, has been quite vocal that “the FCC vote is a win for consumers & innovation. Americans will regain online privacy protections they lost two years ago, & we return to the robust legal protections under which the Internet thrived in 2015 & prior 20 years.”

What’s happening, and why have millions of people submitted comments to the FCC?

Back in the dark ages circa 2000, the major local phone companies and the major cable service providers began deploying broadband services as optional enhancements to their basic offerings. The Telecommunications Act of 1996 established a federal priority to enable broadband services to reach all Americans, with special emphasis on the provision of broadband service to elementary and secondary schools and classrooms (Section 706).

For the past 15 years, the FC has published semiannual updates showing the progress in deployment of broadband services on a county-by-county basis. At the same time, the FCC has explored the definition of “broadband,” periodically updating its definition as new services are introduced that test the limits of high speed service access. Today, “broadband” internet means local service with a 25 Mbps downlink and 3 Mbps uplink speed, or multiuser service with 100 Mbps to cover a 1000 user population (common in public secondary schools). About 83% of US households currently have access to at least one qualifying broadband service, but there are thousands of rural counties across the nation where that standard is not possible, and where less than 10% of residents can obtain high speed services.

Three forecasts for the future of broadband services

The top four broadband providers — Verizon, AT&T, Comcast, and Charter Communications — form an oligopoly for residential broadband services, with the two cable companies holding near monopoly positions for fiber-cable service in their respective geographic locations, and AT&T and Verizon sharing over 60% of their respective core telecom markets. Together, the four top companies share 74% of the US broadband industry. The four top companies have each spent most of the pat 20 years buying and integrating competitors and adjacent businesses, cementing their roles as integrated broadband services providers. For each of the past five years, AT&T and Verizon have been the #1 and #2 investors in capital infrastructure among US companies, surpassing ExxonMobil and the other major oil and gas companies as well as the entire population of major internet and tech companies. The only significant acquisition that has been halted during the current administration was the proposed merger of AT&T and Time Warner, which would have combined a huge content owner with one of the major broadband ISPs. It seems very likely that the four top broadband competitors will continue to increase their aggregate market share by acquiring more secondary or regional firms and by continuing to raise the bar on investment in infrastructure in their major service areas.

One of the claims of the pro Net Neutrality forces is that changing the FCC regulatory environment will allow ISPs to either block or charge separately for access to specific popular services, such as Facebook or Netflix. That is not and has never been part of the core strategy for any of the top firms, but it is highly likely that the firms will streamline the deployment of some of these specific high bandwidth services, especially the two named above, and enable preferential treatment for users who choose to pay for premium plans. Instead of just seeing rates that promote 25 Mbps or 50 Mbps, you will see rates for streamlined 4K video service, potentially naming specific content channels. One of the side effects of this policy would be that the top content service providers — Netflix, Disney, Time Warner — would take even more share of the total service market, while specialty stream services (including StreamSpace’s own blockchain film streaming service) might face an uphill battle to be treated as an equal application service.

Lastly, the next generation of commonly-used broadband services will likely be wireless 5G services, more than fiber-based. AT&T and Verizon recognize that the next wave of capital investment will be for 50–100 Mbps wireless broadband infrastructure, aimed to both stationary users (residential wireless) and mobile consumers, including both automobiles and smartphones. The sheer cost of keeping up with AT&T and Verizon will make it more likely that smaller service providers drop out. Sprint and T-Mobile are losing capital support from their major investors, Softbank and Deutsche Telekom, now that the proposed merger between the two Tier 2 competitors failed in late October. No smaller wireless provider has anywhere the level of capital reach necessary to be competitive in 5G outside of highly focused metro service experiments.

But all of these trends have been apparent for the past two decades, from the early days of hybrid fiber-coax and DSL and LTE 3G wireless service. What is changing is the nature of the content that people are expecting to see from their broadband service — more video, much more complex internet websites with continually updated feed content. The most popular websites in the US today are Google, Facebook, YouTube, Amazon, and Verizon’s Yahoo, all companies that date back only 25 years or less. All of these sites have been increasing their share of traffic, enhancing their services with more complex video content and increasing the amount of time and money their users spend on each of their sites.

The future is already here. Innovation still matters, but the major buyers for innovation are becoming more centralized. We see this in the shrinking of the public stock markets even as the value of those markets continues to rise. More and more industries are becoming more concentrated, resulting in higher prices and profits. Moving regulation of the broadband industry from the FCC to the Federal Trade Commission, alongside most other industries, does not bode well for the long term health of the internet, one of the few segments where young innovators have been successful in the past 20 years.

Author note:

Jose Tormo did some lobbying to the FCC and Congress in 1995–6 as an employee of Motorola, one of the inventors of both ADSL silicon and cable modems and the largest provider of wireless communications equipment in the United States.


  1. FCC Report and Order on Remand, Declaratory Ruling, and Order, GN Docket №14–28, Adopted February 26, 2015, Released March 12, 2015. https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-24A1.pdf
  2. Carr, Brendan. https://twitter.com/BrendanCarrFCC/status/940991727648804864 Twitter post, December 13, 2017.
  3. Taglang, Kevin, Benton Foundation. “What Section 706 Means for Net Neutrality, Municipal Networks, and Universal Broadband. https://www.benton.org/blog/what-section-706-means-net-neutrality-municipal-networks-and-universal-broadband , 2015.
  4. Kimmelman, Gene and Cooper, Mark, Washington Center for Equitable Growth. “A communications oligopoly on steroids,” http://equitablegrowth.org/report/a-communications-oligopoly-on-steroids/ , July 18, 2017.
  5. Di Ionni, Michelle and Mandel, Michael, Progressive Policy Institute. “Investment Heroes 2016: Fighting Short-termism. http://www.progressivepolicy.org/wp-content/uploads/2016/10/InvestHeroes_2016.pdf , October 2016.
  6. Photo by Luca Colapinto on Unsplash

Tags: ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Net Neutrality

Robert Binning

Written by Robert Binning

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