Northern Sky Research

No Neutral Side in This Debate

May 8th, 2017 by Lluc Palerm-Serra   More from this Analyst | Profile

As FCC Chairman Ajit Pai recently proposed to roll back Net Neutrality rules, this reactivated one of the most heated debates in the telecom ecosystem. Arguing for keeping an “Open Internet” on one side and for creating a “framework to foster investments in Broadband” on the other, tech companies and Internet providers are poised for an inevitable clash in the name of better end-user services. Beyond the political debate, what are the implications for users, telecom actors and, in particular, for satcom?


Enabling the Networks of the Future

Telecom infrastructure is on the verge of a major technological change. 5G will disrupt how networks are conceived. However, the business environment that 5G will encounter is radically different from previous generations. Developed markets are starting to witness subscriber saturation, data traffic continues to explode requiring MNOs to densify their networks with the consequent associated costs, and operators are trying to capitalize on premium plans but revenue growth is marginal.

In this context, 5G is much more than just a faster network, it aims to create cost efficiencies and open a whole new range of applications through network segmentation. NSR Senior Analyst Lluc Palerm states that “the promises of 5G won’t materialize without some revision of the net neutrality rules”. Different use cases (with very different priority requirements) like first responders’ communications, connected car, eHealth, industrial applications, IoT or mobile communications will need to coexist in the same networks.

Any move towards smarter networks is positive for satcom. Satellite can’t compete on brute force (capacity and pricing) against ground networks, but it can add value to smart networks. Augmenting network resiliency, flexible traffic allocation, traffic overflow, ubiquitous connectivity or content multicast are a few examples. One of the applications that could benefit the most from this relaxation of the rules is Cellular Backhaul. With operators now having more ways to monetize their networks and users prioritizing the consumption of a limited library of content, operators would have more incentive to further extend their reach and at the same time smart techniques like content cache at the edge would make the satellite solution more efficient. One could eventually envision BTS towers becoming broadcast stations. In that instance, satellite would be the best solution to beam content to many sites.

The risk (or opportunity) is that technology evolution is constantly redefining the point at which satellite becomes more cost effective than ground-based alternatives. If ground providers now can monetize their networks with more applications (traffic, content, etc.), they might have the incentive to further expand their fiber-based backbone to more remote areas, becoming a threat for traditional niche satellite markets.


Content Is King

The Internet is little more than a massive content platform. The value offered by the ISPs to their customers is precisely in offering access to this content network. Blocking content to end users would diminish the value ISPs are offering to their customers and rapidly trigger a migration of customers to competitive alternatives. Any content platform wants to increase the size and diversity of its library (TV, app stores, etc.).


Infrastructure and Markets Might Not Be Mature Enough for This Transition

NSR Senior Analyst Brad Grady raises the concern that broadband markets might not be competitive enough to support the thesis that the availability of multiple options will prevent ISPs from blocking Internet content. According to the FCC, 10% of U.S. Census Blocks still only have 1 ground-based option to get a 10 Mbps Internet connection. Grady adds, “allowing telcos to discriminate against different bits and block competitive offers would impose an unfair competitive advantage, especially in those places with exclusivity/monopolistic clauses.”

Net neutrality regulations can’t be analyzed in isolation. In many instances, ISPs were granted monopolistic power to offset the cost of building their network, and that also came with government regulation. A push to increase the competition level among ISPs is necessary to prevent end-users from unfair data management policies.

Again, satcom is well positioned to see a positive outcome of this deregulation of Net Neutrality as an alternative to that sizable percentage of households with slow speeds and scarce number of alternatives, generally concentrated in rural areas. Two diverging strategies would be feasible here. Satellite ISPs could offer an open, unrestricted connection to the Internet as an alternative to those ISPs discriminating content. Alternatively, they could create incentives to consume pre-loaded content in a local micro-CDN. Considering the multicast advantage of satellite and the large volume of data consumed by Video, this could transform satellite ISPs into a very competitive option in the market.

One must bear in mind that some cases like In-Flight Wi-Fi or professional VSAT networks are exempt from Net Neutrality rules. However, with plenty of competitors more than happy to give to customers an unrestricted connection, satcom seems to be closer to that position where competition drives an open access to the Internet. One threat that service providers need to face is that with higher bandwidth provisioning and lower capacity pricing, the incentive for value added services decreases. If one can stream an OTT service from a plane or a vessel, why would the customer pay for the hosted media offering? It comes to the equilibrium between content, performance and price.


Bottom Line

The Internet has become an essential part of our communication, education and social progress. It has also proven to be a catalyzer for innovation and economic development. There is no doubt these attributes must be preserved and protected vigorously.

Future networks will need to be able to serve a wide range of applications with different requirements. This diversity of requirements needs a revision of the Net Neutrality Principles. However, to avoid end-users being unfairly treated by their ISPs, the telco ecosystem needs to increase the level of competition.

If the right moves like continuing technology evolution to stay competitive in front of ground alternatives or creating new solutions like traffic overflow and content multicast are done, satcom could take advantage of a relaxation in Net Neutrality rules as a key tool for the smart networks of the future and as a competitive solution for end-users seeking alternatives to monopolistic ISPs enhancing the role of satcom in bridging the digital divide and democratizing the Internet.