Major Telecoms Seek to Repeal Net Neutrality - Analyst Blog

Leading wireless carrier AT&T, Inc.T , along with three cable and wireless trade groups, have raised their voices against the Federal Communications Commission's (FCC) recent adoption of the net neutrality laws.

Along with AT&T, trade groups like the Cellular Telephone Industries Association (CTIA), the National Cable and Telecommunications Association (NCTA) and the American Cable Association filed a lawsuit against the FCC on Tuesday. Also, in the previous month, industry trade group U.S. Telecom Association and Texas-based telecom operator Alamo Broadband Inc. had questioned FCC's latest net neutrality laws and had filed a similar case against the regulatory body. Importantly, the U.S. Telecom Association has been formed by companies like Verizon Communications Inc. VZ , AT&T and CenturyLink Inc. CTL , to name a few.

In spite of the fact that the FCC is presently evaluating the company's proposed acquisition of DIRECTV DTV for $48.5 billion, AT&T has filed the court case.

All internet service providers (ISPs), along with several cable and telecommunications industry bodies, have vehemently opposed net neutrality. Notably, Republican senators are also not in favor of this new directive. These groups believe that a slight law reformation under section 706 of the 1996 Telecom Act will be enough to enforce net neutrality.

On Feb 26, the FCC endorsed net neutrality laws after a favorable voting margin of 3-2. The new laws will classify high-speed broadband (Internet) as a public utility under Title II of the 1934 Communications Act instead of section 706 of the 1996 Telecom Act.

Net neutrality implies an open-Internet atmosphere which will prohibit ISPs, especially the telecom and cable TV operators, from discriminating against applications. In order to control the flow of bandwidth-consuming applications such as video streaming, the ISPs have been discriminating against several web-based contents and applications. Also, content developers need to pay heavy sums to ISPs for accelerated data transfer.

The implementation of the new law will ban common ISP practices such as data traffic blocking, slowing data traffic and paid prioritization. Notably, paid prioritization is a method through which content developers strike deals with ISPs for quick and smooth transmission of their data.

The FCC will closely monitor and put a check on all such deals in the future. Moreover, the FCC will supervise interconnection deals, in which content developers pay ISPs to connect with their networks. The FCC rules on net neutrality are anticipated to go into effect from Jun 12, 2015.

Our Take

Telecom is not only important in urban and rural areas but also plays an important role in infrastructural development of an economy. So, we believe that net neutrality may discourage large investments in the telecom sector but will cut down the cost of online access for end users since content providers will no longer need to pay extra fees. However, it is yet to be seen how the government manages a trade-off between the two.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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