How the End of Network Neutrality Could Affect SMBs and the Public Interest

The Federal Communications Commission (FCC)  is poised next month to throw out “net 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. They also cannot currently analyze that data.

The end of the rules would allow the ISPs to track user habits for advertising and marketing. It would also prioritize certain types of delivery for additional charges, such as movies and tele-medicine. Whether ending the net neutrality rules would be good for the public interest — including businesses that use the Web — is not a simple black and white issue. 

Let’s start with their impact on advertising. ISPs like Comcast, AT&T, and Verizon 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 offered by the FCC is to have oversight provided by the over-burdened Federal Trade Commision (FTC), which isn’t currently set up to watch over such discrimination.

The end of the rules, however, would begin to address a major bone of contention: the free ride enjoyed by Silicon Valley companies (Google, Facebook et al). The ISPs have spent billions of dollars to develop their networks.  Meanwhile, Google properties such as YouTube, Google search and The Android Store don’t directly pay for access.

Whether or not Google keeps its 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: that the Internet’s origins were created by the government; that consumers and businesses already pay for access; and that access by content and service providers should be free. The same goes for a company like Netflix — which often swamps the ISP networks during peak usage times like Saturday night.  Netflix has already had a go round with Comcast in 2015-16 on seamless access for high data users — one in which it agreed, under duress, to pay for prioritized access.  It remains an ongoing issue.

Is there a specific argument for-or-against net neutrality for SMBs here? For many years, the government’s assessment of the public interest was to encourage Web access to all. The current FCC, however, contends that this position is better met by eliminating the net neutrality rules — that SMBs will be able to have a variety of ISP options based on their actual needs with the end of the net neutrality rules.

Some very small SMBs with consumer like needs, for instance, can decide to have low-end, non-video options that are 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 for SMBs, however, seems a marginal argument at best, for getting rid of the current Net neutrality protections. 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.

Peter Krasilovsky is the principal analyst for Local Onliner, a consulting firm focused on the transition of local commerce and services.  He was based in Washington D.C for 19 years, often working on telecommunication policy issues.