Industry analysts: Net neutrality "mildly positive" for IoT

April 09, 2015

On February 26th the Federal Communications Commission (FCC) voted 3-2 to reclassify broadband Internet under Title II of the Communications Act of 19...

On February 26th the Federal Communications Commission (FCC) voted 3-2 to reclassify broadband Internet under Title II of the Communications Act of 1934, rendering Internet service a public utility. Since then there have been strongly voiced opinions on both sides of the argument for whether or not the regulation is beneficial in the connected age.

However, little has been said of how this legislation could impact the Internet of Things (IoT) and the billions of devices it will deploy across networks over the next few years. Analysts from Gartner, IHS Technology, and VDC Research weigh in on the topic, the general consensus being that net neutrality is a mild plus for the IoT.

Net neutrality was a hotly contested topic long before the FCC voted to reclassify broadband Internet access under Title II of the Communications Act of 1934 this February, and it remains that way almost two months on with industry visionaries lining up on either side of the debate arguing for freedom of the Internet on the one hand and against limitations on the free market and innovation on the other. While the ramifications of the FCC’s 3-2 ruling in favor of net neutrality are already beginning to take hold at the carrier/network service provider level, however, less clear is what it means for the developer of IoT devices, applications, and services.

But before we dive into where it leaves the IoT, let’s briefly overview net neutrality for some context.

Net neutrality, a brief overview

Net neutrality has roots as deep as the Internet itself, and is based on the concept that all Internet traffic should be treated equally in an “open Internet” paradigm whereby users should be able to freely and easily communicate without interference from a third party (i.e. ISPs). This is not dissimilar from Stallman’s “free speech” argument for open-source software.

These ideals have been disputed for more than a generation, but really came to the fore over the past decade with the advent of technologies such as deep packet inspection (DPI) that enable service providers to throttle the bandwidth of certain traffic based on its content (particularly over-the-top (OTT) traffic such as video streaming), and potentially charge a premium for doing so along the way. Advocates of net neutrality argue that the use of “last mile” network infrastructure for traffic shaping creates artificial scarcity, allowing telecoms to implement tiered service models with extra or hidden costs that are eventually passed to the end user; opponents, including FCC Chairman Ajit Pai, argue that increased regulation will result in a deceleration of the broadband infrastructure build out because NSPs won’t invest if they aren’t certain they can recover their investment.

All of this culminated in a February 26th vote by the five commissioners of the FCC in which Internet services were reclassified as a type of telecommunications rather than information under Title II, making the Internet a “public utility.” The exact details of how the FCC plans to enforce net neutrality are murky, to say the least, but in essence Title II prevents broadband providers from elevating one type of content over another, and proposes a “no-blocking rule and a requirement that broadband providers engage in ‘commercially reasonable’ practices.”[1] A deluge of lawsuits challenging the ruling are expected in short order.

What does net neutrality mean for IoT developers?

According to Gartner projections (, shipments of “Things” will balloon at a 35.2 percent clip from base year 2013 to an estimated 8.3 billion in 2020, which researchers attribute to improvements in regulation, standards, and security that will help remove barriers to growth (Figure 1). Despite those volumes, however, the vast majority of IoT applications are not what one would consider “over the top,” and as a result the impact of net neutrality on the IoT sector is somewhat indirect, says Steve Hoffenberg, Director of IoT and Embedded Technology at VDC Research (, at least in the near term.

Figure 1: Led by the manufacturing and utilities sectors, Gartner predicts that the IoT will reach 25 billion installed units by 2020. Image courtesy Gartner (Forecast: Internet of Things, Endpoints, and Associated Services, Worldwide, 2014.”


“In a nutshell, I would say net neutrality is mildly positive for the IoT,” says Hoffenberg. “The kinds of applications and commercial businesses that would have been likely to want to pay a premium for that ‘fast lane’ if net neutrality had not been adopted don’t tend to be the IoT-kinds of applications. Netflix being an example of one where the usage requirements are so high that it makes sense that that kind of company would want to pay for preferential treatment. But most of the IoT applications are not that time sensitive. The ones that are time sensitive, if you think about critical infrastructure, the real-time aspects can generally be handled at the local level. That is either through intelligence built into a device or a gateway at the local level that can handle real-time or near-real-time kinds of processing. It’s not like in most cases a mission-critical system would have to connect to a cloud-based system to be able to react to a temperature overload on some piece of equipment – that can all be handled at the local level. Even if we were in a scenario where there was preferential treatment available for certain kinds of data, that kind of IoT data isn’t a strong candidate for one that would involve a lot of payment to get priority.

“The kinds of things where timing tends to be more important, ironically, are entertainment applications; video and audio streaming where a little glitch in the timing of the data is very noticeable,” notes Hoffenberg. “If a stream of sensor data from a piece of factory equipment pauses for half a second, it’s not noticeable in general and in most cases the amount of data being sent is such that it would make no difference whatsoever to the reaction of the system. So, overall, a mildly positive benefit to the IoT in that nobody else is going to get preferential treatment over the IoT data.”

Though IoT devices are not the primary offenders in terms of broadband data usage as it relates to net neutrality, their design and development has been and will continue to be affected by lessons learned from the media-rich applications at the center of the Title II controversy. As Bill Morelli, Director, Internet of Things, M2M, and Digital Security at IHS Technology ( describes, net neutrality provides peace of mind for IoT engineers, but, more importantly, offers a blueprint for how IoT devices should be planned, architected, and deployed.

“Net neutrality helps clarify what the guidelines and creates some amount of certainty for folks that may be looking to create IoT applications that they’re not going to have this additional concern of, ‘I built this and have this connectivity solution available, but some link in the chain is dependent on another party, and now I’ve got to worry about that other party holding my transport method hostage unless I pay up,’ Morelli says. “Not that that was necessarily going to happen, but I certainly think that what’s been going on with Netflix and the carriers over the past few years has been very educational for all concerned.

“If you remember when the iPhone first launched, AT&T’s network was just getting hammered, and what they discovered was that a lot of the apps that were being created to go on the iPhone were not very efficient data users, and they were signaling like crazy,” he continues. “It was actually overhead that was causing network congestion more so that data consumption. As they educated the developers, they were able to really minimize those problems while at the same time increasing capacity. Those lessons are now translating over to IoT, and people are being much smarter as to how they program IoT devices – how they transmit data, when to transmit data. Anything that is not mission-critical or real-time they look at batching data and sending it in bursts.

“As folks start evaluating and IoT implementation or an IoT-based strategy, they need to carefully consider what they want to get out of it (whether it’s to improve ROI or improve efficiency), what pieces of data they need to enable that, and what additional pieces of data may add incremental value, which is usually the tricky part because then it becomes ‘what analytics tool do we use? Where do we store the data? How long do we store the data?” Morelli explains. “All of those questions have a direct impact on how much data is collected and transmitted. So the better they can get at doing planning on the front end, the better they’ll be able to manage the amount of data that’s actually transmitted over the network.”

What does net neutrality mean for network technology?

As mentioned, the networking side of the coin is currently the most controversial sector with regard to net neutrality, but despite carrier threats to pull investment in advanced infrastructure, analysts say this is somewhat of a red herring. Enter here the value proposition of providing the data pipe for millions of connected IoT devices, and NSPs can’t afford to let their network performance lag, says Morelli.

“There’s going to be a lot of back and forth over this with the FCC over the next couple years; there’s no such thing as going down without a fight,” Morelli says. “That being said, at the end of the day the carriers see the roadmap as clearly as everybody else and they want to be IoT players as much as everybody else. For them to offer really compelling and interesting value-added services, they need a robust network. If they don’t want to be just a pipe provider, they need to continue to do that, so it’s as much in their interest to continue to innovate their network topology, their network technologies, their offerings as it relates to non-consumer devices.

“There are arguments on both sides, but cable carriers, at least in the U.S., have not been as aggressive as they need to be in updating their connections either,” he adds.

One way carriers may look to innovate on value-added services without the CAPEX of traditional network build outs is through software technologies such as software-defined networking (SDN) and network functions virtualization (NFV), offers Akshay Sharma, Research Director of the Carrier Network Group at Gartner. While he speculates that this trend could eventually lead to partnerships between NSPs and content providers, Hoffenberg believes that the fundamental rivalry between ISPs will drive the adoption of whatever technology can provide a competitive advantage.

“App developers will likely build for OTT providers like Google’s NEST, and likely will avoid any traffic shaping features,” says Sharma. “This may mean carriers will need to innovate with value-added services and likely will partner with OTT providers or become like them themselves, embracing the software-defined datacenter concepts of SDN and NFV.”

“Frankly, for most applications there’s a surplus of bandwidth available and there are only certain scenarios where they could really use more bandwidth than what’s already available today,” Hoffenberg says. “In cellular communications where there’s a high volume of data is one of those where there may be remote devices that need to stream back fairly high volumes of data, but for most IoT applications in most networks there will be relatively little impact on network development. Some of the technology companies might have thought, ‘Okay, if we develop some super-high-speed solution that we can charge more money for we would consider that an incentive to throw more development dollars at it.’ But I think that kind of development is happening anyway, irrespective of net neutrality. In general, it’s just desirable to have faster data throughput for all applications, and any impact that net neutrality would have impacting that would be relatively minor.

“If they have the technology they can still deploy it, they just can’t discriminate on which types of data get to go through it,” Hoffenberg continues. “So in the home environment, for example, you see all these TV commercials between Comcast and Verizon on whose home Internet is faster. That competition exists irrespective of net neutrality, and for competitive reasons alone, all the vendors and developers of network equipment need to keep that race going for ever-faster network throughput speeds.”

What does net neutrality mean for the data service plans of the future?

Perhaps the most critical question for everyone that net neutrality touches, from developer to carrier to end user, is what will become of data plans? To this point, analysts agree that there is something fundamentally broken with the data plans available today, and whether for deeply embedded IoT applications or the smart home, service providers will need to re-architect their data package offerings in order to sustain service uptake.

“Data plans are going to have to change. Period. Everyobody’s pretty aware of that already,” Morelli says. “What we’ve seen is that, if we look specifically at the cellular carriers, as they’ve set up dedicated machine-to-machine (M2M) business units in the past 10 years they’ve learned an awful lot about what the different models need to be for pricing, how the different vertical markets respond to different pricing models, and where they need to target the pricing in order to encourage uptake. Just because they have cellular and they make it available to a given industry doesn’t mean that industry is going to use it if it’s way too expensive. Metering was a classic example of that. So for non-consumer applications they’ve already started learning a lot because they’ve been working on M2M for a bit.

“For consumer use cases it’s a very muddled picture right now because you’ve got wearables coming into the frame, and even though there are not going to be a lot of directly connected wearables, there’s the potential for wearables to generate a lot more network traffic through the smartphone,” he continues. “Smartphones are already one of the largest consumers of data because of all the media-rich content. That’s going to be the tricky piece, because I’ve got my connected car, I may have my smartphone, I may have my tablet, I may have all of the family devices, and, best-case scenario, one or two smart home hubs, so you’re going to need to build a data plan around multiple devices. You’re going to see 5-10 connected devices per person, so you need a data plan that’s robust enough that you don’t feel like you’re getting nickel and dimed. I think there’s going to be some experimentation with this in the next few years because people are going to feel like it’s death by 1,000 cuts; the cable model. I don’t think consumers are going to embrace that, so they need to come up with something along the lines of, ‘Your data allotment is 15 GB or 25 GB and you can authorize up to 50 devices on that as long as you don’t go over.’ What net neutrality does here is get away from the carriers saying that if you put a certain device on your data plan they can charge you a different rate; partially because of net neutrality and Title II we’re going to see them go with a more streamlined approach over time.”

“SDN and NFV will transform carriers pricing and supplier agreements with pay-as-you-go dynamic pricing to consumers, and dynamic pay-as-you-grow payment to equipment vendors,” Sharma says. “So the old subscription pricing to consumers of $10 per month for a cellular modem in a smart meter of years ago will give way to more dynamic pricing of ‘buckets’ or all-you-can-eat will a la carte pricing for bursts.”

Looking to the future, VDC’s Hoffenberg believes that wireless data connectivity will eventually reach the ubiquity of wired broadband and necessarily change the way we look at wireless plans and data consumption. Perhaps with the arrival of 5G networks that could be capable of providing more network capacity than can be consumed, we may be able to move beyond the cost per GB models so common today.

“In terms of wired services, effectively the bandwidth is unlimited for most Internet services. For wireless applications and services where there are so many megabytes or gigabytes of data per month, there is a potential for slight impact there with net neutrality, but eventually the amount of wireless bandwidth will get to the point where there will be as much as you can use also. We’re not there yet, but 20 years ago when you had a wired Internet connection at home, you might have been limited to so many megabytes or gigabytes of data per month, even for a wired connection. The industry has basically moved passed that now, at least for most scenarios. Wireless just isn’t there yet; it might be another 5 or 10 years, with 5G basically being the technology that might push us into that environment where they don’t care how much you use because there’s more than enough bandwidth available.”

Until such a time when wireless bandwidth is abundantly available, however, “service providers will need to literally think outside of the box and look at verticals like the connected car and newer verticals,” Sharma says. “The service provider that provides managed services such as real-time tracking, event-based response/control, asset monitoring/management, remote diagnostics, preventive maintenance, predictive analytics, and visualization will likely win out,” he adds.

The last word on net neutrality and the IoT, for now

In general, the onset of net neutrality regulations will impact the embedded space through a trickle-down effect that first and foremost influences the developers, networks, and data plans of OTT content producers and their NSPs. Given this buffer and the inherent nature of embedded devices, IoT solutions providers should be afforded ample time to react to any net neutrality legislation of serious consequence, Morelli says, even as more and more IoT devices are deployed across the network in the coming years.

“There was an FCC working group that was looking at IoT that I was contributing data to and sat in on a lot of meetings for,” says Morelli. “One of the points that we kept coming back to was, ‘how much of this is actually going to travel over the WAN versus how much of it is going to stay local?’ The general sense was that industry best practice over time is going to evolve because the needs of the device, and the constraints of the device in terms of power and transmission are going to mandate low data volumes. So, in essence, net neutrality is solving a problem that doesn’t exist yet for the IoT.”


1. Federal Communications Commission. “In the Matter of Protecting and Promoting the Open Internet.” March 12, 2015.


Brandon Lewis, Technology Editor