In Business Model, Internet Access, Mobile

Network neutrality, it can be argued, is the wrong answer to a good question. The question is how to maintain competition in internet access markets. Protecting the competitiveness of markets, it can be argued, is the proper sphere of antitrust regulators whose concerns include excessive market power and concentration.  The problem with using network neutrality instead of antitrust scrutiny is that the former unduly interferes with basic methods of increasing uniqueness, value, packaging and pricing in the market. 

In most markets, suppliers compete to create a range of products (low price segment, high price premium; luxury and mass market segments). Network neutrality eliminates a basic method for doing so (allowing quality to become a differentiator).

One can argue that ever-increasing capacity expansion, combined with relatively inelastic willingness to pay, pose either a challenge or a crisis for the internet access industry, at least at the tier-one level. Conversely, openings in the market for local, small specialists should increase.

Consultant Martin Geddes always talks about the need to emphasize quality, not just quantity, where it comes to internet access.

“The broadband industry is presently caught in an insane ‘fat pipes’ model that simultaneously fails to deliver predictable and consistent experiences, whilst also wasting huge amounts of capital and thus inflating costs,” he says. “In this model, the central belief is that the job of a network is to create as much data throughput as possible, which is (wrongly) conflated with enabling good user experiences.”

In effect, “quality of experience” issues underlie thinking about network neutrality (outlawing direct measures to improve quality in favor of measures to increase quantity). At the same time, measures that make “experience” possible within a sustainable business model (zero rating, for example) likewise are viewed strictly through a “restraint of trade” lens, ignoring the alternative issues of “experience that also is sustainable.”

In virtually all other product categories and industries, products can be developed and marketed within a framework that includes both price and quality. Consumer internet access often outlaws any dimension but quantity.

Those issues will begin to cause increased friction as the driver of internet access and bandwidth clearly shifts to video entertainment apps.

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