SMBs, The Public Interest, and Network Neutrality’s Repeal

Photo from Internet Society

The FCC is poised to throw out “network neutrality” rules that prevent Internet Service Providers (ISPs) like Comcast, AT&T and Verizon from discriminating among the types of data they transmit and how fast they send it. Repealing the rules would allow the ISPs to prioritize some content over others. It would also allow ISPs to track user habits for advertising and marketing.

The net neutrality rules were formalized by the FCC two years ago during the Obama administration. Activists who are in favor of keeping the rules believe a repeal would open the door to all kinds of ISP abuse, and violate the spirit of public policy that has always encouraged universal access to the Web, and the development of Web-based services.

Opponents of the rules are the ISPs, which have invested billions of dollars in their networks and want to become full-fledged Web giants. The ISPs want to both partner with and compete against major programming, search and ad-tech giants like Google, Facebook, Netflix and others.

The original net neutrality rules mostly grandfathered the status quo: the Web remained a free for all, and ISPs mostly got compensated by subscriber fees. It was a happy accident for Google and others that they have been getting a free ride, even as they use more and more bandwidth for services like Google’s YouTube, which Forbes once estimated pays about 1 cent for every 50 hours of video streamed. They also offer sophisticated analysis of user data — something that the ISPs would also like to provide.

Indeed, the ISPs believe they have much more to offer than being a dumb pipe. Let’s start with advertising. They are in a strong position to track consumer behavior and provide superior data results to advertisers. If they can find a way to ensure that privacy needs aren’t violated – a big if — it makes sense that they’d want to get into advertising as “Big Data” partners with ad agencies and brands This, after all, was a major reason for Verizon’s acquisition of AOL and its ad tech properties.

A second leg of the rules’ impact on advertising might be more disconcerting to some: the direct entry of ISPs into the ad business to leverage consumer data and serve personalized ads. Smaller firms, including SEO firms and others that serve SMBs, might be seriously impacted.

Aside from advertising, the second major issue is the ISPs’ desire to seek compensation for seamless, high speed access. The business and usage of Google, Facebook, Netflix and other Web giants is increasingly based on video delivery and speed – both of which will be at the mercy of ISPs seeking new revenue streams and higher profits. A web site that doesn’t load in ½ a second is rejected by consumers, right? This impact might be even more severe if ISPs are allowed to prioritize their own programming as a strategic advantage over rivals (i.e. Comcast’s NBC programming).

The end of network neutrality rules could aggravate these issues. The only redress being offered by the FCC, as it seeks to repeal the rules, is to have oversight provided by the over-burdened Federal Trade Commission (FTC). The FTC isn’t currently set up to watch over such discrimination.

What’s in the public interest? Whether or not Google keeps its (nearly) free access doesn’t greatly impact the public interest. But it seems easier to continue to let Google and other players keep their free ride. There aren’t good alternatives.

The public interest, here, is mostly defined by three things:

1- Do the ISPs deserve a gateway status? The Internet’s origins were created by the government, so citizens shouldn’t have to pay private companies for it

2- Are the ISPs already being compensated by the public? Consumers and businesses already pay for access

3- Are the ISPs infringing on free speech by prioritizing access and monitoring usage? Access by content and service providers should be free in the name of free speech and economic development.

Is there a specific argument for-or-against net neutrality for SMBs here? The FCC is contending that a repeal of the rules would benefit SMBs, because they’d be able to have a variety of ISP options based on their actual needs. Some very small SMBs with consumer-like needs, for instance, can “decide” that low-end, non-video options would be more affordable. Others, however, would be able to leverage the capabilities of cloud based storage and delivery to take greater advantage of the platform for everything from Net-based security cameras to on demand delivery of services.

“More choice” of Web access and services plans for SMBs, however, might be illusory. There is already plenty of choice — and the public interest is clearly to provide more choice. It isn’t at all clear how it is in the public interest for ISPs to get in the middle of such services, given that they act as a gateway for thousands of service providers, from giants in the B2SMB space like Go Daddy, DocuSign and Dell to local web site designers. Market power is also an issue here: Comcast Business, for instance, already serves 2 million SMB customers.

The elimination of the Net Neutrality rules are scheduled to be voted on in December. Given that Republicans have a 3-2 edge on the Commission, it is highly likely that the rules will be eliminated. After that, it will be up to the Courts to determine whether the new rules will infringe on free speech and the public interest.

A different solution might be for Congress to pass legislation codifying new rules for a new generation of technology that encourages ISPs to provide state of the art services by getting realistic compensation from all of the largest users; lets ISPS participate in adtech and martech services in a way that leverages their unique eye on consumers while protecting consumer privacy; and protects equal access to the Network by both consumers and businesses.

Political realities would seem to doom the chances of such legislation passing. But these would be the public interest arguments.

An earlier version of this article was published in StreetFight on November 22.

Leave a Reply

Your email address will not be published. Required fields are marked *