Net Neutrality: Telcos versus the Federal Communications Commission


The US Federal Communications Commission (FCC) is currently trying to figure out what to do with the internet.

This is their third try at it too. The last two attempts have not gone so well. The main reason is big telcos do not agree with what the Federal Communications Commission is trying to do. That means lawsuits and litigation to put a stop to the FCC plans.

It’s all about the regulation of the internet.

Regulation and the internet don’t go well together. There’s a big brother element to the issue.

But many believe the FCC is close to getting it right this time. They have a proposal on the table, which is already deep in controversy.

The document is 322 pages long. And it’s not available for public scrutiny. In fact, the public will only get a look at it after the US Congress decides whether to adopt the plan.

That brings up a couple of key issues. Not just for the US and the internet but for investors too.

If the plan goes ahead, it could mean bad times for internet service providers (ISPs). But it would give the government much stronger control over the internet.

If the proposal isn’t accepted, it could mean ISP have their way with the internet and hold consumers ransom for access. This could be great for the telcos and not so great for content providers like Facebook, YouTube and Netflix.

What is the FCC proposal?

FCC Chairman Tom Wheeler has put together a proposal to ‘preserve the internet as an open platform for innovation and free expression’.

Wheeler wants the internet to fall under the Telecommunications Act of 1996. This act was the first major overhaul of the US Communications Act of 1934. It took 62 years for the US to redo a hugely important communications act. And it’s only taken another 19 years to make another significant change to it.

The 1996 change came under the Clinton administration. These new changes would scrap the Clinton-era changes and change the very definition of the internet.

Part of Wheeler’s plan is to define the internet as a telecommunications service. But there’s significant opposition to that from big telcos. Their argument is the internet is actually an information service. Therefore it shouldn’t fall under the act.

If Wheeler gets his way, there will be some benefits for the internet in the US. In an op-ed piece in Wired, Wheeler said,

These enforceable, bright-line rules will ban paid prioritization, and the blocking and throttling of lawful content and services. I propose to fully apply—for the first time ever—those bright-line rules to mobile broadband.

The reason for this is ISP have been playing funny buggers with the internet. For certain websites, there is a ‘toll’ to ensure quality service to the end user.

This problem has been dragging on since 2010. Netflix has been highly critical of the current system.

Source: Netflix


Their issue is they have to pay extra to ISPs to ensure quality service ‘upstream’.

The ‘last mile’, or the downstream part of the internet connection, is the bit between your ISP and your home. The upstream part is the connection between a company like Netflix and the ISP.

The problem is the ISPs seemed to let the upstream connection clog, making life hard for Netflix. This is a problem for any company needing high bandwidth, e.g. Facebook, YouTube and Spotify.

Therefore, these content companies pay the ISP to keep the lines clear to ensure no connection problems.

As you’d imagine, this made content companies unhappy.

Wheeler’s FCC proposal will ensure that this practice becomes illegal. There would be unfettered access to bandwidth for companies that need it. So whether you’re Netflix or a blogger, you have equal access to bandwidth.

The idea of net neutrality is that the internet should be neutral for all users, a level playing field.

But the ISPs don’t like that idea. So in 2010, when the proposals for the Open Internet Order first came into play, lawsuits quickly followed.

And they will follow again. The current proposal from Wheeler will pull the internet into the Telecommunications Act, which governs the free, neutral state of telephone services. With the internet and wireless internet under the act as ‘telecommunication services’, it too will share the same freedoms.

But the ISPs have already said they don’t agree and will take the FCC to court if the new proposal wins its vote. ISPs believe the internet to be an ‘information service’ and as such it doesn’t fall under the Act.

ISPs don’t care about a neutral net because it could have a negative impact on their business. However, if the internet does fall under the act, the government will have oversight and regulatory power in the same way they do over telephone services.

ISPs do play a heavy hand when it comes to access for big companies. But for small start ups and budding entrepreneurs, is it all that bad?

If it ain’t broke, don’t let the government try and fix it

In the last 25 years, the internet has grown from nothing to probably the most powerful invention in history. And it has done so organically, with minimal government regulation.

So why not let it keep doing its thing?

The government already manipulates the internet. We know they do thanks to Edward Snowden. They spy on us and pervert our privacy. So giving them greater regulatory powers might not be the best idea…

Net neutrality is a good thing. Internet access should be unrestricted, but the last thing we want is for government to have greater control. The net doesn’t need greater regulation. It needs ISPs to play a fair game.

The answer isn’t old legislation. The answer is greater freedom.


Sam Volkering,
Tech Analyst, Revolutionary Tech Investor

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Sam Volkering
Sam is Editor for Money Morning and it's small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered.

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