Net Neutrality And Smart Pipes: The Game Is Changing For Verizon Wireless, O2 And Others

Net neutrality, we’ve all heard of it but do we understand the intricacies? Did Al Gore invent it? Fundamentally, net neutrality advocates for an unbiased treatment of data regardless of content, source, application or mode of delivery. As wireless broadband carriers transition what was once referred to as “dumb pipes” to a richer content delivery system, the subject of net neutrality is becoming about as hot as the surface of the sun.

The carrier “space” race

The carrier space, or rather spectrum race, has been fun to watch this year. T-Mobile with its eccentric CEO John Legere delivered a recent earnings announcement around adding one million customers a quarter for the past 17 quarters. Executives also spoke to lighting up 600 MHz spectrum by August with follow on device support by end of year as a legitimate pre-5G push. Sprint Nextel on the consumer side has been aggressively discounting wireless services and placing competitor Verizon Communications  in its crosshairs. The Sprint “Twice the Price” viral video of a pop-up store somewhere in NYC next to a Verizon outlet is priceless and a much watch. Uncle Danny for president! Subsequently, with this awareness activity blitz comes higher demands on carrier networks. It seems to me that some are managing the challenges better than others.

Is throttling the new optimization?

Lost in the bravado of earnings and viral videos is Verizon Wireless. The company reported earnings this week and their business unit performance is telling of their fall from grace. Compared to 2016 YoY, revenue, operating income and margin were flat to negative. As the company struggles to support a staggering load increase on its network from an unlimited data plan push, it was caught red-handed throttling Netflix subscribers. Defending itself with a somewhat confusing interpretation of net neutrality, Verizon offered up an excuse around video optimization of its network. Sorry Verizon, I’m not drinking your Kool-Aid.

On the other side of the pond, O2 recently admitted to throttling its customers as the European Union voted to abolish roaming charges in mid-June. Taking a more transparent approach, the company admitted that roaming far exceeded its expectations and that temporary measures were required to ensure access for everyone. Not ideal, but at least their throttling was applied to the entire roaming population and not singled out by application or service.
OTT yeah you know me?

OTT or Over-the-Top content delivery will only continue to skyrocket through the carriers. Subscribers want their television, movies and music all on-the-go, and the continued marketing of unlimited data plans will continue that momentum. Instead of making thinly-veiled excuses or outright violation of net neutrality rules, the carriers will need to ensure network optimization for video consumption. 5G will help with lower latency and dramatically improved throughput but we are still 18 to 24 months away from a ubiquitous deployment. If the tier one global carriers don’t address it now, they will certainly suffer from subscriber loss, lower revenue and dwindling margins.