Net neutrality: a turning point for the internet

What is net neutrality'?

Net neutrality is the principle that internet service providers (ISPs) should treat all data on the internet equally. The principle has been around since the earliest days of the web, but the term was coined by Tim Wu, a professor of media law at Colombia, in 2003, as an extension of the legal concept of a "common carrier".

In English law (and the law of many other countries, including the US), a common carrier is a person or firm that transports goods or services and is not legally permitted to discriminate or refuse service based on who the customer is, or the nature of the goods.

The most obvious examples include public utilities, such as electricity and water, and also public transport. In the case of the internet, "neutrality" means not discriminating or charging differently according to user, content, site, platform or application.

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Why is it in the news?

Because US president Barack Obama has come out as a passionate defender of the principle, and urged the relevant regulatory body in the US the Federal Communications Commission (FCC) to "implement the strongest possible rules to protect net neutrality" and reclassify the internet as a public utility.

Under the US system of government, Obama doesn't have the power to tell the FCC what to do, but his unprecedented and extremely detailed intervention puts huge pressure on the regulator to meet his demand.

And it's not just Obama who's keen: when the FCC asked for public comments on its review of net neutrality earlier this year, it received 3.7 million replies the vast majority urging the commission to embrace it.

What's happening outside America?

Many governments are just as keen on net neutrality as Obama. The first country to enshrine the principle of net neutrality in law was Chile, back in 2010; Brazil followed earlier this year. In the EU, the Netherlands and Slovenia have already passed similar laws, and EU-wide rules are in the offing.

In April, the European Parliament voted to restrict ISPs from charging for "fast lane" access, and to stop mobile and broadband providers blocking services that compete with their own offerings.

The UK government is less keen claiming that EU laws could make it hard to block illegal material but ten of the biggest ISPs signed up to a voluntary code in 2012, which binds them to offering open and full access to the internet and not prioritising traffic to their own products.

Are there advantages to fast lanes'?

ISPs say yes. They argue that the internet today is totally different from that of the early days and that creating paid-for fast lanes for bandwidth-hungry users(such as YouTube and Netflix) wouldhelp to protect the service levels for everyone else.

Carrying data such as video-streaming or multiplayer online video games obviously costs more than someone in a home office sending a few emails and reading MoneyWeek online. So if those heavy users are required to contribute more to the costs, the extra money can be ploughed back into the system for the benefit of all. Or so theISPs claim.

Why does this matter?

Because the principle that all traffic on the network should be treated the same is regarded by many as a cornerstone of an open internet, free from corporate control. More prosaically, it's a consumer issue that could fundamentally affect prices, service quality and corporate profitability. And it is not necessarily the case that protecting net neutrality forever will mean a better deal for most customers.

For example, if net neutrality is upheld, ISPs could decide to pass on the cost of delivering bandwidth-hungry premium services by raising the monthly fees they charge everyone for net access.

Due to the global nature of the business, this is not just an issue facing America it mattersto Britain, too. For example, after Netflix agreed earlier this year to pay a fee to Comcast and Verizon, the firm put up the price for its monthly streaming service in Europe as well asin America.

What if fast lanes are allowed?

In theory, if ISPs are allowed to use what is, after all, their own infrastructure to charge their customers different prices, then they'll have an incentive to reinvest their improved profits in more infrastructure that helps small users as well.

But if ISPsare allowed to charge more for access to specific kinds ofdata-intensive content, users might find that sites not inthe fast lane would beslower to load and use.

There are even fears that as there is more convergence in the telecoms/entertainment space, ISPs might act to block rival services or slow them down. Those people taking this line of argument point out that ISPs are intrinsically monopolistic: due to the nature of their infrastructure, it's not that easy to develop a competitor network.

Is this Obamacare for the web?

In effect, what Obama has told the FCC to do is treat access to the internet more like access to electricity (a flat-priced necessity) and less like access to cable television (a differentially priced luxury).

It's a return to an early theme for the Democrat, who styles himself as America's first digital president. But it has "outraged the telecoms industry", reports David Crow in the FT.

AT&T says it will suspend plans to roll out its superfast broadband to 100 cities until the policy is clarified. Verizon has promised to fight the proposals in court. And the Republicans have vowed to defeat them in Congress, with the prospective presidential candidate, Ted Cruz, calling them "Obamacare for the internet".