On December 14, the Federal Communications Commission is scheduled to debate regulations that were put in place just two years ago. At the heart of the hearing is whether the internet should be treated as a utility for communication or an information service. This might not seem like a big deal, but trust me it is.
As it stands right now, internet service providers are not allowed to block, throttle or prioritize sites potentially based on compensation or lack thereof. If net neutrality is repealed, we could see ISPs doing all of the above. You can compare it to your television services. If you have cable or satellite services you have likely lost a few of your favorite channels, at least temporarily, as the cable or satellite service provider negotiated with the station operators as they debated how the payments were to be divided.
I live in South Florida and a few years ago we lost our local Fox station temporarily as DirectTV and the station owners debated, and of course it was during the NFL season which is when I watch Fox the most often. Just this year in Indianapolis the same thing happened with the cable provider and the CBS affiliate that shows the Colts games. You can see where this is going with the ISPs and how they could prioritize, throttle or even block certain websites if they aren’t compensated by the sites.
My internet provider is Xfinity and if net neutrality is repealed, it is possible that Xfinity could take the same approach with websites that it does with television stations. Xfinity provides the service and I pay them a fee for their cable service where stations like Fox, ESPN and Bloomberg provide the content. In the case of the internet, Xfinity provides the internet connection and sites like ESPN, Bloomberg, Yahoo and others provide the content.
So now that you understand how it works, how could things change? Are their companies that could benefit and companies that could lose out if net neutrality is repealed? Of course there are and you can imagine how the companies align.
Of those that support maintaining net neutrality and treating the internet as it is treated now are the main content providers: Google, Facebook, Amazon, Twitter and 200 other internet sites. Those that oppose the current status are the main internet service providers: AT&T, Verizon, Comcast, Sprint and T-Mobile. Perhaps the most important supporter of repealing net neutrality is FCC Chairman Ajit Pai.
One of the more interesting cases of how views have changed comes from Comcast. Back in 2014, Comcast’s view towards net neutrality was expressed on its own website with the following statements:
- COMCAST IS COMMITTED TO AN OPEN INTERNET
- Comcast won’t block access to lawful content.
- Comcast won’t throttle back the speed at which content comes to you.
- Comcast doesn’t prioritize internet traffic or create paid fast lanes.
- Comcast’s Internet Essentials will make the internet more accessible to low income families.
- Comcast will inspire innovation, promote learning, create access to jobs.
Those statements remained on their site until April 26 according to an article on Yahoo. That is the exact date when Chairman Pai announced his plans to repeal net neutrality. After that date, the following statements appear on Comcast’s site now:
- Comcast is committed to an Open Internet.
- We do not block, slow down or discriminate against lawful content.
- We believe in full transparency in our customer policies.
- We are for sustainable and legally enforceable net neutrality protections for our customers.
Notice the changes? The second one seems like it was written by a member of the legal department while the first seems like it was written by a member of the marketing department. You may have also noticed that the phrase about “prioritize internet traffic or create paid fast lanes” was completely removed. What do you think that might be setting up for, another revenue source for the company perhaps? Pay us a higher fee and your content will be delivered to readers faster and will be prioritized. Seems kind of like how commercials airing during the Super Bowl are more expensive than ones appearing during the local news.
Obviously the major internet service providers- Verizon, AT&T, Comcast, Sprint and T-Mobile would benefit if net neutrality is repealed or changed. Internet companies like Amazon, Facebook and Twitter would suffer to some degree. Imagine how many subscribers Facebook would lose if you had to pay $5 a month to access it. How about Twitter and ESPN.com? Even Bull Market Rodeo could be hurt if net neutrality is repealed. For instance, Verizon owns Yahoo and they could block sites like Bull Market Rodeo and then redirect people to Yahoo Finance.
While the Trump Administration has stated that they are in favor of less regulation, what they are looking at doing to the internet industry is adding regulation instead of allowing it to operate as a free-market enterprise as it is now. There are tons of small businesses that have been launched in the last 15 years that were successful because of the relative ease and cheap advertising available through the internet. If the ISPs are allowed to block sites that compete with their offerings or charge premiums to access sites like Facebook, Twitter and LinkedIn, it will hurt many entrepreneurs.
With three Republicans and two Democrats on the commission, it is almost certain that the FCC will recommend changing the current status. There is a rumble in Congress that could have an impact on the process. If the ISPs are given the power to decide what can and can’t be accessed, it will hurt the burgeoning online economy. It will hurt me personally as the service I provide to different financial publishers won’t be in demand as much as it is now. I have been writing investment publishing content for 17 years and as an independent provider for the last eight years. I am even considering launching my own newsletter, but I will now have to wait until this ruling comes down as it could have an incredible impact on my ability to market the newsletter.
While some people in Washington are viewing the proposed change as a means to controlling suspicious activity, like the activity accredited to Russian agencies during the last election, there has to be a better way of controlling that than placing the power in the hands of a few major corporations. While the White House and Republicans have been trumpeting the boost the economy would get with the passage of the tax bill, they have not addressed the net neutrality change and the damage that it would do to the economy. It would most certainly cause layoffs in the internet industry and it would certainly affect the thousands of self-employed content providers like me.
While it isn’t trickle-down economics like many speak of, it would have the same effect, or at least the effect it is intended to have —fewer people in the workforce, self-employed people making less and therefore not having as much to spend. I am not making these points as a political statement, but as an entrepreneur and economist.