US President Barack Obama called for the "strongest possible rules" to protect the open internet, advocating stricter controls for the US Federal Communications Commission and causing shares of broadband providers to drop. Photo: Bloomberg

Alex Barinka, Brian Womack and Olga Kharif New York

BARACK Obama’s proposal for an open internet would be a victory for Netflix and its binge-watching users. It may also be a bigger boon for a generation of start-ups working on tools to connect cars, thermostats and even offshore oil rigs to the web.

In urging the US Federal Communications Commission to regulate broadband under the “strongest possible rules”, the president aligned himself with Netflix, Reddit, Yahoo and others that contend equal transmission speeds are better for their customers. He proposed an explicit ban on internet-service providers being able to demand extra payments for speedy delivery of content and data.

Start-ups as varied as smart-device maker Spark Labs, inventor Quirky and electric system Avi-on are working on chips and software that can do everything from entertain your dog with an internet-connected toy to hooking up all the lighting in your home to the web.

The open internet should be of interest to everyone in the US, as more and more devices are digitally connected for remote monitoring.

Having to pay for a priority lane for data over the internet could stifle innovation in the budding industry for web-connected devices, which research firm IDC expects to reach $3 trillion by 2020, up from $1.3 trillion (R14.6 trillion) this year.

“For start-ups, our advantage over a big company is we move fast,” Zach Supalla, chief executive of Spark Labs, said.

The tolls and extra fees favoured by cable and wireless companies – though burdensome for established companies like Google or Yahoo – would pose an even bigger financial challenge to newer companies dependent on venture capitalist cash to make payroll while developing new software and gadgets.

Proposals around fast lanes for the internet would have “crushed product innovation in America”, said Barbara van Schewick, a law professor at Stanford University. “Those kinds of companies would have no chance in the world where they would have to pay to be competitive with everyone else.”

Consolidation in the cable industry has reduced the number of internet providers in the US, and that’s heightened calls from public policy groups for a government-backed guarantee that all websites will be treated equally. Obama’s suggested route would have the FCC oversee broadband companies in the same way it regulates phone companies.

Cable and wireless-service providers responded swiftly and sharply, saying stricter rules for the web would be bad for business. AT&T went so far as to say that if the government chose to regulate the internet like a public utility, the company would challenge it legally.

Under Obama’s proposal, internet providers wouldn’t be able to give superior service to content providers willing to pay for it. Netflix, or Google’s YouTube would be on equal footing in terms of how quickly and seamlessly their customers could download and stream, and start-ups without deep pockets could introduce new technologies with the same internet access as richer competitors.

“It has tremendous implications,” said Rebecca Lieb, an analyst at Atimeter Group. “When a company is placed in the slow lane or the fast lane, this is going to impact the user experience.”

In some cases tech companies unable to pay “could actually go belly-up”, Lieb said.

The growing movement to make devices and everyday items more intelligent typically depends on connecting to the web to make the technology work. Data, video and images are uploaded online, and sometimes analysed by software, to perform tasks like changing a room’s temperature.

Fast lanes would affect anything that transmits a lot of data, like sending health-care images or security monitoring for a football stadium, said Chetan Sharma, an independent wireless analyst. The impact would especially be felt over the long haul as the average amount of data transmitted by a connected device will grow 10-fold by 2017 and 2018, he said. –