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should have access
to broadband Internet.

The Internet Innovation Alliance is a broad-based coalition of business and non-profit organizations that aim to ensure every American, regardless of race, income or geography, has access to the critical tool that is broadband Internet. The IIA seeks to promote public policies that support equal opportunity for universal broadband availability and adoption so that everyone, everywhere can seize the benefits of the Internet - from education to health care, employment to community building, civic engagement and beyond.

Monday, May 03

The Cost of Net Neutrality

By Bruce Mehlman

Research firm Frost & Sullivan has released a new report, “Net Neutrality: Impact on Carrier Investment and Economic Growth,” which examines the possible effect new regulations would have on consumers, the economy, and the FCC’s National Broadband Plan. From the report (which we’ve posted to our site):

After interviews with several carriers as well as several consumer advocacy organizations, we determined that net neutrality was likely to impact the following variables:

Innovation: Net neutrality impacts operator innovation by either providing incentives to develop products and services or to discourage those activities. Based on primary research conducted by this author, the assumption is that the more confusion or restrictions that are placed on an organization, the less likely it is to be creative and, by extension, innovative.

Prospective ARPU: Average revenue per user is a statement of the expectation that particular consumers, both individuals and commercial users, will generate a particular amount of revenue over time. The important point here is not whether the average user will actually generate such revenue, but whether the operator expects the user to do so. It is the expectation of return that motivates an investor to invest.

Non-access Service Revenue: Anything likely to discourage consumers or commercial entities, such as content providers, to subscribe to an operator’s service offerings is likely to decrease the total amount of non-access related revenue that can be generated.

OPEX: Operational expense is the overhead required to deploy, manage and maintain networks. Net neutrality, by potentially increasing the overhead associated with ensuring regulatory compliance or by reducing the efficiency of managing networks could increase OPEX.

CAPEX: Capital expense is the direct cost of deploying networks. In an environment where the revenues associated with services are denied or reduced for operators, CAPEX could be expected to decrease. Contrariwise, if QoS approaches are denied operators, CAPEX could increase as operators overbuild to address traffic growth.

Check out the full report, which should raise a major red flag for the excellent broadband team at the Federal Communications Commission. Rather than getting distracted by divisive new regulations with significant economic risks to consumers, the Commission should drive full speed ahead on those aspects of its Plan more surely focused on broadband adoption and deployment.

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