The News: Leadership of Google fired back against plans by the European Commission to conduct a review in 2023 of policies that regulate the networking bandwidth fees to be paid by streaming companies that distribute large volumes of video on the Internet. Any changes in current rules could have a significant impact on companies streaming video at scale, such as Google’s YouTube, Meta’s Facebook and Netflix. Read more from Reuters here.
Analyst Take: A couple of weeks ago Alphabet, Google’s parent company, had harsh criticism about the move by European telecoms operators as they lobby for Big Tech’s financial assistance in funding network costs, which could have an impact on net neutrality in the EU. A familiar song, go be sure, as it sometimes seems the tech wars over net neutrality and open internet access might never end.
Telcos have long chafed at the traditional rules of the road dictating that all internet traffic is given equal priority, no matter the origin server from which it is requested. This approach of treating all content on a “neutral” basis means that – when it comes to distributing content on the internet anyway, that data-rich video is treated the same as relatively lightweight text and graphics.
For more than a decade, telcos across multiple regulatory jurisdictions have argued that video-intensive applications, such as Google’s YouTube, create an added burden on network resources. To deal with this perceived inequity in network usage, the telcos say they need greater leeway in charging premium fees — presumably to providers of streaming video content – for priority network bandwidth and to guarantee high-quality delivery of their video traffic on the web.
While the debate over net neutrality is seemingly a fight that only a regulatory lawyer would love, the outcome of battle is important to virtually all players in the web business, and it still merits scrutiny.
At its most basic level, net neutrality is all about just one thing: cash flow. If net neutrality rules are in place, software developers and content creators get a bigger share of the pie. If net neutrality policies are rescinded, that cash lines the pockets of network operators instead.
But the longer-term implications of the net neutrality debate extend far beyond the cash flow statements of publicly traded technology companies. I believe that choices made on the net neutrality issue will have significant influence on the pace of technology industry innovation over the long haul.
Certainly, Google, Netflix and other streaming giants would not like the outcome if net neutrality rules turn against them on a permanent basis, but they still would be able to write the checks needed to guarantee priority access on networks operating in a world without net neutrality.
The real question here is what happens to the raft of other businesses, like the web video start-ups and many other small to midsize companies who are unlikely to be able to pay the fees needed to gain access to the internet’s “fast-lane.” Companies armed with fresh approaches that have the potential to disrupt key technology markets may be killed in the cradle simply because prospective customers would be unable to access services trapped in a low-bandwidth abyss.
The European Commission debate on net neutrality will not begin until 2023 at the earliest. So, the net neutrality status quo will stay in place for some time no matter how the political winds blow. In the United States, a reversal appears to be in the works on a Trump Administration decision in 2018 to begin lifting net neutrality regulations. Executive orders issued by the Biden Administration have instructed the Federal Communications Commission to restore net neutrality provisions. New legislation that would permanently codify these network rules, however, has yet to pass both houses of Congress.
I agree that telcos need to be rewarded in some way for investing in the infrastructure that makes broadband web services viable. But the overall economy would be best served if that money came from end users or government funding of infrastructure initiatives — which in some instances is already happening, as in the case of the passage late last year of the $1.2 trillion bipartisan Infrastructure Deal, which includes $65 billion targeted at expanding access to reliable high-speed internet and further bridging the digital divide through investment in broadband infrastructure. Upending a Net Neutrality policy that has played a key role in driving innovation and value creation on the web for the past quarter century would be the digital equivalent of killing the golden goose.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
The original version of this article was first published on Futurum Research.
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