With Rachel Sandler, Tech Editorial Intern for Business Insider
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The Death Of Net Neutrality
In February 2018, the Federal Communications Commission (FCC) issued the Restoring Internet Freedom Order. The misleading title of the order ended net neutrality, an Obama-era rule that, ironically, guaranteed Internet freedom.
To learn more about net neutrality and how the FCC’s new ruling might impact Americans, Steve speaks with Rachel Sandler, a Tech Editorial Intern for Business Insider.
Understanding Net Neutrality
Net neutrality required Internet Service Providers (ISPs) to treat all Internet traffic equally. ISPs are companies such as AT&T, Verizon, and Comcast that run wires into homes and businesses to carry Internet data back and forth. Under net neutrality, ISPs were not allowed to slow down or block particular websites.
To understand what net neutrality is, think of a data wire as an information highway that carries traffic. Before net neutrality, ISPs were looking at creating fast-track lanes to preferentially speed-up traffic from toll-paying content providers. In turn, this relegated non-paying content into slower lanes.
For instance, Comcast blocked peer-to-peer communications where people downloaded things from each other. Similarly, AT&T was looking into blocking Skype and FaceTime traffic.
The FCC feared that such preferential treatment would favor deep-pocketed companies and harm startups and small businesses that couldn’t afford to pay to speed-up their data. Preferential access was seen as something that would stifle Internet innovation.
In response, the Obama-era FCC instituted net neutrality rules that prohibited such behavior and guaranteed free and equal access to Internet traffic from all sources.
The FCC’s Logic For Rolling Back Net Neutrality
So why did the FCC overturn net neutrality?
The FCC’s current chairman, Ajit Pai, said net neutrality regulations were burdensome. They restricted ISPs from investing in infrastructure and trying out new business models. He believes net neutrality stopped ISPs from experimenting with paid prioritization and zero rating programs. Such programs offer unlimited data streaming without impacting monthly bandwidth limits.
Pai says lifting net neutrality will usher in a new wave of innovation that will be good for consumers. Most Americans, however, want net neutrality and are suspicious of Pai’s spin on this issue.
With the FCC rolling back net neutrality, ISPs now have free reign to block, slow down, or throttle traffic. ISPs publicly state that they have no intention of making the Internet less accessible. But it’s hard to trust them since they fought tooth and nail to abolish net neutrality.
Under the new rules, ISPs have to be transparent as to how they manage Internet traffic. However, ISPs could simply bury their new traffic policies deep inside “Terms and Conditions” legalese that most consumers do not bother to read.
ISPs claim that the new rules will give them leeway to prioritize traffic related to the public’s safety, such as self-driving cars or robotic surgeries performed remotely. Critics counter that net neutrality rules already allow ISPs to prioritize such public safety traffic.
States Feuding With The FCC On Net Neutrality
The FCC’s new rule includes a condition that states cannot override the FCC on this issue. However, states such as Washington and Oregon have passed laws to ensure net neutrality stays in effect within their borders. They have also challenged the FCC’s ruling in courts. But such cases are complex and could take years before a judgment is made. Don’t hold your breath for a decision anytime soon.
ISPs are unlikely to act just yet, while this rollback is fresh on everyone’s minds. But have no doubt! Given how hard they’ve fought to overturn net neutrality, ISPs surely have plans afoot to change the status quo. They’re likely to slowly slip-in changes while no one’s watching.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: I can’t say that I really understand just what happened and why. Recently Congress repealed the so-called net neutrality rules. I have a very limited idea of what it all really means to us consumers. So I’ve asked Rachel Sandler, Tech Editorial Intern for Business Insider, to take us through it in laymen’s terms so we can understand it.
Hey, Rachel, welcome to the show.
Rachel Sandler: Hi, Steve, I’m glad to be here.
Steve Pomeranz: Rachel, what is a definition for these new net neutrality rules that are now dead, let’s say. What does it mean to us?
Rachel Sandler: Right, so, net neutrality is the basic policy principle that states that ISPs or Internet Service Providers—so we’re talking about AT&T, Verizon, Comcast, etc.—net neutrality basically says that they have to treat all internet traffic equally. So that means that they can’t slow down or block particular websites. And ISP’s, before these rules were put into place, ISP’s were sometimes using it to gain a competitive advantage in the marketplace. So you saw before the Obama-era net neutrality rules were put into place in 2015, that Comcast, for example, was blocking peer-to-peer traffic. That means that Comcast was blocking traffic where people were downloading things directly from their peers instead of from a particular website.
Steve Pomeranz: I see.
Rachel Sandler: AT&T was also looking to block Skype and FaceTime.
So these are things that, under the Obama era net neutrality rules, ISPs couldn’t do. And now with the FCC basically rolling back those protections, ISPs can do those things and they have free reign without FCC oversight to block or slow down or to throttle traffic
Steve Pomeranz: Wow, okay. So I do understand that now, that’s very well explained. Basically, we have the pipe which is controlled by or produced by Comcast, AT&T, and it’s the bandwidth, and so much can go through that pipe. Upon that pipe, so to speak, you put applications like Netflix and Facebook and Skype. And now, you’re saying that these providers, these ISP’s, now can, if they wanted to, give access to some of these apps, slow down traffic or slow down the speeds to others of them. They can kind of play unfairly if they wanted to in this era of ever-expanding streaming and other apps that they’re using.
Rachel Sandler: Right, exactly. And the fear here is that ISPs will create so-called fast lanes and slow lanes. So they’ll slow down traffic to certain applications, and then they’ll say, hey, Netflix, if you want to reach customers faster, you have to pay us.
And that’s really concerning for smaller businesses because, if you’re a smaller streaming service, you can’t compete with a site like Netflix if they’re paying AT&T to have faster speeds. So this is really concerning for startups and small business owners who are fearful that they won’t be able to afford a situation where an ISP creates fast lanes and slow lanes.
Steve Pomeranz: Yeah, I understand that. Now the game is being watched by all. And many watchers are keeping a close eye on the activities of these ISPs now that the rules have changed. So I don’t think they’re going to do anything right away, would you agree with that?
Rachel Sandler: Right, this is an extremely divisive issue and net neutrality is really, really popular among the American public. So, right now it would be completely detrimental if an ISP decided to take immediate action and started blocking or slowing down websites.
And for their part, the ISPs have said that they are not going to do this. But for net neutrality activists, it’s hard to trust ISPs who say that they’re not going to do this yet at the same time are fighting tooth and nail to get these rules lifted.
Steve Pomeranz: So, the FCC overturned these Obama-era rules, why do you think they did that? I mean they have to have made their pitch to the American public of the positive aspect of doing this. What was that pitch?
Rachel Sandler: Right, so Ajit Pai, who is the chairman of the FCC has said that these regulations are burdensome. And they really restrict ISPs from investing in infrastructure and trying out new business models.
So what ISPs really want to do is they really want to experiment with paid prioritization, which is another way of saying fast lanes and slow lanes and what are called zero-rating programs. So these are services kind of like what T-Mobile has where you can watch or stream content without it having count against your monthly data plan. So that’s technically on the verge of maybe violating net neutrality. And ISPs really, really want to experiment with this.
And those so-called zero-rating programs weren’t actually completely banned under the Obama era rules. They were reviewed on a case by case basis to see if they were discriminatory. And so with the FCC, the new FCC rules, the FCC has no oversight over zero-rating programs at all. So it’s stuff like this that the FCC kind of touts as a positive.
Steve Pomeranz: I can relate to this, Rachel, because I share my data with my son. He’s on my phone program with Verizon. And so every month I had to watch the data downloads between the two of us to make sure I didn’t pass a certain threshold, otherwise we would be both paying more. Then that Verizon came in and they said, okay, you’ve got an unlimited data plan. You can pay us a little bit more and get an unlimited data plan. And I really like that. Does that pertain to this or is that a completely different topic?
Rachel Sandler: Right, so, unlimited data plans aren’t really at play here because when you have an unlimited data plan, they’re not privileging particular websites or particular services. Even if you have a monthly data cap, and you go over that data cap and they start to slow down, or they start to cut your access off, they’re cutting your access off completely.
They’re not privileging certain websites over other websites and that’s the issue here.
Steve Pomeranz: Okay, so it’s not really a direct, there’s no direct correlation between what I just mentioned and net neutrality. So as a kind of a dumb consumer, is this going to affect the speeds or the quality of Netflix or Amazon Prime Video, any of those? Are they going to improve? Do you think they are going to slow down? Are these ISPs going to give… let’s say they decide to start charging more for faster access, faster streaming and one of these services decides not to pay it. Are they going to slow that down? What do you think is going to happen there?
Rachel Sandler: Right, so that very may well could happen. I don’t think it will happen, in the immediate future because everyone is watching what these ISPs are doing. And a condition under the new FCC rules is that, at the very least, ISPs have to be transparent. So they have to add to their terms and conditions that they can slow down or block websites whenever they want. Unfortunately, not a lot of people read the terms and conditions, so-
Steve Pomeranz: Guilty!
Rachel Sandler: Exactly, so I’m skeptical if people will really be paying attention to the fine print that is on the terms and conditions for these ISPs.
Steve Pomeranz: How will it affect social media apps like Facebook and Instagram and those types?
Rachel Sandler: Again, I don’t think this will have much of an impact right now or even in the next few years. Everyone is really watching these ISPs closely. And if they do anything that might violate net neutrality they are going to have to deal with severe public backlash here. So I don’t think that in the immediate future anything will change about how people use social media apps or the Internet.
Steve Pomeranz: I think they are counting on the eventuality that our attention will go elsewhere in the future. And they’ll be able slip in some of these changes without us really paying attention. And even though there may be areas of the country that are going to be very unhappy and very vocal, the rest of us will say, hey, as long as it doesn’t affect me, I don’t really care. This is interesting to me. What do autonomous cars, robotic surgeries, and/or public safety communications have to do with this net neutrality bandwidth issue?
Rachel Sandler: So this is actually a really interesting argument that AT&T has been making. So, back in February, AT&T basically said that, we’re not going to create fast lanes and slow lanes. We’re not going to do that at all.
However, we do want to privilege traffic that is running robotic surgeries and self-driving cars and public safety traffic and traffic that really will spur innovation. And that kind of goes to show another argument that AT&T is making, is that these regulations are burdensome. And with regulations lifted more innovations can happen.
Steve Pomeranz: Do you buy that? I mean it sounds like a positive to me because they are making the case for public safety and putting the interest of the public first, creating innovation there. I had not heard that net neutrality was an obstacle against that, but it seems to me you’re saying that that is a net positive. Do you buy their argument?
Rachel Sandler: So it’s interesting because ISPs can already do this. There’s already infrastructure in place that allows ISPs to privilege public safety traffic and traffic that will have an impact on life and death.
But the idea that self-driving cars are running solely on AT&T connections or broadband is just not true. And so I think this argument is a little bit of a stretch.
Steve Pomeranz: Yeah, a little bit of a political angling, like a PR move, almost.
Rachel Sandler: Yeah, yeah, exactly.
Steve Pomeranz: Well here’s a quote: “The end of the 2015 net neutrality rules and the legal authority on which they are based will allow companies, like Comcast, AT&T and Verizon, to take control of consumers internet experience and favor or disfavor websites programming services and applications at will.” That’s a pretty strong statement against the repeal of net neutrality, is that an overstatement as well? Is that PR for the other team?
Rachel Sandler: Right, so under the new rules, ISPs can do that. I think it’s a fair question as to whether that will actually happen and ISPs have repeatedly said in public statements that they’re not going to do this. However, as I mentioned earlier, they really want to experiment with zero-rating programs and paid-prioritization or fast lanes and slow lanes.
They say they’re not going to do this, but at the same time, they have been fighting tooth and nail to get these regulations lifted. So I can see how net neutrality activists wouldn’t necessarily trust what the big ISPs have to say about this.
Steve Pomeranz: Well, I just hope that the FCC does continue to watch them and at least act in our best interest when they do see some monopolistic or some changes that the repeal brings about unintended consequences, let’s put it that way. Here, I have another question for you. There’s something called a zero-rating program, and I don’t understand how that works. What is that?
Rachel Sandler: Right, so a zero-rating program basically means that a consumer can stream content and not have it count against his or her data plan. So when T-Mobile says you can watch unlimited Netflix and it won’t count against your monthly data cap, that’s a zero-rating program. And ISPs really really want to continue experimenting with this.
Steve Pomeranz: Yeah, I’m sure, I’m sure they do. My guest is Rachel Sandler. She is Tech Editorial Intern for Business Insider.
Rachel, I realize you’re an intern, but you don’t sound like an intern to me. You’re doing great. Thank you very much for-
Rachel Sandler: Wow, thank you so much.
Steve Pomeranz: For spending your time with us. All right, this is a done deal; the repeal has been completed. There are a lot of people up in arms against it and this is a federal oversight issue. What about the states, can they get involved? Are they getting involved in this?
Rachel Sandler: Right, so a few states have already made moves to institute net neutrality rules within their own borders. So Washington State and Oregon have already passed laws that ensure net neutrality within their borders. However, that only applies to ISPs operating in those states. So if you live in Washington and Oregon, you are technically using the internet that is net neutral.
However, when the FCC repealed those Obama era rules, there was a condition that said that states cannot make their own rules. So this is being challenged in the courts and we’ll probably get a decision in a few years because it takes a lot of time to litigate these things. But, again, it’s an issue of federal regulation versus state regulation and power. So this is an issue that we’re going to see play out in the courts.
Steve Pomeranz: All right, Rachel Sandler, Tech Editorial Intern for Business Insider, explaining net neutrality rules. And I value education, I want to make sure my listeners get what they need and what they want.
So come to our website Stevepomeranz.com to hear this interview again and to hear all of the other interviews that we do. We have an archives section, we have a search section, if any topic in particular interests you. Rachel, thank you so much for joining us.
Rachel Sandler: All right, thank you so much, Steve.
Steve Pomeranz: Don’t forget to go to stevepomeranz.com.