Management

Will Losing Net Neutrality Mean Losing Business?

March 16, 2017 • 10 min read

Business owners tend to be concerned with issues like minimum wage, payroll taxes, and healthcare. Net neutrality? Not so much. After all, how does an internet policy really affect a brick-and-mortar business?

Actually, it’s more than you might think. Whether you generate more of your revenue through online operations or in-person sales, you probably have a website for your business, use an internet connection to process credit card transactions, or stream music in your store or office through a service like Spotify or Pandora.

That means that net neutrality impacts your bottom line.

According to San Francisco-based graphic design marketplace 99Designs, it could even be a big chunk of change. In an article, the company says, “If an e-commerce site is making $100,000 per day, a one-second page delay could potentially cost the business $2.5 million in lost sales every year.” In sum, it argues that “a threat to net neutrality is essentially a threat to small businesses.”

So, yeah…internet policy matters.

What is net neutrality?

Before we get to the specifics, let’s talk about the big picture.

Net neutrality regulations were created to prohibit three three types of activity, in particular.

  • Blocking: Broadband providers may not block access to lawful content, applications, services or non-harmful devices
  • Throttling: Targeting lawful internet traffic to be delivered to users more slowly than other traffic
  • Paid prioritization: Treating internet traffic favorably in exchange for money, services, or other things of value of any kind — in other words, no “fast lanes.” ISPs are also banned from prioritizing content and services of their affiliates.

Net neutrality is currently preserved through the Federal Communications Commission’s Open Internet rules. The FCC explains that these rules “protect your ability to go where you want when you want online,” and bar internet service providers (ISPs) from interfering with speeds for internet services or apps.

What’s the argument in favor of net neutrality?

The Electronic Frontier Foundation, a digital civil liberties nonprofit, says network neutrality is a principle that must be upheld if we want the internet to live up to its promise: fostering innovation, creativity, and freedom. Businesses, however, may be inclined to a less philosophical approach on the matter.

Proponents argue that net neutrality is also critical for businesses. 99Designs cites statistics about internet use, like the fact that 40 percent of customers will abandon a site that takes more than three seconds to load. In other words, slower load times may reduce a business’s customer base.

It’s not just a potential problem for e-commerce businesses. If your site takes so long to load that customers abandon it and go elsewhere, not only are you losing any business you might generate by selling online, it also means those people will have a harder time finding out your location, your hours, what products or services you provide, and so on. That can affect your rankings in a search, making it less likely a customer would stumble across your business online at all.

Net neutrality, its supporters argue, is “the great equalizer, putting your business on an equal footing to success as your competitors.”

Here are some ways that dismantling net neutrality might adversely affect your business:

  • The cost of keeping your site accessible and operating to your customers’ standards will likely increase. (This could also hinder entrepreneurship and competition generally, as it would make competing with established companies more expensive.)
  • High bandwidth channels, like video-based ones, might become out of reach for small businesses, as a result of a spike in associated costs imposed by ISPs.
  • Digital marketing might become more of a luxury for small businesses even while remaining essential to any successful marketing plan. Anything that consumes high bandwidth is likely to become more expensive.

What’s the other side?

Net neutrality opponents, including ISPs like AT&T and congressional Republicans, say the system previously worked for years without government intervention. Mashable notes that, with very little regulation, there’s been more than $1 trillion in investment in the internet since the 90s.

Then, there’s the fact that net neutrality gives the government more internet oversight. In a post-Edward Snowden era—when many people are worried about the government spying on U.S. citizens—there’s concern about giving the government more access to the inner workings and data of internet traffic.

Finally, opponents say there’s a question of fairness. David Cohen, Senior Executive Vice President at Comcast, says, “People who use more should pay more, and people who use less should pay less,” noting that’s the way it works with electricity, gas, and water. There’s nothing stopping tiered pricing on utilities.

Why is net neutrality a hot topic?

Although the FCC gave net neutrality the thumbs up in 2015, the Open internet rules could change under the new administration and its new chairman.

After taking office in January, Donald Trump appointed Ajit Pai to head the FCC. Pai—a former Verizon lawyer who voted against the Open internet rules while serving as an FCC commissioner—has been critical of the policy’s impact on investment. While addressing the Mobile World Congress in February, Pai called for a “light-touch approach to regulation,“ pledged to pursue a broadband policy that is “practical, not ideological,” and said that the government would “embrace what works” and “dispense with what doesn’t,” USA Today reports.

Some things are already changing. For example, Pai’s FCC has shut down an investigation of service providers accused of violating current net neutrality provisions and “pledged to revoke the regulatory classification of broadband service under which it is treated like a telephone-style utility.” Treating internet service as “information,” like television, could give providers more power to determine what information is accessible, as well as how it is accessible (including how much it costs).

Pai says the US experienced its first-ever decline in broadband investment outside of a recession after it gave the internet the same public utilities treatment as power and water. There are numbers to support his position: AT&T, for example, “decreased its broadband capital expenditures by…16 percent in 2016—spending $17.8 billion—compared to 2014 ($21.2 billion), the last full year without the FCC’s net neutrality.”

According to Pai, net neutrality could delay the adoption of faster 5G networks, because they will require considerable investments in infrastructure. The “more difficult that government makes it to rebuild a business,” he told the conference, “the less likely it is that broadband providers, big and small will take the risk [and] invest the billions of dollars that are needed to connect consumers to digital [opportunities].”

That said, Bloomberg’s coverage of last year’s “super-fast” broadband competition between Google and AT&T implies that net neutrality or no, service providers will keep needing to innovate.

It’s important to point out that there’s no evidence that Pai is opposed to all internet regulation. In his net neutrality dissenting statement in 2015, Pai acknowledged the four principles of internet freedom—the freedom to access lawful content, the freedom to use applications, the freedom to attach personal devices to the network, and the freedom to obtain service plan information—and declared, “I support the four internet freedoms, and I am committed to protecting them going forward.” Based on his dissent, it seems that Pai would continue the net neutrality opposition to blocking (of lawful content and so on); the question is how he will address throttling and paid prioritization.

Does the FCC have final say on net neutrality rules?

Yes and no. While the FCC can decide whether it will enforce its Open internet rules, state and local governments can create some of their own rules. Last year, the San Francisco Board of Supervisors approved an ordinance requiring landlords of multi-unit buildings to honor reasonable requests to allow service by any state-accredited ISP a tenant chooses. Given San Francisco’s and California’s stated plans to resist to the Trump administration, it wouldn’t be surprising if either the city, the state, or both adopted policies to protect net neutrality.

What does this mean for you?

Changes to net neutrality rules may affect your business, so pay attention. Read up on the subject. If the FCC proposes modifications to the current net neutrality policy that would negatively affect your business, take the time to weigh in.

Every federal agency offers a public comment period before enacting a new regulation, and submitting a comment is the best way to make your voice heard. For more information on the FCC process, check out the FCC’s tips on submitting comments. Whether you support or oppose net neutrality, this is one regulatory issue where it doesn’t pay to be neutral.


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