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Court's smackdown on net neutrality could hit you right in the pocket

Mark Sullivan | Jan. 16, 2014
The D.C. Circuit Court of Appeals struck down most of the FCC's 2010 Open Internet OrderĀ on Tuesday, rejecting the FCC's power to impose and enforce network neutrality rules on Internet service providers (ISPs).

Tuesday's court decision could close the door forever on the Internet that gave birth to innovative companies like Google and Yahoo. The next generation of Web entrepreneurs will grow up in a post-neutrality world where true market disruption just isn't possible.

But consumers could suffer in more immediate ways. The abandonment of network neutrality principles could hurt users — you and me — right in the pocketbook.

With only a few large Web companies providing specific services, nothing would stop them from simply passing their new premium carriage costs on to Web users. We may be headed toward what Free Press calls a "pay-per-view Internet" where Web sites routinely charge usage fees. We may be asked to pay a "network tax" to run voice-over-the-Internet phones, use an advanced search engine, or chat via Instant Messenger, Free Press contends.

Worse yet, in a market with just three or four large Web companies providing a certain service (whether it's search, travel booking, personal finance, or entertainment), the danger of active or passive price collusion becomes more real.

In "mature" markets, a handful of dominant competitors agree to share the market and set prices at about the same level. For years this was the situation in the wireless service market. A wireless service contract from one of the four major carriers cost about the same (high) price — until T-Mobile, suffering from sinking market share and a failed merger with AT&T, decided to lower its prices.

We could return to the bad old days of site blocking.
And what's the fate of Internet companies that happen to offer services that compete directly with those offered by the ISP itself? If the ISPs are allowed to charge Web companies variable rates for access to the Internet, what's to stop them from simply blocking the traffic of companies they see as competitors? Put another way, what's to stop Verizon and AT&T from simply blocking Vonage's Voice over IP service from running over their networks, since it competes with their own offerings?

In reality, AT&T and Verizon would never do that. They may not have to. They need only set their carriage prices so high that Vonage could no longer afford to pay the toll. If Vonage decided to pay the high carriage rates, it would certainly have to pass those costs on to users. Either way, you and I lose.

Conglomerates might dominate news and entertainment on the Web.
The stakes around net neutrality grow even higher as music and video streaming become preferred ways of receiving content. An independent news blogger can still offer a comparable alternative to CNN if all she's doing is publishing text. The public, low-speed Internet is fast enough for that. But if she begins streaming video blogs to thousands of her followers, she likely won't be able to pay an ISP for the service level needed to offer video that loads as fast and looks as good as what CNN can afford. Will she too have to begin charging her readers a fee to access her videos?

 

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