Business

How is Net Neutrality a business issue?
The Short Answer

Canadian telephone service and cable service began as monopolies, and this fact is still impacting the business of providing Internet access today. Internet access represented new revenue streams for telephone and cable companies because it could be delivered over their current infrastructures - the phone and cable lines.

Today's Internet requires high-speed access to provide multimedia and real time experiences. This level of service needs bigger, faster networks, which requires large investments by ISPs. ISPs want to minimize the risk of these investments. Third-party services like VoIP (Vonage), streaming video (YouTube) and P2P compete with the services the ISPs are offering, so ISPs want to prioritize their video and telephone services. This network management by ISPs would limit the ability of individuals and small companies to develop and deploy new applications and content.

The Long Answer

  1. What is the history of Canadian broadband?

    In the early 1990’s there were many businesses offering dial-up Internet access. Multimedia content and interactive sites required faster access and more bandwidth. The technology available to offer that service was ADSL over the telephone infrastructure and data over the cable infrastructure. This required large capital investments to upgrade both telephone and cable networks. The regulatory climate and government support encouraged this investment. The cable and telephone companies were quickly able to dominate the developing market. Most of Canada has only one or two telephone and cable providers, and Canadians have ended up with a duopoly in each geographic area.

  2. Where are we now?

    There are different stakeholders in this debate. The various companies involved want to ensure their profitability. Internet users want consistent service without higher prices. Government wants to ensure political and business concerns are balanced.

    Telephone and cable companies are entering new markets to attempt to build revenues. For example, telephone companies are developing Internet Protocol television (IPTV), which would compete with cable television. It requires faster access, which requires capital investment in the telephone network. The decision to invest depends on the potential for revenues and the associated risk.

    If telcos upgrade their networks, but only enough to offer their new IPTV service, competing services like YouTube, Google Video, or other third-party services will be degraded. They will be slower or choppy compared to the telco video IPTV service, and as a result, less competitive. The same situation is occurring for cablecos entering the telephone market.

    This is complicated by the fact that ownership of content producers and network owners overlaps to a great degree. Québecor owns not only cable and broadcast television stations, but also Vidéotron Cable Internet Service, and several Québec newspapers and magazines. The same is true of other Canadian media companies. This cross-ownership increases the incentives described above to prioritize their own services, earning their company an advantage in the market.

  3. Where are we going?

    The business issues of the net neutrality debate are important and for a solution to be successful it will have to address the concerns of all stakeholders. The solution will have to:

    • Protect communications as an essential service which has societal impacts (censorship, freedom of expression, security/public safety, etc).
    • Improve service quality and prices for customers.
    • Spur capital investment for network upgrades for faster, internationally competitive telecom services.