Verizon/AOL and Net Neutrality

To me, Verizon’s acquisition of AOL signals what could be a growing trend for ISP’s going forward into our “Net Neutral” world. Tom Wheeler, chairman of the FCC, has taken a strong stance in support for net neutrality and even recently, showed cable companies he is not backing down. On May 6, Mr. Wheeler spoke at the NCTA (National Cable & Telecommunicatins) annual conference seemingly to solidify his stance on greater competition, another pillar of his proposal to list ISP’s as common carriers under the Title II of the Telecommunications Act.

One of the surprises in the announcement from the FCC for Title II classification is to include wireless ISP’s. Although there is more competition in the wireless space, securing net neutrality across all access to the internet is priority. Finalizing these rules has a long way to go and though I do support the proposed changes, there is potential for a side-effect not thought of before the internet proclaims it won.

Pretending for a few minutes that Net Neutrality does win. Our future is brighter without fast or slow lanes on the web, fostering effective competition. In this dream land ISP’s are just dumb pipes. Their job is to deliver the internet with speed and efficiency. In the net neutral world the ISP’s won’t be able to add additional revenue streams by charging content companies higher rates for using more bandwidth. But, that is not what investors want to hear. ISP’s would need to look into other industries to grow top level sales and increase the total company profitability. Without jeopardizing the Net Neutrality rules.

In a way this has already been sought by an ISP, just in a different market. Cable TV providers are essentially a dumb pipe. Companies like Comcast have to negotiate deals with creators, such as CBS or Disney, without being able to monetize those relationships. When CBS raises their rates, Comcast has two choices: Pass the rate changes to the consumer or absorb the cost. The growing cost of cable TV subscriptions show the additional costs have been passed the consumer. But, Comcast is not increasing their profit doing so. A way to increase profit would be to buy a content creator. Which is exactly what Comcast did when the purchased NBC Universal.

Recent reports suggest this is not what they plan to do with the acquisition of AOL. Some places suggest Huffington Post, Engadget and TechCrunch may be sold off or spun out of Verizon. Verizon’s move may have been to acquire the ad business from AOL, a growing industry, especially on mobile. But, supposing Verizon doesn’t plan to sell off the content arm of AOL, instead creating a new company as a subsidiary of Verizon. To me, this seems like a similar move as when Comcast purchased NBC Universal.

If the future of the internet, including mobile, is to relegate the ISP’s to a “dumb pipe” then this is a justifiable move by an ISP. Bringing in popular content creators and monetizing the content of the web, instead of the actual bits, would add the additional revenue stream and a new market to expand. Particuarly if Tom Wheeler’s FCC is able to increase competition. Even if Verizon decides not to keep The Huffington Post or TechCrunch, this will not be the last of these types of acquisitions by an ISP. In a net neutral world, we may see less competition in creators with larger corporations controlling a great number of creators. History has proven this already in both radio and print newspaper. What’s to say it can’t happen on the web.

Banner Image Attribution: By Fry1989 eh? (Brunei Darussalam Road Safety Council),Public domain, via Wikimedia Commons

Originally published at on May 13, 2015.

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