The wave of telecommunications mergers continued this week as Verizon, the country's most popular mobile phone network, agreed to buy AOL, the country's most popular dial-up Internet service. OK, that was a cheap shot. Verizon isn't forking over $4.4 billion because it wants AOL's 2.2 million dial-up customers, as doggedly loyal as they seem to be. Instead, the prize for Verizon is AOL's content businesses, most notably its advertising arm.
In that sense, the deal falls into the same category as AT&T's agreement to buy DirecTV and Comcast's purchase of NBC/Universal. Such combinations of conduit and content have fallen in and out of favor over the years. The dial-up Internet market was dominated by AOL, which offered subscribers access to a “walled garden” of exclusive content, but the company was overtaken by broadband service providers that offered little more than access to the wide-open Internet. Now ISPs have come full circle, and are eager to provide more than just a virtual pipe to someone else's content.
That's one of the reasons so many content providers and application developers urged the Federal Communications Commission to adopt strong net neutrality rules. Among other things, they feared that ISPs would give preferential treatment to their own sites and services, or to companies that paid for their traffic to be prioritized. The more broadband ISPs invest in content, the greater the incentive they'll have to steer customers to that content, to the detriment of a free and open Internet.
The FCC responded in February by adopting the most stringent rules yet against ISPs favoring some content and service providers over others. The rules have been roundly denounced by the major U.S. ISPs, including Verizon, AT&T and Comcast, whose trade associations asked a federal court Wednesday to put the new rules on hold pending an appeal. They're also backing a bill that would set some basic net neutrality rules while barring the FCC from adopting broader ones.
We believe that the FCC acted properly and that strong neutrality rules are necessary, but either the courts or Congress will have the final say on that. Meanwhile, Verizon's purchase of AOL should remind policymakers of the time not so long ago when America Online connected customers to just that part of the Internet it controlled. Back then there were scores of other ISPs to choose from if users didn't like AOL; today, there's just a handful. But as long as the FCC's neutrality rules remain in place, consumers will be free to steer their browsers wherever they choose.