Net neutrality overturn could dampen mobile Web innovation
January 16, 2014
The iPhone needs a bigger screen size
While the United States Appeals Court's striking down the Federal Communications Commission’s net neutrality rule this week favors big brands that have the money to pay carriers for increased data costs, the new rule could also cause services such as Netflix to hike up subscription prices.
Earlier this week, the U.S. Appeals Court shut down the FCC’s petition for net neutrality, which forced carriers to offer the same data coverage across all services equally for consumers. As carriers look for new ways to monetize the amount of growing mobile traffic, the shut down of net neutrality suggests that there will be more innovation in the coming year from the carriers.
“The question is, will carriers and Internet service providers that have their own content offerings — i.e. cable service — be able to throttle or slow down the speeds of competitive content offerings like Netflix?" said Michael Boland, senior analyst and program director for mobile local media at BIA/Kelsey, Chantilly, VA.
"That has yet to be seen, but in a non net-neutral world, it certainly puts them closer to a position to favor their own content, or that of their partners and highest bidders," he said.
"If things were to move in that direction, it could have the potential to dampen the innovation and level the playing field that has led us to the Web we know today.”
Verizon challenged the FCC’s net neutrality law in 2011, but the court has now ruled that the FCC does not have the right to control how much carriers choose to charge services for data costs.
The ruling could potentially cause data-heavy services including Hulu and Netflix to pay significant fees to carriers.
As a result, video and TV streaming companies could be forced to increase subscription costs for consumers.
Additionally, data-heavy services may begin rolling out offerings that let consumers pay to watch a specific piece of content.
The drop of net neutrality could also favor big brands that have the budget to pay carriers.
For example, a shoe brand such as Nike could pay for the data charges so that the company’s Web site loads quicker than a small shoe store.
Although big brands may have an advantage, there is still room for smaller brands to become more creative in how they package content to consumers.
At the same time though, this could cause marketers to become more innovative in how they monetize content.
As more consumers rely on their smartphones and tablets to access data-heavy content, including movies and television shows, carriers are scrambling to find ways to tackle higher carrier costs.
The ruling could also change the way that carriers offer data with new tiered plans that give consumers new options in how they access content.
Depending on how carriers choose to charge services, the ruling could significantly limit the amount of content that consumers have access to.
Proponents of net neutrality say that the ruling will let carriers discriminate companies and create a closed ecosystem.
The FCC’s decision underscores the uptick of marketing initiatives from carriers to monetize mobile traffic.
For example, AT&T became the first carrier to roll out sponsored data last week as a way for marketers to serve a sponsored ad in exchange for offering consumers free data (see story).
One of the first brands to leverage this new technology is UnitedHealth Group.
These healthcare companies could also significantly benefit from the FCC dropping net neutrality.
“I think the competitive market will force all carriers to become more competitive,” said John Styers, executive vice president at Sumotext, Little Rock, AR.
“When you look at specific products that need a small amount of data – such as healthcare products – this could be interesting,” he said.
Lauren Johnson is associate reporter on Mobile Marketer, New York
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