Net New Reality

Jan 20, 2014

Last week, a US appeals court in Washington appeared to make a decision that would drive a stake through the hearts of over-the-top (OTT) service providers, and bring a few rays of sunshine to the struggling communications services providers (CSPs). The announcement that the FCC’s attempts to ensure all internet traffic is treated equally were invalid has been widely reported as the end of net neutrality as we know it.

How true is this? Does it mean a return to the age of simple flat rate charging? And should we all be getting so excited?

Not very. No. And yes. But not for the reason the news outlets think. Here are three reasons why:

Firstly, this weeks’ activity notwithstanding, surely very few operators will want to be rocking the boat by attempting to kill Netflix et al? Whether the people building the networks like them or not, the end customer loves what they get from YouTube, Spotify and the like, and those services are here to stay. Blocking content will not only ask the regulators difficult questions, but will also drive customers into the arms of the competitor who doesn’t place such restrictions on popular services.

Next, if an operator wants to be seen as just a "dumb pipe", the best way to go about it is to try to block content providers. Far better to be seen as a partner, and a valued part of the means by which customers get access to content. This big net neutrality death story has taken the limelight away from another story of the New Year - that of AT&T launching new sponsored data programs. Here, instead of draconian bandwidth throttling, there are new incentives for customers to use a particular service, because the content or application provider is subsidising the data usage. The latest charging systems make this kind of initiative possible through deep-packet inspection and real-time cost-sharing logic.

Finally, and despite what the doom-mongers might say, the opportunity for CSPs is too great. Better to look for innovative ways to provide access to OTT content and charge someone for it, rather than trying to block it at source. The imaginative communications services provider is building bundles of usage, packaged into something that makes sense to the customer. Just look at how the likes of Vodafone are already bundling Spotify or Sky Sports Mobile TV with their 4G data plans, in a bid to differentiate not just on data speed or price.

Last week’s court ruling seems to have been made based on a technicality of whether broadband providers should be treated like “common carriers” of phone services. And the conclusion of the court was that the FCC cannot currently classify them in this way and therefore there is no requirement for all data services to be treated equally.

The net neutrality debate is therefore likely to run and run as the FCC attempts to revise its position and appeal this ruling, so don’t expect to see any (legal) OTT services being blocked just yet. In the meantime, CSPs should focus on building content partnerships with the OTT providers rather than trying to build their own competing services. This may seem like “sleeping with the enemy”, but CSPs are simply not fast enough to respond to the breadth of consumer needs on their own.

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