According to the discourse surrounding the core gaming scene right now, loot boxes and similar business models are the greatest threat to interactive entertainment. But while fans shout down publisher Electronic Arts over the progression in Star Wars: Battlefront II, the Federal Communications Commission is gearing up to kill net neutrality. Reuters and Bloomberg are each reporting that FCC chairman Ajit Pai, an appointee of President Donald Trump, will reveal plans next week to undo an executive order from President Barack Obama’s tenure that classifies internet service providers as equivalent to utilities.
Net neutrality is a concept that includes a number of rules and regulations with the purpose of preventing internet service providers (ISPs) such as Comcast and AT&T from blocking, slowing, or favoring certain content over their networks. The basic idea is that Comcast, which owns NBC Universal, shouldn’t be able to slow down a competitor like Netflix’s content while providing a fast lane for its own streaming service. This is one of the reasons that so many technology companies support net neutrality. But repealing this could also hit the budgets of gaming fans and divert some of that disposable income away from publishers and developers and toward Comcast and AT&T instead.
I’ve reached out to Microsoft, Sony Interactive Entertainment, Nintendo of America, Valve Software, and The Entertainment Software Association for their perspectives on this story. Microsoft declined to comment, The ESA said it won’t comment until it sees the order, and the rest did not respond. GameasBeat will update if any of them do decide to provide a statement. Every game company uses a ton of bandwidth, and ISPs may slow their traffic unless they get a cut in on some of the revenue. That’s one of the reasons analyst Mat Piscatella of industry-tracking firm The NPD Group is concerned about the impending retraction.
“The overturning of net neutrality rules has huge implications for the games business,” Piscatella told GamesBeat. “Particularly as it heads to 4K assets and more digital distribution of content. If this happens, I do expect ISP costs to rise for gaming consumers in particular, and I would also expect video game digital sales growth to slow with an according drag on overall gaming spend.”
Spending on digital games continues to climb, but eliminating net neutrality could stunt that growth because gamers would potentially have to pay extra to get games and then maybe even more on that to download large or 4K releases.
We can already see an example of how ISPs work without net neutrality thanks to Portugal. That country does not force ISPs to treat all data equally, so telecom corporations split the internet up into various cable-television-like content packages.
In Portugal, with no net neutrality, internet providers are starting to split the net into packages. pic.twitter.com/TlLYGezmv6
— Ro Khanna (@RoKhanna) October 27, 2017
Without net neutrality, U.S. ISPs could introduce similar packages. For example, Comcast could have “Basic internet” or “Extreme Gamer’s Internet.” As part of the basic bundle, maybe you can access Steam, Xbox Live, or PlayStation Network, but Comcast slows download speeds to something painful like 500Kb per second. If you upgrade to the gamer bundle for an extra $50, however, you get faster speeds on all of those services. Or you can get the top-tier “Extreme Gamer’s 4K Internet for $100 extra per month, and that gives you unlimited speeds and unlimited data.
“Implementation of even more stringent data caps or speed reductions could make digital purchasing unrealistic for many consumers, particularly the less affluent,” said Piscatella. “I’m very concerned about what this would mean for the future of the games business overall.”
But not everyone thinks dropping net neutrality will raise prices for consumers. Wedbush Securities analyst Michael Pachter thinks it’s exactly the opposite.
“The money is in charging enterprise users — like Netflix — and not end users,” Pachter told GamesBeat. “The ISPs are going to charge the biggest users of bandwidth, so they will look at Sony and Microsoft. The reason ISPs care about this is that they don’t want to raise prices for users. They prefer that Xbox Live or Netflix raise prices.”
And while this change could hurt game spending, it’s important to remember that’s not why regulation is important.
Today, ISPs can only offer you different speeds and data caps that apply equally to anything on the web. Permitting Comcast to charge you more to get certain data is like letting the phone company charge more for people to make business calls. That is inherently anticompetitive because it gives the utility the power to pick winners and losers. And if the ISP owns a service, it could easily give itself every advantage and its competitors every disadvantage. That destroys the free market, which has enabled the internet to grow into a massively important economic driver over the last two decades.
I already hate my data cap in the 4K era, and Comcast doesn’t need any help figuring out ways to squeeze me for every last dollar.