Telecoms around the world are experimenting with new ways to deliver content to customers – some of which run in contrast to the long-held principle of maintaining an “open Internet,” also known as network or “net” neutrality.
The principle of net neutrality advocates having no restrictions by Internet service providers or governments on what consumers can access via networks connected to the Internet. Specifically, this position prevents restrictions on content, sites, platforms, and/or modes of communication.
One model that bends the rules of this principle is a tiered service model, which would allow telecoms to let users select from a smaller set of sites, such as Facebook and Twitter, for a lower monthly fee, as opposed to paying a higher monthly fee for unrestricted Internet access. To the right is an artist’s rendering of what that type of plan may look like.
This type of pay structure is nothing new, as telecoms have long used this model for cell-phone plans in the form of charging customers differing amounts based on the number of voice minutes, text messages, and various other features used.
That’s the exact type of model France Telecom (NYSE:FTE) is employing, offering a mobile Internet experience limited to Facebook and Twitter for less than $14 a month, with an extra $0.70 for every 20 minutes spent on other sites. Turkish mobile operator Turkcell is also testing a similar system that lets users access Facebook for a flat fee.
In the domestic market, AT&T (NYSE:T) is considering a plan to shift some of the costs of data traffic onto the companies generating the traffic, namely web developers and content providers. This would likely benefit consumers, as certain movies and apps wouldn’t count against AT&T users’ data plans. Since customers would be using less bandwidth, they wouldn’t have to pay either a higher monthly fee to access more data or face an extra charge for going over their plan’s data limit.
In the long run, this could hurt competition, as the new model would favor established players in the mobile development space, because they would have the cash to pay AT&T and other telecoms to make their services free for their mobile customers. This would give established companies an advantage, since smaller companies would not be able to subsidize their customers’ purchases, incentivizing consumers to buy apps and other mobile products where they don’t have to sacrifice any of their limited monthly data.
Network technology companies have seen this coming and have already begun producing equipment that allows telecoms to control the speed of mobile traffic, thus letting carriers bill customers at different rates and offer more complex data packages.
A spokesman for Huawei Technologies Co., a Chinese telecom, showed off a new tablet the company has developed that lets carriers control the amount of bandwidth the device can use, and another device that would let mobile carriers limit which websites certain users could access.
These actions by some of the world’s largest telecoms show that, as more and more browsing takes place on mobile devices, the “open Web” concept is becoming a thing of the past.
(Click on image to enlarge)
Should we blame telecoms for these changes? Players in this highly capital-intensive industry have invested billions into the infrastructure through which Internet traffic flows, and it’s not unreasonable that they want to profit from their investment. However, many Internet entrepreneurs worry that shifting the rules of the game will favor better-capitalized companies – like Facebook – that can afford carriers’ new terms.
Even so, it’s an undeniable truth that the more customers use mobile devices to access the Internet, the more telecoms will need to invest in infrastructure to increase data capacity. According to data from Cisco Systems Inc. (NASDAQ:CSCO), global mobile Internet traffic has doubled in each of the last four years, and the company expects mobile traffic to increase 26% by 2015, reaching 6.3 exabytes per month. Additionally, Cisco expects global mobile data traffic to grow three times faster than fixed IP traffic by 2015. This growing traffic has prompted AT&T and Verizon (NYSE:VZ) to eliminate unlimited data plans, instead making customers who use lots of data pay more to do so.
(Click on image to enlarge)
However, telecoms don’t want to keep charging customers more and more as mobile data usage continues to double, so they’re going after content providers to help find a balance between what customers pay and what major sources of traffic – including Google (NASDAQ:GOOG) and Facebook – contribute.
Proponents of net neutrality will undoubtedly keep rabble-rousing about how the Internet should be open and free. But as the costs of maintaining mobile networks rise and demand for such services increases accordingly, global telecoms will use any weapon in their arsenal to make their operations more profitable.