Pros and Cons of Internet Neutrality

If you’re reading this blog, I wonder how many of you are aware of the media discussion on Internet neutrality and the associated pros and cons. We should all be concerned because within the next couple of weeks the FCC will be voting to determine whether this two-year old regulation should continue. Deregulation will allow Internet Sevice Provders (ISPs) to bundle services, much like cable companies do today. I have done some research and below are some of the pros and cons associated with deregulating the Internet.

Pros:

  1. The new FCC commissioner, AJit Pai, once worked for Verizon and he believes that deregulating net neutrality will benefit consumers by allowing ISPs to offer discounts on bundled services.
  2. Deregulation should lower FCC service fees on the monthly consumer bill, and it will lower costs for telecommunications providers.
  3. Services that are now free, like Skype and Google, will have to pay more for their own Internet Access, thus decreasing debt incurred by ISPs for infrastructure costs.
  4. The lower cost to ISPs can result in higher profits that can be reinvested in innovation.

Cons:

  1. ISPs will be able to offer preferential costs to affiliates and partners. For instance, Verizon can bundle Yahoo at a lower cost, their preferred search engine, and raise the cost for Google.
  2. ISPs can slow the speed for whatever applications they choose if that service does not fit in their market plan.
  3. Higher Internet access costs for application providers, like Google, will be passed on to consumers and businesses.
  4. Internet service will be less like phone service and more like cable, where the provider chooses what content you can or cannot view
  5. Deregulation will create an oligopoly like cable, where a few companies control the market.

I will leave it to each reader to decide which argument prevails. However, it is readily apparent to me that companies like AT&T and Verizon will benefit the most because they will have more control over the content we engage in. More importantly, they will benefit from the profits derived from bundling. But, we have yet to see the cash flows they are already sitting on being effectively reinvested in innovation and fiber optic infrastructure.

 

 

 

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