Cord cutters, it could be worse than you think.Higher Netflix bills might just be the beginning of the effects from a federal circuit court’s recent striking-down of the Federal Communications Commission’s open Internet rules.
Consumers could be facing an online future that more resembles the current pay TV ecosystem — the exact thing that many Netflix consumers attempt to evade as they cut the cord.
“People are going to be upset. What I hate about my pay TV service you are going to do to my Internet service, too?” says Phil Swann, president of TVPredictions.com. “It’s opened the door to the likelihood of that reality unless something changes.”
Back in 2010, the FCC adopted so-called net neutrality rules requiring broadband providers to treat all Net traffic the same. Verizon challenged those rules, and on Jan. 14 the U.S. Court of Appeals in Washington upheld the company’s challenge.
The result? “Companies are going to be able to negotiate (with Internet service providers) for certain most-favored-nation status and smaller companies that can’t afford that are going to get left out,” says Corynne McSherry, intellectual property director for the Electronic Frontier Foundation. “And the consumer will never know because all they will know is this service is working better than others.”
Since Netflix is a bandwidth hog, accounting for nearly one-third of all Net traffic during peak periods, subscribers rightly feel threatened. But the streaming giant could just be the most obvious target in a new non-neutral Net.
“Companies would make deals just as they make deals to be on a cable system or satellite system,” Swann says. “And your Internet would not just be $30, $40 or $50 per month; it’s going to be so much per month depending on what services you get with that. I think that’s where the ISPs will eventually go with this. It’s too good for them not to do that.”
Consumers have embraced streaming movies and TV with subscription services up 31% to nearly $3.2 billion in 2013, according to IHS Technology. And new Internet TV ventures are in the works at Sony and possibly DirecTV, which has expressed interest in a sports streaming service aimed at younger viewers who might not get pay TV.
Add those two projects to the already-crowded streaming space with Amazon, Apple, Google, Target and Verizon/Redbox and “that’s a lot of companies with a lot of money,” Swann says. “And ISPs are going, ‘What a feast this could be for us.'”
Echoing Swann’s concerns is Rashad Robinson, executive director of minority consumer group ColorOfChange.org, who said in a statement that “the Internet could very soon start looking like cable TV, where one corporation holds the power to decide which content we’re able to access.”
Similarly, the Writers Guild of America, East labor union urged the FCC to “figure out how to protect the interests of the public, and of the men and women who devote themselves to creating the content the public loves.”
Not everyone is convinced that consumers will see a lot of change on home broadband service, or that they would bear the brunt alone. “People are really concerned about the concept of quality of service and ISPs blocking things,” says Dan Bowman, chief technology officer of networking company Sandvine. “We think that the court of public opinion protects from that occurring.”
It’s the Waterloo, Ontario, firm’s report that found Netflix accounts for 32% of all downstream Net traffic during peak periods with YouTube close behind, accounting for 9%.
More likely, it is major networking companies such as Cogent and Level 3 that provide connectivity for ISPs (the AT&Ts and Verizons of the world) and content providers (Netflixes and Amazons) that will seek to adjust deals on each end of the equation, Bowman says.
For an ISP to tell a residential customer “that ‘if you pay more, it will be less bad’ is a hard message to sell,” Bowman says.
Netflix might already be preparing to pay more to connect to consumers, as it has been testing a lower-priced $6.99 plan for new customers to get a single stream of standard definition video. At the same time, the company plans this spring to begin streaming 4K video, which delivers more than four times the resolution of HD — but thankfully won’t increase video data traffic at quite that rate because of encoding.
“It doesn’t take too much creativity to see a Netflix go, ‘If you just want standard definition streaming it’s going to be this much a month, if you want high definition, it’s going to be this much and if you want 4K streaming this much per month’ and so on,” Swann says.
The FCC may appeal the court decision — the fine points of which can be complicated to the average consumer. Basically, the agency attempted to “pick and choose” its regulatory powers in regard to the Internet, Bowman says, sometimes looking at broadband providers as common carriers, like telephone companies, and other times as information services.
Instead, the court said that “the FCC has the duty to encourage openness on data services but they can’t do it this complicated way,” he says.
While FCC Chairman Thomas Wheeler mulls over an appeal or a new strategy, Sen. Ed Markey, D-Mass., has said he plans to introduce a bill that gives the agency the power to “preserve competition and safeguard consumers.”
In the meantime, the EFF’s McSherry encourages consumers to write or tweet concerns about #NetNeutrality to their Internet providers. “Some companies really respond to that and if they know that people care about more than just speedy Netflix access,” she says, “they will respond.”
