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Net neutrality could hinder 4G and differentiated services

The arrival of 4G wireless broadband may increase government net neutrality intervention, and as a result, stifle differentiated services growth and the revenue generated by it in the name of equalizing Internet access.

The Internet has been in widespread use for more than 15 years, but it seems every so often the specter of net neutrality looms over what would otherwise be a fairly peaceful existence. Now that 4G wireless has come along with its promise of hundreds of megabits per second to devices over a pure IP packet-switched network, you can bet legislators and regulators are keeping a keen watch on what transpires.

Any time you get a significant bump in technology, like the shift from 2G and 2.5G to full 3G in most parts of the world, and the exponential leap to 4G that many subscribers will see in the next 12-to-18 months, you also see the long arm of the law try to smack down any semblance of differentiated services.

My view has always been that regulators have it fundamentally wrong by trying to regulate at the network level instead of the service level. I have to wonder if being in a 4G world will make the current thinking we have about legislation and regulation seem pretty silly, or if government entities will continue their crusade to try to equalize Internet access.

4G changes the regulation game

I believe 4G will be a game changer when it comes to regulation. With the possibility of blazing fast speeds coming to smartphones, is there any sense forcing legislation that would prevent customers' ability to pay for better classes of service?

I say let the market run as the market wants to run; I don't see any advantage in distorting it.

If during the recent healthcare debate in the U.S., President Barack Obama said everyone is going to get basic government-provided healthcare with no option for private care, you can bet there would be rioting in the streets. Take a look at other types of markets that offer different levels of service and quality. You don't see regulators stepping in if someone wants to pay more to get their package to its destination faster, or if they want to get premium options for their new car.

But that's essentially what net neutrality proponents are saying about communications. Is this mentality really going to serve a world where people are eager and willing to pay for subscription services that give them HD-quality video with the highest service quality levels and speeds? Do providers really want to be forced into a position of having to decline this potential new business and new revenue streams because short-sighted bureaucrats passed a law saying they couldn't charge premium prices for premium services?

Network carriers straddle monopoly and competitive markets

So we find ourselves in this bifurcated world where we have network carriers that tend toward a natural monopoly in a low competition type of market, and well as an incredibly buoyant, competitive world sitting right on top of it delivering new services and doing clever things. What is the boundary between the two? Is it merely all-you-can-eat IP packages, or is it a much more rich and complex boundary where underlying enabling technologies are provided by enabling technology suppliers that may not all be like AT&T or Verizon. Instead, they could be companies like Apple, Amazon or Google.

Down the road, service providers could even become part of these new technology players or divisions of them, or there might be a whole host of new companies that enter the picture to deliver services.

What would be the role of regulation in these situations and in others we can't even imagine today? My sense is to say that even though we've just been through the worst recession in living memory, fundamentally Adam Smith was right that regulators, government, lawyers and other meddlers of various sorts, when they seek to distort or change markets, might get it right for a short period of time. But ultimately, the market itself is the only regulating mechanism that truly matters.

So I say let the market run as the market wants to run; I don't see any advantage in distorting it. If someone is prepared to pay for investing in a high-quality infrastructure to deliver high-quality services to customers willing to pay for high-quality services, then why not let them do just that?

Letting the communications chips fall where they may

Some people will argue that if you let the market run as it wishes, you'll end up with a monopoly for communications services. On the other hand, the monopolies that existed in the past -- especially in the U.S. -- were sanctioned by law. You weren't allowed to run up against the phone company, and even if you could, there were so many rules and regulations about how to interconnect with them that it just wasn't worthwhile. It took MCI a huge amount of time, money and effort to break through to compete with AT&T, for example.

I haven't quite worked out what the net neutrality people are worried about. Do they think premium-grade service will be available only for AT&T's traffic, while Google's will be stuck in the slow lane? If that's the case, it's relatively easy to solve.

With the limitless desire for information in today's world, and the better and faster network availability that will be standard for so many customers, there's never been a better time to step back and let the market chips fall where they may.

About the author:
Keith Willetts is recognized as one of the world's leading authorities on communications management. As co-founder and chairman of the TM Forum, he has been the driving force behind its continuous evolution. Currently managing partner at Mandarin Associates Ltd. in the U.K., Willetts consults with companies on a wide variety of business development issues. He previously held executive positions at BT and TCSI. A regular presenter and writer, he co-authored the highly influential book The Lean Communications Provider.

This was last published in August 2009

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