On Dec. 14, 2017, the Federal Communications Commission voted to repeal net neutrality. The new rules, called Restoring Internet Freedom Order, came into effect on April 23, 2018. Now that the new regulation has been in effect for a little over six months, we are starting to see that this new order has far-reaching consequences for Internet service providers, the digital community as a whole, and, especially, small businesses.
Before going on to see the impact of net neutrality on small businesses, let us briefly understand what net neutrality is.
What is net neutrality?
Net neutrality was created in 2015 by the Obama administration and is based on the principle that all data has to be treated equally. The proponents of net neutrality wanted to ensure that ISPs made no discrimination in data speed and delivery because they believed the Internet should keep the flow of data as open and free as possible.
This net neutrality was, in fact, seen as one of the most important advancements for creating an inclusive digital economy.
If you’re wondering why this net neutrality was not passed earlier, it was because the FCC had no jurisdiction over ISPs. So, these ISPs had to be classified as a common carrier under Title II, which means the Internet is a public utility like water and electricity. This classification gave the FCC greater control to regulate ISPs and to maintain net neutrality.
However, under the Trump administration and after an intense debate, the FCC voted to repeal net neutrality.
Who stands to gain or lose?
Ajit Pai, who was appointed chairman of FCC by President Donald Trump, contends that startups founded over the last two decades were successful without net neutrality and no additional regulation was ever needed then. So, he argues the same theory would apply now too, and there was no need to give solutions to a problem that never existed.
But much has changed in 20 years. Digital traffic has grown multiple times over and today digital delivery and content have become a central part of our everyday life. In such a scenario, there are some who stand to gain a lot while others will tend to lose.
The repeal of net neutrality is a huge advantage for internet service providers because they can now charge websites fees for faster delivery of their content to users. In some ways, these ISPs can also limit the ability of users to access the content of their choice. These ISPs are the biggest gainers from this repeal while small businesses that cannot afford to pay huge amounts of money to ISPs or compete with larger companies are the losers.
A survey by Paychex shows that 44 percent of business owners said that the repeal of net neutrality will affect them negatively while only 12 percent said that it will benefit them. The remaining 44 percent are not sure what this is all about and how it can impact them. In addition, 59 percent believe that this repeal will bring down the number of visitors to their website and business.
In another survey, conducted by the University of Maryland, out of 1,077 respondents, 83 percent believe that net neutrality will have far-reaching negative consequences for the digital community at large. Only the supporters of the FCC’s decision. Such as some members of the U.S Chamber of Commerce, believe that nothing much will change for small businesses. Some proponents of net neutrality repeal even argue that this creation of different bandwidths such as fast lanes for large companies and slower lanes for small businesses will work better from an operational and economic standpoint.
Impact of net neutrality on small businesses
Net neutrality affects small businesses in many ways. Here is a look into the different ways in which they will be impacted.
ISPs are known to offer a slew of packages under their business plans that range from support for business applications, security tools like antivirus programs, firewalls, support for business accounts, and so much more. Now, ISPs can add more levels to their tiered pricing strategy that could have varying speeds offered under different plans. Choosing from these different plans can be frustrating for small businesses, to say the least.
The repeal of net neutrality opens the door for ISPs to charge for VoIP calls like the way calls were charged in the past. This means ISPs can charge a higher amount for calls made during peak times.
As ridiculous as this may sound, there is always an opportunity for ISPs to make some quick money through such complex and untenable pricing plans. Unfortunately, small businesses have to toe this line because the Internet and VoIP have become an indispensable tool to do business today.
ISPs will have the power to decide which content should be streamed to users and which should be blocked. This could create an anticompetitive environment for small businesses and could open the road for favoritism. For example, Verizon owns Yahoo, so there is a possibility for Verizon to stream content from Yahoo in the fast lane and similar content from smaller companies in the slow lane.
In this sense, ISPs have the power to suppress competition and promote those companies that are favorable for them. This is a particular problem for small businesses because they have to compete with large companies and those with connections, so more often than not, they will end up on the losing side of the game.
Entrepreneurship and innovation
Free Internet, like free speech, is believed to be an essential aspect for promoting entrepreneurship and innovation. This is why in some countries like France and Estonia Internet connectivity is a basic human right.
To understand this impact, let us say a new company enters the marketplace. If it is a level playing field, this new company will have an equal opportunity to reach customers. But if this company knows that it doesn’t stand a chance to take on the big names in its chosen field, what is the motivation for this new company to start its operations? Right there, innovation and entrepreneurship is crushed, even before it takes shape. In the long run, this can be detrimental to the intellectual and economic health of a country.
Today, many small businesses use SaaS services and they rely on ISPs to connect to these services. If small businesses are put in a slow lane, it is sure to affect the productivity and performance of employees as it will take a longer time for them to access the services they want.
Another problem is the ISPs may force small businesses to choose certain SaaS services over others either by means of cost or non-cost incentives.
Both these problems are likely to impact the choices that small businesses make for their software needs, and could even change the face of SaaS industry in the future.
Worse service for clients and customers
Many small businesses thrive on delivering products or services directly to their clients. This delivery model helps small businesses save costs, source material ethically, and have transparent labor practices, all of which give these companies an opportunity to compete with their larger competitors.
However, if the web page of a small retailer is slow to load because of discrimination made by ISPs, it will result in a bad experience for customers. Naturally, customers will shift to larger retailers that provide quicker service.
Such poor service can eventually impact small businesses in a big way and can even lead them to close shop.
The impact is huge
It is clear that net neutrality will impact small businesses in a big way. Do you own a small business? Please give us your thoughts in the comments section.
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