Net Neutrality -- Ready for Presidential Politics? -- February 26, 2007 (Also appearing in the MBA NewsLink)

To say the term or concept of net neutrality has not invoked passion on both sides of the debate is an understatement.  Just do a Google search on the phrase and over three million pages, references, and organizational sponsorships appear.  This fervor shapes itself into concerns for unfettered free trade, too much government interference and oversight, to groups of bloggers who are confident there might be a conspiracy afoot. 

Indeed this seemingly “neutral” topic invokes a wide range of emotions, facts, and fiction.  With upcoming presidential elections forthcoming and consumer advocacy groups pushing equal and unfettered access, rest assured that this topic will become part of the candidate’s political pulpits and campaign rhetoric during the next 18 months. 

With estimates of nearly two-thirds of the United States with Internet access and changing consumer electronic consumption habits (including the delivery of TV programs to the computer screen), the stakes for legacy content providers and new media upstarts are equally undeniable.  Remember just ten short years ago the number of homes in the US with Internet connectivity was under 20% and blackberries were something most people ate. 

It was a short six months ago when I wrote my first article on this topic, outlining the debate from both sides of the aisle (“Net Neutrality – It’s Not Just about the ‘.XXX’ Domain,” MBA Tech NewsLink, August 15, 2006).  Shortly after the article was created, the Congressional majority had successfully rejected an attempt to pass legislation defeating the bill primarily along then party lines.  But the political landscape, as we all know, has changed. 

This on-going debate has turned into a brawl with all “heavy weight” conglomerates visibility weighing in – Amazon, Google, eBay, major telecommunication firms, national and regional cable operators, and of course, a host of lobbyists and “hired guns.”  There is much at stake for these providers and their spokespersons, but let us not forget the consumer.  These decisions have the potential of not only impacting their home surfing habits, but their TV viewing, phone usage, and accessibility options, by either promoting or restricting content or features without paying additional fees. 

So what has changed, if anything, to prompt yet another review of the concept of Net Neutrality?  Have the potential economics compelled action from the legislators?  Have industry association groups, both for and against, reached a tipping point whereby they can materially impact the discussions and decisions once and for all?  Without trying to revisit old materials, we’ll move into the “political” stage of trying to uncover the hidden implications of this charged and polarizing discussion.

So where are we now?

With new faces and shifting loyalties arriving in Washington for the 110th Congress, the debate of Net Neutrality has taken on new life and vigor.  A new bipartisan introduced bill entitled the Internet Freedom Preservation Act of 2007 may become the next lighting rod for this on-going, multi-year debate.  It appears that the bill is not only widely popular with consumer advocacy groups, but also several of the presidential “hopefuls” including those classified as having “star power.”  

We need to face the implied and explicit facts confronting not only the corporations promoting virtual services and products, but the customers who have increasingly come to rely on Internet accessibility, much like prior generations that relied on ubiquitous “dial-tones.”  For politicians and the industry groups, the following macro themes and debate points will dogmatically resurface.

• While the Internet represents the free exchange of ideas and information, it is also about profit.  It has been fueled by on-line banking, mortgage origination, retail purchases, research, downloads, and yes, those sites we block our children from viewing.  It represents the future for eMortgages, horizontal market disintermediation, and a “greener” standards-driven utopia for the mortgage and real estate industries.  To state the obvious, it is a marketplace that if reduced or restricted, could create downward economic pressures or even recessionary implications.  For national and state politics, this is a paramount concern.
• Internet access has become not just part of the American culture, but the global on-line social order that is estimated to already include up to 25% of the six billion inhabitants of this planet.  Why do you think corporations are so eager to tap into the over two billion individuals in the rapidly expanding economies of India and China?  For politicians concerned with accelerating job losses, expansion of sourcing and outsourcing offshore contracts, and a “throw the bum out” electoral base, anything that could inhibit productivity or innovation may not be popular and dent their reelection chances.
• The provisioning costs and bandwidth for providers is not trivial.  Just four to five years the infrastructure and support costs of large, complex downloads and exchanges didn’t even appear on the performance dashboards and tools -- music, videos, TV viewing, photo libraries, software purchases and updates, security encryption, electronic security and signing, and software as a service (SaaS).  We all remember the “20/80” rule–of-thumb – 20% of customers typically account for 80% of the volume.  Within the political landscape both locally and in Washington, there will be significant studies, reviews, and lobbyist opinions to aid them with the determination of “where to cast their vote.”
• Historically, the Internet has been fueled by innovation – some relevant and others arcane.  Regardless, proponents of an “open” Internet infrastructure and offerings adhere to the belief that unless the government (i.e., politicians) guarantees the unfettered access and content dispersion, the only organizations that will benefit are those who can pay for priority handling, bandwidth, and accessibility.  The counter argument, simplistically stated, is that innovation must recognize the resource usage that it requires and if a customer wants this new or expanded service or product, they should be willing to pay extra for that right.  Furthermore, opponents profess that a free-market economy should be the deciding factor rather than a government mandated oversight and increased regulatory burdens. 

While many of the prior bills and legislative squabbling have been historically in the favor of the telecommunication and cable operators, the future may not be as encouraging.  With the debate set to take on a more public prominence as the presidential candidates begin their open sparring, the shifting sands of politics may push this into the national spotlight. 

What could 2007 bring?

For the mortgage and real estate industries and the myriad of associations at a national and local level, they will be judged by the positions they advocate.  If these industry groups are silent on the matter that concerns their constituents and consumers, the judgment from their memberships could be severe.  Too often, organizations are reluctant to take a position on these national debates as they perceive their endorsement of a bill could be construed as a candidate endorsement during these presidential races. 

To date, it has been surprising the lack of visibility given to Net Neutrality by industry groups for or against the various legislative acts proposed during the last two years.  Perhaps, these groups recognize the polarization of the topic and wish to steer clear of the controversy?  I wonder if that will continue to be acceptable for their memberships as it enters further into the mainstream consciousness of the general population.  Did I mention that Net Neutrality is now politically correct?

For an industry already reeling from a meltdown in various business segments, rising defaults, and concerns over lending practices and standards, this topic may not appear to be of material importance.  However, when you examine potential solutions to the aforementioned combined with an increased need for error reduction, government reporting, and advocacy group demands, the use of the Internet for mortgage and real estate commerce will be greatly expanded.  We’ve already experienced the first wave of this interoperability usage for the industry with innovative pioneers from early in this decade becoming commonplace in our conferences and vendor base. 

The new generation of suppliers and providers will become increasingly “virtual” offering models that include software as a service (SaaS), legally defensible electronic interchanges, comprehensive end-to-end electronic capture, storage, and selling of mortgages from cradle to securitization – and that is just for the first six months of this year.  Yes, Net Neutrality is painfully important for our industry regardless of the positions being taken for or against by your organization. 

For corporate officers and industry leaders, there needs to be a definite understanding of who is representing these interests.  It is easy to overlook this seemingly arcane topic of Net Neutrality in favor of more pressing issues of top-line revenue, cost containment, new product introductions, and even sourcing and vendor management.  However, as these legislative bills are introduced or reintroduced, industry and organizational interpretations cannot be left to chance.  Ask yourself, who is representing your corporate interests?  What are the implications and costs of not knowing?  How does a bill’s passage or rejection influence corporate offering, expenses, CRM, call center, and vendor or provider relationships? 

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As my immigrant Grandmother used to say to my Grandfather, “Hang on Vic, that mule is heading for the barn!”  Have you ever tried to reason with a mule when they don’t want to do something?  Let’s just say, it’s going to be a busy upcoming Spring and Summer for both sides of this debate.  Who knows in a few months I’m expecting several million more web pages to review as a result of this evolving passionate and now politically escalated debate.

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