Research Highlights Article

May 31, 2016

Will an internet "fast lane" ruin the web?

Understanding the contentious net neutrality debate

Tim Hyde

Illustration by Gian Romagnoli, images from Macrovector/Bigstock

The debate surrounding net neutrality has long had an apocalyptic cast.

Telecom companies that act as internet service providers (ISPs) – the companies that ferry data from content providers like Facebook and Netflix to consumers – have argued that strict net neutrality rules threaten the existence of the internet. They will strangle off investment in new internet infrastructure, grinding web traffic to a halt even as consumers’ bills skyrocket.

At the same time, net neutrality advocates, groups like the ACLU and the Mozilla Foundation, warn that compromising the principles of net neutrality will result in a weakened internet controlled and manipulated by corporate interests. This is a future where ISPs will charge people for access to specific websites bundled like cable packages, throttle down data from popular sites to the point of unusability if the providers don’t pay up, or simply block access to sites with political messages or policy advocacy that the ISPs don’t like.

But what is net neutrality, and who’s right about what will happen if it disappears? An article from this month’s edition of the Journal of Economic Perspectives examines the economics of this contentious issue.

In Net Neutrality: A Fast Lane to Understanding the Trade-Offs (PDF), authors Shane Greenstein, Martin Peitz, and Tommaso Valletti define net neutrality as the principle that ISPs should treat all data from content providers – ranging from internet heavyweights like Google to obscure blogs spouting political opinions – equally. No preferential treatment for any providers, no “fast lane” for certain providers who pay up, and no blocking any legal content anywhere on the web.

The authors point to the controversial deal struck between Netflix and Comcast as an example of the reasons why companies might not always want to observe the net neutrality principle, and why some people are worried about the consequences. During 2013, streaming speeds declined for customers at several of the largest ISPs. The underlying cause of this slowdown is still not totally clear, but in February 2014 Netflix paid an unspecified sum to Comcast for the right to place its own servers in Comcast’s facilities, in effect gaining preferred access to Comcast’s network.

In the subsequent months, speeds increased for Comcast customers streaming Netflix movies and TV, and Netflix eventually struck similar deals with other major ISPs later in the year (see figure above).

Was this just an innocent case of companies negotiating terms for investments that will be mutually beneficial? It happens all the time in other industries, but this arrangement garnered more attention than usual because it directly contravened the core net neutrality principle that all data flowing through the web should be on an equal footing. Netflix was effectively paying for the right to have its traffic receive priority treatment on Comcast’s network, to the potential detriment of other providers.

The authors point out that all data is not created equal, at least when it comes to the urgency of the information contained within. If emails took 10% longer to travel from the sender to your inbox, you probably wouldn’t notice. If a filesharing download took 10% longer, it would be a noticeable inconvenience but probably wouldn’t deter you from accessing the file. But if a Netflix stream required constant buffering, or a video phone call kept cutting out as you talked, it might ruin the entire experience.

Real-time entertainment and communications, an increasing part of our collective internet diet, require fast connections that continuously feed data to users with minimal delay. During peak hours when internet connections are working the hardest to shuffle bits across the web, traffic naturally tends to slow down. In a net-neutral world, that sluggishness is spread equally across all different types of traffic, including types that are very sensitive to delay (along with types that aren’t).  

This inefficiency is the reason that paid prioritization – a “fast lane” for certain types of content -- could in principle improve the overall experience for internet users. It’s possible that the Netflix agreements with ISPs were a good thing on balance, if streaming traffic was able to arrive promptly even during rush hour while other less urgent internet uses like email and web browsing were slightly delayed.

But any policy that allows ISPs to prioritize some kinds of web traffic over others opens the door to all sorts of ISP misbehavior, especially since there tends not to be robust ISP competition in most of the country. There might be an incentive to degrade the non-priority lane if that will induce companies to pay for fast lane access, a phenomenon sometimes called the “fast lane versus the dirt road.” Indeed, Netflix eventually likened the deals they made with the ISPs to ransom payments, saying that the ISPs “opted to hold our members hostage until we paid up.”

Additionally, if ISPs launch services that compete directly with existing web offerings, they will be able to create an uneven playing field. An ISP that wants to direct traffic to its new search engine will be tempted to shunt Google’s traffic into an ultraslow lane or ask its customers to pay extra to access it at all.

In principle, government regulators could monitor non-priority lanes to make sure they don’t get “too” slow, but if it's hard for them to really observe how uniform or reliable the product is, or decide a standard for how slow is too slow, a strict net neutrality policy might be a solution. If everyone’s data has to take the same path and gets the same priority, ISPs have no incentive to reduce the speed on their lines.

Net neutrality advocates are also concerned that a fast lane could stifle entrepreneurship and make it harder for new startups to find their footing on the web. Presumably the existing tech giants like Facebook and Google will have no problem affording access to a fast lane, but that could leave the next Facebook or Google languishing in the slow lane even though quick internet connections might be extra valuable for their novel products.

Then again, if the charge to access the fast lane isn’t too high, paid prioritization might actually provide a boon to newcomers. Depending on the equilibrium that results between ISPs and content providers, a fast lane could be a relatively affordable way for startups that can’t afford costly investments in their own transmission capacity to find a new audience.

Paid prioritization and the reliable high speeds it could provide might also hasten the development of future web applications like interactive e-learning, telemedicine, or autonomous vehicles – technologies that we don’t yet see on a large scale and which will probably require fast, stable internet connections before they can come into their own.

It should come as no surprise . . . that the thrust of the conclusions from economic analysis tilt against simplistic declarations in favor or against net neutrality.

Greenstein et al. (2016)

The problem of managing web traffic efficiently is getting more important every day as more of the global poor come online and web traffic volume continues to grow. Without continued investments by ISPs, the internet will potentially collapse under its own weight as traffic (especially on mobile networks) is universally expected to explode in coming years.

But official net neutrality policy remains a muddle – a recent 2015 ruling by the U.S. Federal Communications Commision was hailed as a victory by net neutrality advocates, but the decision is tied up in court and in the meantime new carriers are rolling out popular new plans (such as free mobile data for certain uses) that may run afoul of net neutrality principles but are proving popular with customers. ISPs and content providers can’t really be sure what net neutrality rules will look like in the medium term.

Meanwhile, strict net neutrality policies around the world have also stymied some iniatives, including Facebook’s “Free Basics” plan to provide access to Facebook.com and select other web services to customers in India free of charge. Free Basics was opposed by a consortium of major Indian startups that feared Facebook was exerting too much power, and Indian authorities decided to block it in February. This preserved an important net neutrality principle, but it also meant that very low-income people in India lost a chance to access at least some of the internet’s resources for free.

The debate over Free Basics highlights the tough tradeoffs that net neutrality policy can entail. The authors conclude with a note of caution, pointing out that little or no empirical evidence exists to support the strong claims that appear on both sides of this debate. They call for policymakers to proceed carefully as they try to preserve a free and useful internet for the next generation of web users. ♦

“Net Neutrality: A Fast Lane to Understanding the Trade-Offs” appears in the Spring 2016 issue of the Journal of Economic Perspectives.