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Carriers, Apple, Google, Microsoft... Fighting Over Slices of the Pie

Part 3 | Do the bit-carriers really have an open playing field to do what they want?

Much of the dialog over net neutrality seems rather dated. This is understandable, since the debate has been going on since last century.

The January 14th Federal Appeal Court decision in favor of the Internet access providers gave those companies (apparently) a degree of latitude to selectively block or prioritize edge provider services. We know that they want to do this, even though they might be coy about admitting it. Verizon, the plaintiff in the recent appeal case, issued a statement saying that nothing much will change as a result of this decision. We all expect Verizon and the other ISPs to take advantage of this change to the maximum extent they can. If they don't their shareholders might be a bit upset, after spending all that time and money.

However, there's more to this than the presence or absence of the FCC's now depleted Open Internet Rules, now substantially demolished. Do the bit-carriers really have an open playing field to do what they want? Since this debate started, the Internet has moved on. As a result the expectations of the access service-providers on one side, and the network neutrality proponents on the other, may both have to be revised. In my last blog on the topic of net neutrality, I hinted that there might be other factors in play that could make the whole concept less simple than it was when the topic first became hot. One of these factors is the role (and power) of the device manufacturers. Let's start there.

Apple was one of the first companies to demonstrate that there's more than one way to build a walled garden. While the Internet access providers dreamed of an end to net neutrality so they could control and charge for the flow of media from edge providers to content providers, Apple and others have already succeeded in doing something similar, and without spending huge amounts on legal actions and lobbying. And without upsetting their customers much, either.

In the mobile world, users of iPhones are pretty much limited to the apps chosen by Apple and offered in the Apple App store. By and large, those Apple-selected apps, which often dominate the users' experience, define the edge providers that the iPhone can access. Of course, general-purpose web browsing is still available, but most people live quite happily within the walled garden of apps approved by Apple. Apple led the way in circumscribing user behavior in this way, but the fashion quickly caught on. Android users have the Google (Play) store, and Windows Mobile users have the Windows Phone Store.

We can see the same thing happening for fixed-line Internet customers using desktops and notebooks. Oddly, Linux users were the first to experience the app-store approach. Some Linux distributions have long provided their users with an easy route to install approved applications from online repositories; non-approved apps are still available, it's just harder work to get them. With recent releases of Apple OS/X (Snow Leopard onward), the default way of buying software is via the Apple store; buying direct from a third-party vendor is starting to feel like a rather exceptional thing to do, as users are challenged when they try to bypass the store and have to tweak some security settings to make it possible to install a non-official app. From Windows 8.1 onward, Microsoft Windows users have their own App store too.

I don't believe there is anything suspicious going on here. Apple, Google, Microsoft, and the open source community are all aiming to make life simpler and easier for users, and at the same time create a user environment that is more structured, and controlled. These large corporations and communities are not forcing users into these walled gardens. They are enticing users to come inside and be safe and comfortable. For most ordinary users, this is seen as a fair trade: a win-win situation. Users can always take a walk in the wild woods outside if they want to, it's just that increasingly they don't want to.

Meantime, the US access providers have been busy in their efforts to remove the constraints imposed on them by the FCC. Now, theoretically, they are free to block and favor edge providers as much as they like. Well, perhaps not completely. Google, Apple, MS, and a lot of other companies in the web-connected device business have already built up their own portfolio of favorite web-enabled apps, providing device users with information services, online games, social networking, streaming media services, cloud services and more. Any attempts by the bit carriers to block or favor any of those online services would impact on the perceived value of all those net-connected devices, one way or another. The device manufacturers are now a firmly established part of the Internet value chain, and as such they will not be passive. If an access provider wants to provide preferential service to an edge provider, then the access provider needs to be sure the preferential user experience is not thwarted by the user's device. Or, if an access provider wants to downgrade an edge-provider's service it might be prudent to clear the ground with the device companies first, because they will want to know whom to point the finger at when their device users complain that certain apps no longer work the way they used to.

It seems that the Internet access providers might have to tread carefully here. Today, access ISPs are differentiated just by price for bandwidth, not much else. As long as the service is passably reliable, users can use any ISP. But, by definition any level of blocking or favoring will make a difference. It must, because if it didn't make a noticeable difference, no edge provider would pay for it. The device manufacturers are bound to take notice. Worst case, the device companies can explicitly tell users which ISPs will provide the best user experience for their devices and portfolio of apps, and which are to be avoided. Best case, the access ISPs will have to share the loot with the device vendors to keep them happy.

Either way, it will be interesting to watch the game. Starting with the iPhone, the device companies have mostly called the shots when it comes to defining the user experience. It's not likely they will be content to see this court decision changing that substantially.

More Stories By Esmeralda Swartz

Esmeralda Swartz is CMO of MetraTech. She has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda is responsible for go-to-market strategy and execution, product marketing, product management, business development and partner programs. Prior to MetraTech, Esmeralda was co-founder, Vice President of Marketing and Business Development at Lightwolf Technologies, a big data management startup. Esmeralda was previously co-founder and Senior Vice President of Marketing and Business Development of Soapstone Networks, a developer of OSS software, now part of Extreme Networks (Nasdaq:EXTR). At Avici Systems (Nasdaq:AVCI), Esmeralda was Vice President of Marketing for the networking pioneer from startup through its successful IPO. Early in her career, she was a Director at IDC, where she led the network consulting practice and worked with startup and leading software and hardware companies, and Wall Street clients on product and market strategies. Esmeralda holds a Bachelor of Science with a concentration in Marketing and International Business from Northeastern University.

You can view her other blogs at www.metratech.com/blog.

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