Industry News – Net Neutrality And How It Affects Residential Real Estate

Industry News

At the end of 2017, there was a lot of talk about the Federal Trade Commission’s decision to end “Net Neutrality.” 

In the media, many preached of doom and gloom and that this could bring about the end of the world and you could almost hear the evil large corporations giggling at the new-found profits with which they planned to further line their pockets.  Profits that they would get by charging consumers and content providers to be given priority fast lanes for their data enabling them to get a leg up on their competition.

Big story lines aside, what the heck does all this actually mean?  It helps if you first understand what net neutrality is and then we can delve into whether this is really a good or bad thing for consumers.  Net neutrality is a set of rules imposed in 2015 by the Federal Trade Commission based on the principle that internet service providers must treat all data on the internet the same, and not discriminate or charge differently by user, content, website, platform, application, type of attached equipment, or method of communication.

On the surface, this seems like it would be something that everyone would be in favor of except those who intended to profit if there were no rules in place.  In reality, it’s just not that simple.

The following is an excerpt of an article published in Wired magazine by Robert McMillen:

The net neutrality debate is based on a mental model of the internet that hasn’t been accurate for more than a decade. We tend to think of the internet as a massive public network that everyone connects to in exactly the same way. We envision data traveling from Google and Yahoo and Uber and every other online company into a massive internet backbone, before moving to a vast array of ISPs that then shuttle it into our homes. That could be a neutral network, but it’s not today’s internet. It couldn’t be. Too much of the traffic is now coming from just a handful of companies.

Craig Labowitz made this point [In 2014] when he testified before a Congressional committee on the proposed Comcast-Time Warner merger. Ten years ago, internet traffic was “broadly distributed across thousands of companies,” Labovitz said in his prepared statement to the committee. But by 2009, half of all internet traffic originated in less than 150 large content and content-distribution companies, and today, half of the internet’s traffic comes from just 30 outfits, including Google, Facebook, and Netflix.

Because these companies are moving so much traffic on their own, they’ve been forced to make special arrangements [Fast lanes] with the country’s internet service providers that can facilitate the delivery of their sites and applications. Basically, they’re bypassing the internet backbone, plugging straight into the ISPs…Does this give companies like Google and Netflix a potential advantage over the next internet startup? Sure it does. But this isn’t necessarily a bad thing. In fact, this rewiring has been great for consumers. It has allowed millions to enjoy House of Cards, YouTube, and Kai the hatchet-wielding hitchhiker. It’s the reason why the latest version of high-definition video, Ultra HD 4K, is available for streaming over the internet and not on some new disk format.

Plus, although Google does have an edge over others, not every company needs that edge. Most companies don’t generate enough traffic to warrant a dedicated peering connection or CDN. And if the next internet startup does get big enough, it too can arrange for a Google-like setup. Building the extra infrastructure is expensive, but making the right arrangements with a Comcast or a Verizon is pretty cheap—at least for now.

So, what does this translate to for today’s real estate consumer? 

It means that if you are looking for homes on a smaller broker’s website vs. looking for homes on Zillow.com, Realtor.com, or a large company’s website, it might be a little slower.   My guess is that it probably won’t be slow enough to make you only use the big guys since real estate data sizes are so much smaller than watching a movie on Netflix.

The root of the problem (if there is one) is that so few companies like Verizon and Comcast now control the internet pipes.  If you are a lover of freedom and are concerned by this, then the best action to take would be to lobby your congressman to make internet more widely available by more companies to induce competition.  In my experience, competition does a much better job at improving customer experience than government regulation does.   Just look at the difference in the customer service you receive when you go into the DMV vs. when you order from Starbucks. 

 

 

 

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