Impact Of Net Neutrality On SMBs & Other Businesses – Positive Or Negative?

Written By Gary McCauley

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With FCC ruling in favor of net neutrality, what could its impact be on businesses, especially SMBs, which rely on ISPs for delivery of its video and content. Read on…

Impact Of Net Neutrality On Businesses

What’s Making News?

On February 26, 2015, the US Federal Communications Commission (FCC) ruled in favor of net neutrality by re-classifying broadband access as a telecommunications service, applying Title II (common carrier) of the Communications Act of 1934 to internet service providers (ISPs).

What is Net Neutrality?

Net neutrality, coined by Tim Wu, a professor of media law in Columbia University, in 2003, is the principle that ISPs (cellular, cable or phone internet) and governments should treat all data on the internet equally, without any discrimination in terms of charging differential amount on the basis of user, site, content, platform, application, type of attached equipment, or mode of communication. According to net neutrality, your ISP shouldn’t block or degrade access to certain websites or services, nor should reserve a ‘fast lane’ that allows content favored by the ISP to load more quickly than the rest. Net neutrality is also called as ‘internet neutrality’, ‘network neutrality’, or ‘net equality’.

Why Net Neutrality?

Being a supporter of net neutrality, President Obama, on November 10, 2014, recommended the FCC to re-classify broadband internet service as a telecom service to preserve net neutrality. Without net neutrality, big organizations would have tight control over how customers access websites and services. Net neutrality is required for the following reasons:

  • It ensures customers are not at the mercy of big organizations
  • It spurs competition among ISPs
  • It encourages the spread of ideas
  • It helps prevent unfair pricing practices
  • It stimulates entrepreneurship and hastens innovation
  • It safeguards the freedom of speech.

Impact of Net Neutrality on Small & Medium Businesses (SMBs)

If you are an owner of a SMB, net neutrality could affect you in the following ways:

  • Exorbitant Costs: Absence of net neutrality enables ISPs to charge individuals and businesses according to their whims and fancies. These ISPs could charge exorbitant costs for higher speeds. For instance, if an ISP increases its cost for a leading streaming video provider such as Netflix, Netflix, in turn, will be forced to charge more from customers for delivering content faster. According to USA Today, Netflix may have to incur an additional cost of $75 million to $100 million every year in content delivery for providing customers the same level of service that they expect from the company. SMBs that cannot afford such exorbitant costs would have to deal with a slower website, compared with their competitors, pushing them out of the market place ultimately.
  • Level-Playing Field: Net neutrality ensures a level-playing field for SMBs, which enables them to compete with bigger companies. Since both SMBs and big companies have same access to the internet, they are both able to leverage the business opportunities equally. Elimination of net neutrality would mean that SMBs would be rendered crippled and unable to compete with bigger companies.
  • Leveraging Video Marketing: SMBs that depend on video (such as YouTube, Netflix, etc.) as part of their marketing strategy could be impacted if net neutrality is eliminated. For instance, if your company streams videos to homes across the country, or if you want customers to view your company’s product videos, then there’s a probability you might be affected. Similarly, if SMBs can’t afford to pay ISPs to share their content, their prospective customers may be unable to view the product videos and may not be enticed to purchase their products. Moreover, the investment on producing and optimizing the videos will result in a financial loss. The FCC decision, thus, could have an impact on your SMB and how you are able to access the internet in the future.

Overall Impact of Net Neutrality on Other Businesses

If you’ve been following the recent news, you must have heard of net neutrality. As an owner of a SMB, it’s important you have an understanding of net neutrality and its impact on your business to ensure you are prepared, when changes to the way the internet content is delivered is effected.

Telecom companies usually enforce a tiered service model to regulate the pipeline and eliminate competition, create artificial scarcity, and constrain subscribers to buy their otherwise non-competitive services. Many people believe net neutrality is crucial for the safeguarding of current internet freedom, and a lack of it would allow ISPs (such as Verizon, Comcast, AT&T) to fleece content providers (such as Netflix) and such additional charges would ultimately be passed on to consumers. So, ISPs want to manage internet access and charge customers based on their usage, which means that they will have the ability to pick and choose what consumers see online and then charge content providers. This could imply that an ISP such as Comcast or AT&T could block a service such as Google Maps and charge for their own.

For the first time, the current FCC decision would make all existing ‘unregulated and unmetered internet traffic bits’ ‘regulated and metered bits’. The potential financial liability on internet traffic originators such as YouTube, Google, Netflix, Amazon, etc., could be several billions of dollars per annum, as broadband internet traffic is currently an unregulated service. The current operative telecom metered rate is 18 cents per gigabit/second or $182 per terabit/second. This implies that Google and YouTube, who are the internet’s largest content providers, would have a cost liability between $5.7 billion and $16.4 billion per annum, according to the blogpost at netcompetition.org.

Opponents of net neutrality (Intel, IBM, Juniper, Cisco, Qualcomm) claim that its regulations would prevent investment into broadband infrastructure, which, in turn, will stifle economic growth and lead to a slowdown, as opposed to billions of dollars of investment into broadband infrastructure, which would propel the other sectors of the economy forward. However, some critics of net neutrality argue that data discrimination is necessary to guarantee quality of service.

How ExterNetworks Can Help?

Here, at ExterNetworks, we have been helping businesses operate their infrastructure at optimal performance over the internet. We have deep roots in the telecommunications industry and have been providing managed network solutions for over 15 years. We pride ourselves on thought-leadership in this space and are always happy to provide insights that helps make your business day easier. Feel free to reach us for an in-depth insight into this topic or any other technology challenge questions you might have. Ask us anything at ExterNetworks IT Consulting Services or contact us at TwitterFacebook, orLinkedIn.

 

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About the author Gary McCauley

Gary McCauley is responsible for management of ExterNetworks’ National Accounts. He has over 30 years of experience in providing technology services and enjoys providing insights to help business decision makers implement sound strategies.