With the ink not yet dry on the new FCC net neutrality rules, there are already concerns about the impact they will have on the music industry. The new regulations set the stage for Internet service providers to create different tiers of service (paying more for faster downloading) and the possibility of certain content or applications being favored over others.
The exact implications of these new rules are not yet clear, but IRIS Distibution president Matt Laszuk expects small businesses to be impacted more than larger ones. A well-funded company will have few problems dealing with the paid prioritization, he says, "and we expect companies like Amazon that have deep pockets will be able to better keep up with additional costs."
But for small startups, Laszuk says, paid prioritization expenses could be problematic -- if not debilitating. This is especially troubling for nascent music businesses requiring larger bandwidths for music streaming or other data transmission services. For any cash-strapped company already working on thin margins, paid prioritization could put them out of business.
Because the FCC chose not to regulate mobile broadband services, LyricFind founder/CEO Darryl Ballentine is concerned the new rules will open the door to restricting or slowing access to some digital services. "There's a very scary possibility of one particular service being locked out because a carrier has a deal with another service to be the music provider," he says. Such a deal would not only limit consumer choice, but could also impact third-party providers such as LyricFind, a lyric and licensing database used on music sites and mobile devices.
Depending on the service provider, consumers may have little recourse to protest content restrictions. Mobile carriers' long-term contracts, for example, limit customers' ability to use another carrier without financial penalty. Ballentine says music may not be so high enough a priority that people will complain when their mobile carrier blocks a particular music service. "They might get annoyed at it, but not enough to actually do anything about it," he says.
The new rulings become most confusing when it ventures into piracy. The language of the ruling applies only to legal content, explains Daryl Friedman, VP of advocacy and government relations for the Recording Academy. "You have situations where even what constitutes a legitimate site is murky," he says.
Companies themselves may be forced to decide which sites and services are illegal, he says, as Comcast did in when it slowed or blocked its subscribers' access to BitTorrent file sharing services. (In April, a Federal appeals court ruled that the FCC did not have the power to regulate broadband access.) But ultimately, Friedman says, the courts will be the ones making those decisions.
Beyond the business aspects of the new net neutrality rules is a political battle zone. The big question is whether the FCC has the authority to regulate the Internet, Friedman says. "It's going to be interesting come January. There's a three-way battle between the three branches of government who are all going to weigh in on this -- Congress, the FCC and the court -- to decide whether this ruling can even stand," he says.