US neutrality verdict good news for telcos

Dylan Bushell-Embling
17 Jan 2014
00:00

The US court decision overturning part of the FCC's policy on net neutrality spells bad news for internet companies, but could be a positive for operators in the US, Asia and elsewhere.

Cyrus Mewawalla, managing director of TMT research house CM Research, notes that the verdict has negative investment implications for internet companies - particularly heavy bandwidth users including Facebook, Netflix and Google.

Not only do these firms face rising cost bases, but the competitive balance of power in the internet sector could shift temporarily from internet companies to telecom operators, he said.

Striking down the FCC policy means US telcos will be able to charge bandwidth hogging internet companies additional fees, increasing their revenue bases.

In Asia, companies looking to develop their own internet sector, including China and India, may meanwhile allow domestic operators to charge the mainly-American large internet companies more for carrying their traffic.

While net neutrality advocates argue that an open internet is essential to fostering innovation and free speech, Mewawalla said fears that scrapping net neutrality would result in a more closed-off internet are “grossly overdone.

“Telcos already offer tiered prices to consumers depending on the speeds they require,” he said. “In future, content providers like Google and Netflix may pay telcos more to ensure their content is assured of the highest quality of service on the network. What is more likely is that all content will remain open to everyone but quality of service will be better for those who pay more.”

US operator AT&T made waves last week by announcing a new service allowing content companies to pay for wireless data used by AT&T customers. This “sponsored data” service had reignited the net neutrality debate even before the FCC verdict was handed down.

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