As online video streaming grows in popularity, subscribers are suffering from worsening quality of service. They may not be aware, however, that this issue is the topic of upcoming FCC hearings. The rulings of these hearings will have important global implications for the reach and quality of Internet service.
Online streaming company Netflix surpassed 50 million subscribers this summer, but customers of Netflix and other streaming sites say their experience is increasingly plagued by slow service. Unfortunately, Internet users may not realize that there is an ongoing debate over Internet regulations that affects their favorite pastime. When millions of customers watch high-definition videos online, it places a strain on available Internet bandwidth. Accordingly, Internet service providers want to charge Netflix for a guarantee of faster service for its customers. The Federal Communications Commission rulings on how service providers can treat internet traffic will have a profound impact on consumers. Furthermore, these rulings will set a precedent for other governments that wish to regulate their local internet service providers. The FCC's decision on net neutrality, the premise that all Internet data should be treated equally, must place the interests of consumers above Internet ideology and corporate profits.
While appealing in theory, net neutrality would have high costs for consumers if mandated by law. It creates what economists call a free-rider problem, in which some customers use more bandwidth than they pay for. Internet bandwidth is like a breakfast buffet: you can have as much as you want, but there is only so much available to everyone at one time. During periods of high traffic, everyone’s internet service suffers. Under current pricing models, service providers have no way to charge more for increased usage and no incentive to accommodate more traffic. Laying new data cables to increase bandwidth would only raise prices for all customers, forcing some to drop out of the market.
Net neutrality advocates yearn for the early days of the internet when neutrality reigned by default. Most internet content appeared as text, pictures, and audio—none of which put a strain on existing infrastructure. The explosion of video consumption followed the founding of YouTube in 2005 and the introduction of Netflix’s video on demand service in 2007. While text is measured in kilobytes, videos are measured in gigabytes, greater by a factor of one million. A two-hour high definition movie can occupy 4 gigabytes of bandwidth, the equivalent of downloading 13,000 200-page e-books. If the 50 million Netflix subscribers, for example, stream the season premiere of “Orange is the New Black,” or if internet users stream video for the World Cup Final at the same time, the increased traffic overloads available bandwidth and reduces quality for everyone.
This issue will only worsen in coming years as online video consumption increases. Network device manufacturer Cisco estimates that video could make up 84% of internet traffic in the United States by 2018. Comcast and Verizon have negotiated contracts with Netflix for priority service, but neutrality advocates argue that these contracts set a precedent in which service providers could solicit payments from any website. In this scenario, only websites with sufficient financial resources would actually reach customers.
The outcome of the debate over net neutrality will also have repercussions for the accessibility of information worldwide. A single set of net neutrality regulations removes any barriers that would prevent users in one country from accessing information that originated elsewhere. Most governments place no additional requirements on Internet usage within their country. By mandating network neutrality, the FCC would set a precedent for other governments to intervene with their own local Internet service providers. Local intervention creates conflicting regulations between countries, forcing content providers to navigate a maze of regulations for delivering content between nations and threatening the open accessibility of information on the Internet. Mandating net neutrality in domestic markets could counteract American foreign policy objectives for maintaining an open Internet.
To prevent gatekeeping and conflicting standards, new regulations should encourage metered pricing of Internet data. Rather than a fixed cost for all Internet data, consumers would pay for only the data they use. This solution upholds neutrality since it charges a flat price for all content, but takes the amount of use into account. Video consumers will inevitably pay more, but their experience will also improve as a result. In addition, metered pricing encourages competition among service providers. They will upgrade their infrastructure to accommodate more traffic, and increasing bandwidth will only drive down the price of data. This pricing model for data already exists in much of Europe and East Asia and in the United States on mobile devices on AT&T and Verizon’s networks. Because it already exists in foreign countries, this pricing model will not encourage other governments to impose their own standards for net neutrality. Forcing companies into net neutrality will not only reduce the quality of their service, but will also compromise widespread Internet access. Moving to metered pricing will expand and improve service, and also reduce its cost to consumers.
Jack Karsten is a 2nd year graduate student in the International Science and Technology Policy program at the Elliott School of International Affairs. He earned his bachelor’s degree in Economics at Boston College. His current focus is on innovation policy, how technological change enhances economic growth. Jack has completed internships in the United States Senate as well as the Council on Competitiveness. He can be contacted at firstname.lastname@example.org.