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About the only way it could stifle innovation is that the ISPs get mad and sit on their hands and don’t spend money to improve their networks. Oh yeah, they are already doing that, and asking content providers to pay for the upgrades to their networks so that customers who are also paying the ISP can get reasonable access to the content they want.
The amount of money that ISPs spend on capital expenditures as a percentage of revenue has been dropping for years. They are making more money, but instead of devoting it to improving services, they are devoting it to improving their already healthy bottom line. Let’s look at Comcast, since they already don’t have many friends that defend them, with the exception of paid lobbyists (you know, like the head of the FCC was a couple of years ago). In 2002, Comcast was spending about 37% of revenue on capital expenditures. Now, that figure has dropped to about 12%. The emphasis from ISPs has already moved away from innovation. When the average internet speed in the US is worse than countries such as Belarus and Uruguay, I can’t give American ISPs much credit for innovation and infrastructure improvements. How much worse are they going to do? They aren’t innovating anyway.
Here are a couple of articles that go more into the poor state of innovation by US ISPs: