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Analysts Confused by Net Neutrality Debate

IDC predicts that regulation around net neutrality will be decided in favor of facilities-based broadband service providers like AT&T, Verizon, and Comcast -- in a decisive move by the combined telecom and big media lobbyists who are are actively shaping U.S. government policy.

IDC believes that keeping the Internet free from net neutrality regulation will ultimately benefit large scale Internet incumbents like Google, eBay, and Amazon. Here's their rationale.

Core to the net neutrality debate is the issue of control and monetization of broadband networks by facilities-based broadband providers, according to IDC. In contrast, I believe that the real issue is big media companies maintaining their "gatekeeper" influence, with a perpetuated status quo that favors both a bias of perspective and a scarcity of alternative opinion.

Led by an explosion in Internet video, IDC forecasts that the U.S. consumer Internet generated IP traffic is going to be three times heavier in 2011 than it is today. The magnitude of this growth of IP traffic signals an obvious and critical need for broadband network upgrades.

IDC says aggressive versions of net neutrality regulation would have a dampening effect on this upgrading effort as facilities-based providers would be prevented from architecting their networks to offer new services that require higher speeds or quality of service (QoS).

In IDC's opinion, net neutrality proponents like Google will realize that quality of service (QoS) is essential to the delivery of new services and quietly modify their position and join the network prioritization environment they now oppose.

"Google will likely maintain a public-facing resistance to network control in the short term, but should be making behind the scenes plans to act quickly when the matter is settled and the opportunity materializes," advises Matt Davis, program director of IDC's Consumer Multiplay Services program. "Being caught flat-footed when a game-changing development occurs makes disruption from smaller, hungrier players willing to deal with facilities-based providers much more likely."

I believe that some industry analysts apparently don't fully comprehend the prior broadcaster co-dependence model within the U.S. -- where the FCC-approved consolidation of media delivery modalities placed control of access to a legacy mass-market in the hands of a few and very powerful companies, and ultimately the wealthy individuals that own those big media enterprises.

Clearly, the trend of a vanishing mass-market is a direct threat to those who have invested heavily in traditional closed-media (newspapers, radio and television) consolidation. Their continued power and influence was predicated upon the assumption that major advertisers would always pay them the high "toll fee" to gain access to a compliant American populous.

That said, the Internet's application as a low-cost open-media publication platform was an unwelcome and unanticipated disruptive development. Therefore, the big media companies are now attempting to realign themselves with any broadband service provider who agrees to a business relationship that could potentially help them to recreate the traditional mass-market model on the Web.

However, this notion of a financially successful new collusive co-dependency is flawed if online low-budget media fragmentation is allowed to continue unabated, and high-cost "broadcast quality" video content is progressively devalued as a result. Hint: the current shift in advertising budgets is a key market indicator of the likely outcome.

This IDC study entitled "U.S. Consumer Internet Traffic Forecast 2007-2011: The Impact of Net Neutrality on Service Provider Infrastructure Investment," examines Net Neutrality with a focus on issues surrounding potential broadband infrastructure investment.

IDC measures the categories and volume of Internet-generated traffic traveling over U.S. operator access networks in detail. The analysis uses data gathered from real world deployments of broadband using deep packet inspection technology that resides in networks representing over 5 million U.S. broadband users.

This data allows IDC to estimate both the volume and type of traffic that currently travels over broadband networks. IDC uses analysis generated by experts in VoIP, video streaming, email and other applications to forecast their expectations of growth in Internet traffic over the next five years. Their analysis is then placed in the overall context of the impact of the debate surrounding Net Neutrality.

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