On Thursday, February 26, the Federal Communications Commission split along party lines, voting 3-to-2 in favor of net neutrality. The rules require Internet service providers like Comcast (NASDAQ:CMCSA), Time Warner Cable (UNKNOWN:TWC.DL), and Verizon (NYSE:VZ) to treat all legal data and websites equally.
The vote was strong pushback to ISPs and a win for consumers. What started as a small group quickly grew in influence and scale and forced FCC Chairman Tom Wheeler to adopt the more stringent Title II designation instead of the earlier Section 706 rulemaking. For many, this battle was a manifestation of the earlier "Hope and Change" President Obama built his campaign on.
But while you can't blame advocates for celebrating the decision, when it comes to the actual specifics of net neutrality, this vote substantively changes nothing.
Treat all websites equally? They already do that
As previously stated, the biggest issue in net neutrality is banning ISPs from putting in a fast lane or banishing websites that don't pay extra to a slow lane. Lost in the political rancor lies a rather inconvenient fact for both sides: ISPs don't do that. Comcast EVP David L. Cohen has stated that Comcast agrees with Mr. Obama's overarching goals of no blocking, no throttling, and no paid prioritization. Furthermore, Mr. Cohen stated Comcast has "no plans" to engage in these practices going forward.
For another example, Charter Communications CEO Tom Rutledge addressed net neutrality by stating, "I've been managing ISPs since when they began, literally was there at the beginning and I've never had anyone come to me and ask for a fast lane. So, we're worried about something that theoretically could happen but has never happened."
To be fair to net neutrality advocates, Mr. Rutledge and Mr. Cohen acknowledged that theoretically ISPs could throttle or slow data prior to the ruling, but it appears no ISPs engaged in the practice.
Note to ISPs: Get better spokespersons ... and stop insulting customers
To be fair to ISPs, there's an argument to be made for throttling or charging websites more for delivery. In November, Sandvine published a report that Netflix accounts for 35% of downstream traffic during peak evening hours. In the event there's a strain on the network -- especially if ISPs need to build out to accommodate traffic demands -- the concept of charging more for bandwidth hogs could find receptive ears ... but you have to make that argument.
Instead, those arguing against net neutrality seemed motivated by a philosophical belief that any governmental regulation is negative. But that simply isn't true; just like they do with corporations, the media focuses on governmental failures while ignoring successes. However, most people know that and respect at least a baseline of regulation within the economy. In addition, calls against regulation generally fall upon deaf ears when the industry has a history of treating its customers poorly.
ISPs are finding that after years of not having to worry about how they treat customers, customer goodwill is important in a hyper-connected world. Things like changing your customers' names to vile curse words, putting a cancelling customer on hold for 3 hours or refusing to cancel the service altogether, and discussing a customer's dispute with his employer — causing that customer to lose his job — speak volumes in regards to your feelings about customers.
Some changes with a future focus
There were some changes in Mr. Wheeler's proposed net neutrality rules: Netflix's "paid peering" deals will now be included in the broader net neutrality discussion. Because the issue was between Netflix and the ISP -- and not between the ISP and end consumer -- the FCC didn't regulate this prior to the vote. Now, the FCC has the ability to rule if fees imposed for paid peering are "just and reasonable." Overall, this was a small change from prior precedent but the paid peering deals will continue.
To be fair to net neutrality advocates, this vote was about the future of the internet and not the past. Although nothing has substantively changed today, websites and advocates can rest assured that data will be treated equally going forward. And if you own stock in any of the named companies, relax; this decision is essentially a non-event as far as investors are concerned.