Could the net neutrality battle kill cloud competition and create SaaS monopolies?

The scorched-earth legal and PR battle currently taking place between Netflix and Verizon makes for some entertaining headlines. But the outcome of this fight will have profound impacts for both end-users and IT professionals. 

One thing that doesn’t get discussed enough is the potential effect that this battle could potentially have over market freedom and competitively within the general SaaS and media space. But before we get into this discussion, let’s look at some of the key areas of conflict that have pushed the Net Neutrality debate to the point where it is today. (Not just for Netflix-Verizon, but for the general ISP industry as a whole).

Consumers and SaaS/Content Providers

The argument from the consumer and SaaS and content provider perspective is simple and easy enough to understand. Consumers are paying for a specific ISP service, and they would like to enjoy the full benefits of what they’ve paid for. And SaaS providers don’t believe that they should pay in double for the ISP traffic that their customer has already paid for. (After all, service providers have no control over end-user’s choice of ISP service).

Internet Service Providers

ISPs generally have 2 primary justifications for wanting the right to selectively block or throttle bandwidth. 

  • The first justification is the fact that very few SaaS and content providers (Mainly Netflix and YouTube) are responsible for a disproportionately high percentage of all traffic. Cable providers invest billions in establishing and maintaining their infrastructure, and they believe in enforcing their property rights. The argument is “this is our house, and we should be able to decide who is allowed in, and enforce standards of conduct”.
  • The other possible motivation (although many ISPs won’t openly admit this) is that online video services have the potential to kill off other revenue streams such as cable television subscriptions. So there is a strong business incentive to prevent certain types of vendors from eroding this business.

Cloud Controversy

I’d like to preface this by saying that, in my own personal experience working in this space over many years, most Internet Service Providers tend to have very high standards of ethics, fairness, integrity and accountability. Contrary to what the media would tell you, my own experience is that ISPs actually seem to care for their customers and want to act in their best interestes. 

So although it’s highly unlikely to come to fruition, there is a hypothetical scenario where ISPs could theoretically use these same arguments to lock customers in by taking away their “free market” choices. 

Using the same logic that was applied to the Netflix debate, an ISP could just as easily say “We can’t have users uploading their entire hard drives to the Internet. We’re going to block all online backup services”. Or, an ISP could offer their own online backup service, and force all of their customers to back up exclusively with them. 

And if this scenario could be applied to online backup, it could also be applied to VOIP, VPNs or just about any other bandwidth-consuming service. Taken to extremes, this could even get low-bandwidth SaaS services such as CRM, Accounting and Email.

If ISPs were to force consumers to use specific services in this way, it would create buyer “lock-in” and makes it harder for customers to switch. (You can drop your Internet, but all of your other online services stay with us)

Yes, this is a slippery slope, and there would certainly be consumer, media and legislative backlash if ISPs ever took matters to these counter-productive extremes. But the rules are currently trending towards a scenario that might potentially allow something like this to take place in the future. 

As I’d said, this is more likely an improbably scenario. Instead, I think that both legislators and ISPs will most likely lean towards a middle-ground that ensures a competitive, wealth-creating marketplace that looks after the best interests of consumers. To accomplish this, one of 2 things will probably need to happen. 

1) The new rules of net neutrality will need to be continuously updated and refined for every possible business case. These complex legal rules will likely be expensive to navigate & enforce, and will only benefit companies with legal large budgets.

2) Legislators will need to start over with a new approach that puts consumer rights first, and focuses on fundamental privacy principles that are simple to understand and accessible to everyone.

As we enter the age of big data and “cloud-first” computing, the Net Neutrality debate will have a tremendous impact on the competitive of the United States in the international marketplace. And since a major hub of activity within the cloud and media spaces, it will be interesting to see how the future of these industries are influenced by the outcome of these Net Neutrality debates.

About The Author: Patrick Jobin is a technical writer at Storagepipe. Storagepipe is a leading provider of cloud-based data protection services for SMBs and Enterprises. Some of these services include off-site backup, business continuity, archiving and disaster recovery.

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