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The U.S. telecommunications industry is currently plagued by pressing concerns like intense pricing competition and spectrum crunch.  Massive adoption of smartphones and tablets are compelling wireless operators to seek other options for revenue generation as well. Mammoth promotional expenditures and cut-throat pricing competition are naturally keeping telecom players on tenterhooks.

In addition, the U.S. telecom regulator, Federal Communications Commission (FCC) has adopted net neutrality laws further raising alarms among telecom operators. Several ISPs (Internet Service Providers) are in hot waters over increased upload and download speeds of Internet to be termed “broadband” as ordered by the FCC.

Pricing Competition Persists

In the meantime, the U.S. telecom market continues to witness intense pricing competition. The two telecom behemoths, namely, Verizon (VZ) and AT&T (T), at present command around 68% of the U.S. wireless market whereas Sprint (S) and T-Mobile US (TMUS) jointly controls the remaining 32%. These two relatively smaller firms are now bringing on board several low-priced value-added products to lure customers away from their bigger peers. In the first half of 2015, both Sprint and T-Mobile US added a substantial number to its customer base.

On the video services front, the pay-TV industry is facing severe competitive threats from low-cost online video streaming service providers. Cord-cutting has become a regular phenomenon in the country with over-the-top video operators offering a smaller package of channels, designed according to a customer’s need, at dirt cheap prices. Established pay-TV operators are now opting for the more customer-friendly Internet TV service in order to counter this major threat.

Net Neutrality: A Change for the Entire ISP Landscape

The net neutrality law adoption mandate by the FCC was announced on Feb 26, 2015, per which high-speed broadband (Internet) will now be classified as a public utility under Title II of the 1934 Communications Act instead of section 706 of the 1996 Telecom Act. Importantly, the latest regulations will be applicable to both mobile and fixed broadband networks. The reclassification of Internet makes a radical change in the way the government treats high-speed broadband services and ISPs. The FCC can now strongly regulate the ISPs.  

Net neutrality implies an open-Internet atmosphere which will prohibit ISPs, especially telecom and cable TV operators, from discriminating against applications. In order to control the flow of bandwidth-consuming applications such as video streaming, the ISPs have been discriminating against several web-based content and applications. Content developers thus have to expend heavy sums to ISPs for accelerated data transfer.

The implementation of the new law will ban common ISP malpractices such as data traffic blocking, slowing down data traffic and paid prioritization. Notably, paid prioritization is a method through which content developers strike deals with ISPs for quick and smooth transmission of their data traffic. The FCC will closely monitor and put a check on all such deals in the future. Moreover, the FCC will also supervise interconnection deals, in which content developers pay ISPs to connect with their networks.

Notably, on Jan 29, 2015, the FCC increased the download and upload speeds of Internet services to be deemed as broadband (high-speed data). In a majority voting, the FCC raised the new threshold download speed to 25 Mbps from the existing 4 Mbps while the same for upload has been boosted to 3 Mbps from the current 1 Mbps.