02.05.201810 min read

The FCC Ruled to End Net Neutrality Regulations. What Does This Mean for Small Businesses?

If you’ve perused social media feeds, flipped through cable news channels, or checked news notifications on your phone in the last few months, you’ve probably heard something about net neutrality. Like many, you’ve probably thought, what does “net neutrality” mean, and why should I care?

We get it. The term doesn’t exactly drum up any exciting feelings, and unless you’re entrenched in the tech industry, the buzz around the topic hasn’t been crystal clear about what its implications mean.

A few months ago, we wrote about what you need to know about net neutrality, which was a great primer on the topic, and even delved into both sides of the argument. However, since that last post, the Open Internet Order was repealed by the Federal Communications Commision on December 14, 2017.

Because the repeal of net neutrality is now a reality, we thought it important to revisit the topic and dig into what its implications are for small businesses.

As a refresher, net neutrality refers to the principle that all content and applications on the internet should be equally accessible to all users regardless of the source. The repeal of the Open Internet Order lifted limitations on Internet Service Providers (ISPs) from charging users more for faster speeds or better quality of service, and from the ability to block certain websites.

So, what does this mean for small businesses? If you want the quick facts, here’s a TL;DR:

Pro-repeal:

  • Proponents for the repeal of net neutrality argued that it allows ISPs to invest in improving broadband infrastructure, particularly in rural and remote areas.
  • They also claim that without government oversight, ISPs’ ability to offer different pricing models would spur more innovation, creativity, and competition.

Anti-repeal:

  • On the other hand, opponents suggest that repeal will monopolize already powerful, dominant corporations. Most regions of the U.S. only have one choice of ISP already, so the repeal could further limit their choices in internet service and quality.
  • There’s also a fear that ISPs could spike costs for faster internet speeds and better quality service. When businesses have to pay more for this service, it’s likely the price hikes could trickle down to their customers and clients (and their customers and clients) to make up for the cost. Small businesses could find themselves pushed out of the market simply because they can’t keep up financially.

Conclusion:

  • Ultimately, nobody knows for sure what will happen now that net neutrality has been repealed. As far as small businesses are concerned, there’s no need to panic for now. Even if ISPs are to break up internet services into “fast lanes” and “slow lanes,” there’s still an opportunity for entrepreneurs to find new ways to conduct business and new opportunities to capitalize on.

Strategic Planning Kit

Those who argued for the repeal of net neutrality claimed that regulatory overreach reduced investment in rural and underserved communities. Nicholas Economides, an economist at New York University, has even stated that under certain conditions, “the ability to price discriminate increases [ISP’s] incentives to invest.”

*If you’re a small business owner in a remote or rural area, this new ruling could potentially improve the broadband infrastructure in your area, which would mean better internet service for you and your customers or clients. *

Another argument in favor of the repeal suggests that when ISPs are able to offer different pricing models, competition, and innovation rise.

In his editorial article for the New York Daily News, “The net neutrality farce,” former FCC Chief Economist, Thomas Hazlett recounts the history of America Online as an example of innovation spurred by deregulation.

In the 1990s, America Online became one of the largest dial-up internet services, distributing 250 million sign-up disks in 1996 alone. Hazlett claims that this success was largely in part because of the 1980s “peel back” of Title II mandates (the same regulations imposed on broadband providers in 2015). Without AOL’s ability to aggressively market subscriptions in easy-to-use formats, Americans might not be able to benefit from the unlimited internet access they enjoy from today.

AOL log in screen

However, Hazlett’s example is of a large corporation with an equally large spending budget. While the argument that the repeal of net neutrality will spur innovation is convincing, it’s unclear whether it holds water for smaller entities. A more plausible, beneficial outcome of the repeal for small businesses is that we’ll start to see innovation from entrepreneurs and startups trying to find new ways to conduct business and upend the post-repeal status quo.

Lastly, another trending argument for the repeal of net neutrality is that over-regulation is more costly than deregulation—a decrease in FCC involvement means less government spending on the issue. It’s also unlikely that ISPs will truly restrict services for customers because they’ll still be able to maximize their profit by giving their cost-constrained customers what they want.

To put it plainly, *small business owners will probably still get the services they need and want because ISPs still want that revenue stream. *

But on the other hand…

… there’s a lot of speculation that deregulation of the internet will cause a monopolization of already large and profitable corporations, like Amazon, Google, and Netflix.

With the repeal of net neutrality, ISPs now have the freedom to charge what they want for internet access and to control the speed and quality of service they provide to customers. Many speculate that we’ll start to see a rise in tiered package rates for internet access, where premium packages with the fastest internet speeds and highest quality of service are so costly, only customers with the biggest pockets will be able to afford it. This could allow for those large corporations access to a “fast lane,” while smaller entities get stuck in the “slow lane.”

As a result, this could cause a trickle-down effect for consumers. If paid services like software-as-a-service (SaaS) applications have to pay more for internet usage, they may charge customers more.

For small businesses using those SaaS applications to run their businesses, this could require them to increase their own prices to make up for the difference, potentially losing them customers and clients turned off by the increase.

In another potential scenario, business that can’t afford to pay for premium internet could also lose customers due to slow website load speeds. In fact, DoubleClick found that 53 percent of mobile visitors leave a web page if it takes more than three seconds to load. Google also confirmed that site speed is a ranking factor in search engine results.

This all may seem like a slippery slope of assumptions, but it’s actually a fair judgement—there has been a pattern of bad behaviors from ISPs during eras of both net neutrality and deregulations.

In 2012, AT&T considered requiring its users to purchase a Mobile Share plan in order to use FaceTime over their cellular networks. In 2014, Netflix’s streaming speeds began to noticeably plummet, but regained quality and speed once the company agreed to pay Comcast more for its internet usage. Also in 2014, AT&T was sued by the FTC for throttling their unlimited data customers.

Another point of concern for the repeal of net neutrality is that most ISPs already have a functional monopoly in many regions of the U.S. Not only does this limit customers’ choice in services, it provides little incentive for providers to improve their services due to lack of competition and a stronghold on their regions.

Without regulations, ISPs also have the freedom to block websites of competitors to their bigger customers, or content they deem unagreeable with their terms and conditions, whatever they may be.

According to Forbes contributor, Jenny Odegard, if ISPs can block, slow down, or charge more for internet-based services you like, it’s more likely you’ll change to the services your ISP prefers. This isn’t ideal for customers, nor is it ideal for the owners of those smaller services not preferred by ISPs.

So, should you care about the repeal of net neutrality? Ultimately, that’s up to you. But if any of these counter-arguments to the repeal of net neutrality scare or worry you, you can take solace in knowing that these are all speculations.

The internet as we know it will continue to be for the foreseeable future. The best we can do is hope for a balanced, light touch regulatory environment moving forward that will allow ISPs to improve internet infrastructure while still providing an even playing ground for entrepreneurs, small business owners, and content providers.

If you still want to know more about the repeal of net neutrality and what it means for you as a customer and a small business owner, check out these additional resources:

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