Net Neutrality: What it is and Why it’s so Important

Net Neutrality: What it is and Why it's so Important

I typically write about business and the senior living industry, but I decided to tackle a new subject with this blog post:  net neutrality. It might seem off-topic, but it could actually have a very real impact on the senior living industry. And it definitely has the potential to affect all of us in our personal lives.

I want to be upfront about the fact that I likely don’t have all the details and my knowledge might be limited in some ways. And I certainly don’t have all the answers to this issue. But I do feel like it’s important to start a dialogue about this topic before it changes the way we use the Internet.

This is not about politics as I am about as “middle of the road” as you can get politically; I can identify with both sides of the aisle when they’re trying to do the right thing. But from what I understand, replacing net neutrality is not a good thing for the consumer, eCommerce, or startup development.

If you don’t have a full understanding of net neutrality, Burger King put out a great parody video of the issue using its Whopper hamburgers as an example. While the video is funny, the underlying message is not. The premise is they want to sell more chicken sandwiches, so in the absence of “Whopper Neutrality” they restrict the flow of hamburgers and now have different prices points for speed of service. 

A Little Backstory

Many of you already know that I spent the first part of my adult life working for the telephone company. During those 18 years, this company went through many changes; from pre-divestiture American Telephone and Telegraph (AT&T) to post-divestiture Southwestern Bell Telephone Company (SWBT), SBC Communications, and now back to AT&T.

I started out as a cable splicer and later a cable repairman in a small town in Texas. I eventually finished out my career as a construction manager responsible for splicing copper and fiber cables in one of the fastest growing counties in the United States.

I’m also what is affectionately known as a “Bell Head,” which means I had a family member before me who worked for AT&T as well. That person just happens to be my mom, who spent 35 years in the business office.

During my time in the industry, I witnessed a lot of changes. Some of you might remember the pre-divestiture AT&T. This was a time when there was no competition in the marketplace, in later years there was competition in the long-distance market. At the time, the 200-pound gorillas were AT&T and General Telephone and Electronics (GTE) (which later became Verizon). Smaller markets were serviced by regional providers or even mom-and-pop exchanges.

The 1984 divestiture of AT&T was brought about by the U.S. Justice Department lawsuit, which perpetuated the rise of long-distance companies like Microwave Communication (MCI) and Sprint. Yes, there was a time in the not-too-distant past where you actually had to pay to call out of your immediate area.

(Side note: As a kid, I lived out in the country and at one point, our family had an eight-party line! This means at any one time there were up to seven other families who could use that same phone line. If one of your neighbors received a phone call, you could pick up and hear their entire conversation.)

Flash forward from 1984 and although we might have had technology gains, it’s hard to say if divestiture created them or just sped them up. The only thing I know for sure is that the quality of service became increasingly worse.

Because the companies were more focused on profit, cable maintenance became a thing of the past. In fact, it was basically non-existent unless you racked up enough trouble reports to force the companies to spend the time and money repairing or replacing a cable. They become more reactive than proactive at heading off cable problems before they became major issues. 

The Deregulation Act of 1996

Then came the federal Telecommunication Deregulation Act of 1996 and things continued to worsen. We did all sorts of nonsense that would help us save a dollar in the short-term, only to cost five dollars the following quarter.

I remember helping a friend troubleshoot problems on his parents’ phone. His dad had terminal cancer and was spending the end of his days with hospice care. I found the problem was in the cable and traced it back to some splicers that had been working up the road.  

I called to report the issue late on a Thursday and to convey the family’s dire need for access to a phone. This was during the early 2000’s and cell phones weren’t as prevalent as they are today. Despite the fact that there were no other disasters in the area, the phone company didn’t take any action until the following Tuesday.

The Telecommunications Act of 1996 also deregulated the local service space; this was supposed to allow for “competition” and “innovation.” The structure of the plan was mostly that other companies could set up dial tone generators or switches in a local telephone service provider’s central office. You could even be a reseller of someone else’s dial tone, pay a percentage to the provider, and bill the customer yourself.

It was a crazy time. And while this sounds like deregulation, in my opinion, it’s not really. The incumbent local service provider still maintained control and was obligated to provide maintenance on the outside network from the local provider’s central office to the end user’s premise demarcations, usually a customer’s home or business.  

I was part of a pilot program, the first in the State of Texas and maybe even the U.S., where SBC buried a fiber cable from a Southwestern Bell telephone company’s central office into another exchange carrier’s central office, GTE. We co-located switching equipment inside of the GTE office which enabled us to provide Southwestern Bell service to a person living in a specific GTE territory, which was a first.

But what were we really providing? If I’m being honest, we were providing a phone number, dial tone, add-on services, billing, and that was it. The service was still carried out over the old existing GTE lines to the customer’s house. So, let’s say a customer lived in a GTE territory, had GTE service, and was totally dissatisfied. Thanks to the Deregulation Act of 1996, customers who lived in certain well-to-do neighborhoods could now call Southwestern Bell and get their service instead.

But 99 percent of phone problems were always beyond the provider’s central office, out in the cable. So, it should go without saying that if you lived in GTE territory and were unhappy with your service, it wasn’t due to a faulty switch. It was more than likely due to a failure in the outside network beyond the GTE central office due to poor maintenance or damage from an outside source.

So consequently, when we put our dial tone on that poor outside cable network you still had the same poor service, just a different phone company billing you for it. Nothing about the quality of the service itself changed.

Therefore, in my opinion, the Telecommunications Deregulation Act of 1996 did very little for the consumer.

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The Problem with Deregulation

Now we move on to net neutrality, which was the true intent of the Internet. Back in the beginning, universities were connected in order to share data and further research projects. The “pipes,” as some refer to the pathways or cables, should be open to whatever legal content the end user wants to pay for and it should be delivered at the same speed and quality. There should be no discrimination or extra fees to receive it.

Why would a subscriber pay for Internet service and then leave it up to the provider to dictate what they can view and how fast they can view it? Would the Internet be provided to the consumer for free? I doubt it. But there is still a lot of core infrastructure in place that was built with proceeds from the days when companies had a virtual monopoly in certain areas.

I am a great example; as a boutique consulting firm, I couldn’t afford to spend as much as the larger competitors out there. So, my website might not be as easy to view or load as quickly as our larger competitors’.

The prospect of investment seems odd because why would a local telco provider want to go build out a new expensive network when they can just concentrate on the high margin services where their network is already deployed? This only hurts poorer neighborhoods and rural areas.

This is why I don’t think a mega-deal like AT&T and Time Warner is in the best interest of the consumer without net neutrality protection. AT&T would have a vested interest in making sure that the Time Warner content was fast and more visible than competing products and they would now have the means to control access. It can also curtail growth because startups might not be able to afford to gain access to the Internet.

There are many examples of local telephone companies slowing or blocking content that impacted them. One local company was found to have been slowing down the Vonage service because it competed with their offerings. There was another major phone company slowing down FaceTime unless you paid for a certain data plan. And yet another larger company was found to have been throttling Netflix and YouTube.  

Net Neutrality and Senior Living

How can net neutrality affect senior living? First of all, it could impact operators if the Internet Service Providers (ISPs) decide to charge them more in order to have their webpage load quickly. The ISPs could also develop tiered plans, such as cable TV, where you would have to buy a certain type of plan to access certain websites and services.

This could affect activities programs, online training, facilities management, contact with families, or electronic medical records. And any other Internet-based reporting for cloud applications could be impacted. All of this has the potential to affect senior living communities, particularly those in rural areas.

There probably won’t be any big, overnight changes, but rather, a lot of little changes that cause you to use the Internet differently over time. There is a chance to stop this with the Congressional Review Act of 1996, but from what I have heard, because there is a Republican-controlled Congress that’s pretty unlikely.

When you get down to it, we’re basically right back where we started in 1984, except now, these behemoth providers control a large segment of the cellular market as well content. The cable, telephone, and cellular companies usually have the worst customer service reputations as well.

A Federal Trade Commission (FTC) report from 2007 said that without proof of collusion, as long as there is at least one competitor in the market, forces will take effect if one company tries to throttle or eliminate content. The net neutrality framework put forth by the FCC basically said there were “insufficient” competitive forces when talking about broadband providers. And they felt it would harm the investment in content, “fundamentally change the nature of the Internet,” and reduce network growth and innovation.

This is what happens when you have a duopoly, which is what a large portion of America has. You can choose between AT&T and a cable provider or Verizon and a cable provider. In some areas I know of, there is only one provider. From my limited experience, satellite providers are still not a viable competitor, especially when you live in an area with a heavy tree canopy such as I do.   

The problem is that often, the competitive nature can work backward. Instead of having price wars, the companies can actually begin coordinating the raising of prices or reduction of services. A recent example would be the accusation of collusion involving the four major airlines to keep ticket prices high by reducing capacity or seating available.

Another example of this would be cellular data plans. When first introduced, there were plans that had truly unlimited, uncapped, unthrottled data plans. But then one of the big carriers announced they were doing away with truly unlimited, uncapped, unthrottled data plans and the others quickly followed suit.

The argument put forth by these providers was that the extreme use of data creates more expenses for the providers and strains their networks. Some saw it as these two companies realizing they could capitalize on the higher data usage since users were at saturation levels. I believe the truth lies somewhere in the middle.

Preserving a Free and Open Internet

Even if you own a home phone you still have to pay to be connected to the network. Simply buying a telephone set and plugging it into your house would not allow you to call out. You would still have to pay the local service provider to actually connect you to the network and then pay a long-distance provider to give you access to calling out of your area.

Back in the day, defense contractors, credit card companies, credit reporting agencies, and credit card processors transferred large amounts of data. These companies had to pay for all the bandwidth they were using. And they needed to have large, sophisticated networks and redundancy built in and to pay for the associated construction costs and service fees to keep it going.

Similarly, companies like Netflix and Amazon aren’t connecting to the Internet for free. They have multiple locations across the country, so they pay many times over. And you can bet the cities and utilities work together to provide incentives which attract these huge data centers to their area.

Likewise, you should be able to pay for your bandwidth but you shouldn’t have to pay to access certain sites. At the end of the day, all website traffic should be treated equally. The Internet pathways should be considered a common carrier, and everyone has a right to the same treatment.

Suggested Solution

The Texas power grid is a great example of how deregulation should work. A neutral company was formed to build and maintain distribution lines from the power generators to the end consumer. This distribution company Oncor, doesn’t have a horse in the race when it comes to power generation. They actually don’t care who’s generating the power they carry. Their sole function is moving it from generator to end user. The consumer pays a fee on their power bill and gets their power in an orderly and timely manner no matter who they buy it from. 

This would be a great model for the Internet. The cables that carry the Internet traffic should be free and open to any legal content and not restricted in any way. The consumer can decide what they want in the way of content and what they are willing to pay. They are free to negotiate if they want Netflix, Hulu, or Amazon based on the cost and content provided, not whether their ISP will restrict one or the other or maybe all three.