Internet Service Becomes a Utility

Internet service has become a lifeline for us – as individuals and businesses. People have given up traditional phone service and even television for Internet service in recent years. Internet service has been on track to becoming a utility and that happened with the historic decision last week by the Federal Communications Commission.

The FCC reclassified broadband Internet as a utility. Under this decision, both fixed and mobile broadband providers in the United States become common carriers under Title II of the Communications Act. This allows the FCC to enforce networking neutrality rules and other standards. This marks the start of a new era. It will change how we use the Internet.

You’ll be hearing more about net neutrality in the future. In essence, net neutrality is the concept that all Internet traffic should be treated equal. This means not charging differently by user, content, site, platform, application, type of equipment or mode of communication.

What’s Next?
This will be a process. You won’t see much movement for a while. The challenge is that the current Internet service rules are far from utility regulation. Some people believe it can harm the consumer experience and future investments. Others are concerned about the taxes that will come with it as a utility. This is not unlike the move that telephone service had to make in the past.

FCC Chair Tom Wheeler, a former lobbyist for the cable industry, followed the controversial news announcement, saying this is not a move to regulate the Internet. The FCC says its intention is to have what the industry calls an “open Internet.” The term usually means open standards, lack of censorship, low barriers to entry and transparency.

Wheeler sees this move is more like what has happened in the wireless industry with deregulation. At the same time, the FCC approved allowing city-owned services to expand in areas that commercial providers do not serve.

What Changes?
What will it mean when it is done? Here’s what past experience predicts for the future of Internet as a utility:

• Pay for type of use: There could be different rates based on the content you are getting. For an example, the user would pay more to stream video or video surveillance.
• Prepare for download limits: There could be limits on how much you can download in a month. This would be similar to wireless data plans or even the old AOL plans.
• A focus on bandwidth demands: This move has less to do about privacy and content than it does about paying for high bandwidth services. Services like video streaming take up more bandwidth than sending an email. Bandwidth is what the big providers charge for and they want to charge more for usage that requires more bandwidth. With this move by the FCC, users likely would pay a premium to use services like Netflix or Amazon Instant Video.
• Leveling the playing field: Without net neutrality, the ability for small startups could be stifled. If video streaming providers (like Netflix) have to pay additional fees, then a startup may not be able to compete.
• Increase competition: A lack of competition can limit what can be done. The average U.S. household today with six connected devices (smartphones, laptops, televisions) easily uses  25 Mbps. Streaming compressed HD video requires at least 7 Mbps, yet 20 percent of Americans still do not have access to it and only 3 percent have more than two providers to choose from. (See the chart). More competition is definitely needed. The FCC has said it aims to protect competition where it exists, encourage it where it doesn’t and even initiate service where it is needed. Hopefully, that happens. With or without net neutrality, access to higher speeds (25 Mbps) will be needed. View a map of how connected your community and others are.

Not all the rules for common carriers under the Telecom Act apply to Internet service providers so they all likely will not be enforced.