When all bits are not considered equal, bandwidth becomes a traded commodity. A Free Market, not Net Neutrality is in store for the continuing evolution of the Internet.
While many of you like myself were out of town during the holiday break enjoying some time away from work, or partaking of the mind-numbing substance of your choice to tide away the chilling weather and/or snowpocalypse that kept us all inside through the New Year, the Federal Communications Commission issued the 87-page long Open Internet Order.
The Open Internet Order imposes certain limitations on what they believe (emphasis on believe, because the FCC still needs to prove in court that they can actually enforce these rules) service providers can and cannot do regarding your connectivity as a broadband and wireless Internet services user.
So All Bits are Now Created Equal, right? Well, not really. While the Order adopts "basic rules of the road to preserve the open Internet as a platform for innovation, investment, competition, and free expression" the reality is that under the new FCC rules, if they pass muster in Congress, we're likely to see a fundamental shift in terms of how we consume and prioritize the use of data in broadband and wireless and how providers will charge us for it.
Under the Open Internet Order, the service providers get new restrictions, but they're also being given some additional leeway as well, hence the current trend of referring to these new rules as "Net Neutrality Lite". As consumers, we didn't get what we really wanted in terms of Net Neutrality legislation -- but neither did the big telecoms either.
So what exactly does this really mean? This is certainly going to translate into additional costs, but it also means the Invisible Hand of Capitalism and the Free Market will give consumers additional flexibility.
First, the (sorta) good news. Under the new rules, providers cannot block access to specific kinds of websites and services, such as Netflix or Hulu provided they are lawful. Additionally, "Paid Prioritization" is going to be history, based upon verbiage which states that businesses cannot favor one type of traffic over another (Improved Quality of Service) in the connection of one subscriber over another. The actual verbiage from the Order states:
A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not unreasonably discriminate in transmitting lawful network traffic over a consumer's broadband Internet access service. Reasonable network management shall not constitute unreasonable discrimination.
"A commercial arrangement between a broadband provider and a third party to directly or indirectly favor some traffic over other traffic in the connection to a subscriber of the broadband provider (i.e., 'pay for priority') would raise significant cause for concern," the Commission then elaborates. This is because "pay for priority would represent a significant departure from historical and current practice."
All of this is well and good, but did you read the bit about Reasonable network management? What does that mean? Well, this is what the FCC says it means:
"A network management practice is reasonable if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service. Legitimate network management purposes include: ensuring network security and integrity, including by addressing traffic that is harmful to the network; addressing traffic that is unwanted by users (including by premise operators), such as by providing services or capabilities consistent with a user's choices regarding parental controls or security capabilities; and by reducing or mitigating the effects of congestion on the network."
So if you haven't nodded off and you're still following along, things such as throttling by ISPs in order to prevent congestion are perfectly okay. And while they can't block Netflix or Hulu or any number of 3rd-party services, ISPs have the right to adjust how much of it you can eat and how fast you can eat it. And they also have the right to charge for said bandwidth accordingly.
But wait, there's more. These "reasonable management" restrictions only apply to fixed broadband connections, not wireless. Wireless providers are pretty much exempt from all of the new FCC rules outlined in the Open Internet Order with the exception of network transparency (disclosing in detail how their network management practices work) and no content blocking of lawful websites.
To better understand what we are dealing with, let me paint a picture of what the typical wireless and consumer broadband experience might look like, eight years from now.
Well before the end of this decade, the wireless network infrastructure of all of the main US telecom providers will have been completely migrated to 4G -- there will be seamless, blanketed, end-to end coverage across the country. Use of legacy 3G and GSM/CDMA technologies will be completely de-incentivized and eliminated altogether. Everyone with a smartphone will be running on either LTE or WiMAX, and for network simplicity even "Feature Phones" if they still exist then will also be running on 4G.
With the move to 4G, consumers of wireless services are going to be able to pull down data at speeds much faster than they were before. But as we recently discovered, it's also possible to consume an entire month's 5GB allotment of Verizon LTE data in a matter of hours, depending on what applications are being used.
So it's a foregone conclusion that in the 4G universe, the "Unlimited Data Plan" is extinct. Wireless companies like Verizon and AT&T won't be able to afford it. They'll just go broke doing it, and end up like Clearwire.
However, there are both positive and negative aspects of the FCC's New World Order from the perspective of both consumers and service providers.
Firstly, I think we can reasonably assume that the concept of buying a separate "Minute" plan for voice traffic from the "Data" plan will probably need to be eliminated/re-evaluated based on the FCC new ruling as well as from ongoing smartphone consumer usage trends.
As everything with 4G will be end-to-end TCP/IP, your "Plan" is simply going to be Data, period, because whether you use Verizon's or Skype's or Google Voice's networks to carry your VOIP calls makes no difference -- all voice traffic is IP data, and anything that travels over that 4G connection is Data, period.
The bread and butter of the Voice business with wireless carriers is going away -- what they really want to charge you for is Gigabytes. And they will charge you for it. Every single byte. And it will almost certainly cost you more than it does now.
On pure 4G systems, you'll probably see 5GB and 10GB or more "Plans" and the carriers will go to war over who has the best pricing on these base plans and also who charges least for overages. As it is today, the customers will be spectators over the battle of the best coverage and the fastest and least expensive. Initially, they will maintain the status quo of devices being locked into specific networks, just as it is now, while we have transitional blended 3G and 4G networks.
But that status quo won't persist for long, because the integrated device chipsets that are coming out in the next few years will allow for commodity 4G smartphones to be built and sold at full retail for about $300.00 or less (I'm thinking realistically about $250.00 for a fully featured, top-of-the-line Android device, with basic devices selling for $100).
These devices will be able to communicate over all of the respective LTE and WiMAX networks of the competing carriers, without the consumer being locked into a two-year contract and they will obviously be cheap enough for purchase outright without requiring a subsidy.
In the year 2019, besides driving flying cars, stopping for lunch at the streetside ramen shop and chasing down rogue Replicants, you'll buy unlocked multi-network 4G smartphones at WAL-MART and Best Buy or even Amazon.com off-the-shelf, ready to go on the carrier of your choice.
So instead of calling yourself a "Verizon" or a "Sprint" or an "AT&T" wireless customer, you'll be able to buy "Data Credit" from anyone you want, in as little as 1GB chunks or possibly even less. Pay As You Go versus monthly contracts will be the preferred way of doing business as a consumer with the carriers, and you'll be able to switch carriers as often as you like.
It will probably cost you more in the long run, and it won't be like the good 'ol days of unlimited data, but you'll have freedom of choice.
You'll buy Data Credit at places like Walgreens and Starbucks --- perhaps on the very same pre-paid cards you use for your Chai Lattes. It wouldn't even surprise me to see 200MB or 1GB "boosts" from Verizon, Sprint or AT&T offered with $20 coffee cards for promotional purposes. 50GB T-Mobile cards for $200.00 at COSTCO and Sam's Club. Et cetera. You might even see the credit provisioning process for these providers manifest as Apps in iOS or on the Android Market.
You won't even have to worry about giving up or transferring phone numbers either if you flip carriers on a monthly basis -- you'll use services like Google Voice that give you unified messaging and your "Permanent" phone number, and your device's MAC and IPv6 addresses will be its unique identifier which will allow it to register on multiple networks simultaneously.
With everything boiling down to Gigabytes, and with Pay as You Go becoming the norm, consumers will also need to have much more complicated self-metering habits. Smartphone OSes will need more sophisticated and much more detailed and granular accounting of which apps chew up what data and on what carrier.
You might find, for example, that the Google Voice app or the Verizon VOIP app that came with your Data Credit that you use for phone calls only chewed up on the average of 500MB this month on your 4G iPhone, but iTunes ate up 2GB for 4G music downloads and you did 5GB of FaceTime video calls, and you'll have to adjust your habits accordingly.
Maybe you'll think twice about doing an On-Demand download that 2.5GB Netflix or iTunes movie over 4G with your iPad or Android Tablet when you're on the road, since it will have a real cost attached to it.
So we know that Wireless will likely become the Free Market Wild West. What about Broadband?
We know from the FCC rules that Broadband providers now have to be transparent in their bandwidth management practices and can't block services like Hulu or Netflix, nor can they discriminate based on "Paid Prioritization". But if everyone decides they want to get their TV On-Demand thru services like NetFlix, Hulu or Apple TV, there may be additional costs associated with going "Out-of-Network".
What do I mean by Out-of-Network? For example, let's assume you are a Verizon FiOS customer, and you've decided to use it exclusively for your Internet broadband service and use Netflix and Apple for all your On-Demand movies, with your "Live" TV coming from Over-the-Air.
Under this scenario, It's at Verizon's discretion as to whether they charge you a premium or additional fees for going Out-of-Network for using your Apple TV, versus using their own On-Demand service with their DVR/Streaming hardware.
Their own hardware and services may be cheaper for them to offer to the consumer because they might have secured a bulk bandwidth deal with a CDN like an Akamai or a Limelight to deliver their own equivalent Pay-per-Play or monthly all-you-can-eat movies over FiOS versus an Apple TV. Or maybe Verizon might even build its own CDN to try to do it all in-house.
While Verizon cannot discriminate in terms of traffic prioritization between one customer and another assuming equivalent sized bandwidth going into the home, they can definitely throttle across the board (provided it doesn't degrade the service to the point of becoming useless) according to the new FCC rules if they determine that Netflix and iTunes movie downloads puts an undue strain on their Internet pipes.
Under these new rules, it may very well be less cost effective for a consumer to buy a straight-up broadband plan from Verizon and buy their services separately rather than use Verizon across the board for VOIP, live television and premium channels, On-Demand, DVR and also Internet broadband.
There's also nothing in the FCC Open Internet Order preventing them from offering tiered pricing plans which make using services like Netflix more attractive or even a metered bandwidth plan.
But at the end of the day, I think we're all going to be paying more. For everything. That's Net Neutrality for you.
How do you feel that the FCC's Open Internet Order will affect you as a consumer or a business? Talk Back and Let Me Know.