Net Neutrality – What Happens Next?

I’ve been thinking some about what happens next in the industry with the fall-out from the FCC’s decision to kill net neutrality and to eliminate Title II regulation. It seems like the big ISPs have gotten everything they ever wanted in terms of having unregulated broadband. What might happen next?

I expect there to be little change in the industry in the short run. The FCC just made the ruling and there already looks like there will be a number of lawsuits against the order. It’s not unusual for courts to put FCC orders on hold until lawsuits make it through the legal system and this probably won’t be much different.

But even without the lawsuits I don’t expect to see the big ISPs make any drastic changes in the next year. There is a huge public furor over this ruling and my guess is that the ISPs don’t want to roil the public for a while. The end of net neutrality will allow the ISPs to make all sorts of changes the public will hate, such as big price increases for broadband or the introduction of draconian data caps. But I’m guessing that the ISPs are not going to do anything too drastic until the topic has settled in the public mind.

The ISPs also still have to worry about regulatory push-back. There is a good possibility over the next few election cycles that Democrats take back part or all of Congress or the administration, and reversing what this FCC just did is probably high on the Democratic wish list. Net neutrality is popular across the political spectrum and an administration that puts it back in place will likely get lauded by the public.

I think the big ISPs really made a tactical error in pushing to totally deregulate broadband. It’s easy to think that the net neutrality rules have only been around for a few years since the latest iteration was just approved in 2015. But the FCC has been discussing net neutrality since 2005 and to a large degree the big ISPs didn’t do anything too outrageous during those many years so as to invite strict regulations they didn’t want. I think the ISPs would have been far better off to have compromised and put in place a new set of rules that a future FCC might still keep.

For instance, they could have changed the rules to give them safer pricing flexibility, which is what I think they most want. But they could have kept the three basic net neutrality principles in place to mollify the public and regulators. But honestly, I don’t think big corporations are capable of constraint. The big ISPs got a friendly FCC and it seems they are going after everything on their wish list, with Title II regulation just one item on the longer list.

But over time, if some future FCC or Congress doesn’t put some version of net neutrality back in place then I think you will see all of the many things that the public feared start to come into play. There will be a lot of zero rating with content bundled with bandwidth. The ISPs will put pressure on big content providers to pay for premium access, to the detriment of smaller players and start-ups. We’ll see significant price increases and billing practices like data caps that make the ISPs more money.

And a lot of this isn’t going to happen due to large strategic decisions by corporate management at the ISPs. That’s not how huge corporations work. A lot of changes that would have violated the previous net neutrality rules will actually come as the result of lower-level management making decisions. Marketing people will promote bundled packages if they think it will increase sales. Divisional VPs will negotiate tough terms with content providers if doing so will increase their bonuses. In the recent past one has to think that many discussions of new ideas inside of ISPs included somebody asking if the new ideas violate net neutrality. But with net neutrality out of the picture that question will no longer be asked and the desire for bonuses and profits will drive the people at the ISPs to make decisions that are good for the company while not necessarily good for the public or the industry. That’s the main reason why we regulate big companies, because they have a natural tendency to favor profit over almost everything else.

My own personal prediction is that we are not done with net neutrality and that a future administration is going to bring it back in some manner. And that is probably the worst possible outcome for the big ISPs. It’s ironic that the CEOs of all of the big ISPs said that they could live with the three principles of net neutrality – and I believed them. But, when they were given the chance, they still could not help themselves from lobbying to kill it. Uncertainty is far more costly to big corporations than regulatory rules they don’t like. And my guess is we might not be done with this topic for quite some time. I just hope we don’t get into a pattern of yoyo decisions out of each future administration.

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