Blog Post

Jan. 8, 2018

Startups Beware: Killing Net Neutrality Will Leave You Gasping for Air

By Tara Matamoros Carter and Laura Ringer


The Federal Communications Commission (FCC) voted 3-2 in a majority vote on December 13, 2017 to dismantle rules regulating the business that connects consumers to the Internet. On January 4, 2018 the final order was issued.

Broadband companies, including Charter, AT&T, Verizon and Comcast, will now have the power to control the Internet including what consumers can and cannot access and how quickly certain pages load.

“Fast lanes” will promise quicker load times and access to customers, but startups may be unable to compete with multi-billion dollar corporations.

Previous administrations went to great lengths to build net neutrality regulations to prohibit broadband providers from blocking websites and charging premiums for higher speeds and access to content.

Without net neutrality oversight, the FCC will no longer regulate high-speed internet delivery as a utility and will instead impose fewer regulations associated with phone services.

Prior 2015 FCC decision

Net neutrality has been a hot topic of debate since the inception of the shapeshifting entity we refer to as the internet. In 2015, the FCC gained strong oversight over broadband providers.

Allow us to introduce the contenders.

Internet service providers (ISP) are the companies that maintain the wires and networks responsible for delivering internet services to businesses and residences in every nook and cranny of our land of opportunity.

And on the other side we have all those internet-based businesses who provide information, education, opportunity and community.

Due to the open, and largely unregulated nature of the internet, these two sides have been battling out issues of speed, security and access in product releases, innovations and mergers. In 2013 Verizon Wireless, AT&T and T-Mobile all blocked the Google Wallet app from being downloaded on their networks, a competitive move they hoped would force subscribers to use their own payment app. And in 2012, AT&T made a decision to remove the limitations preventing iPhone and iPad users from using FaceTime on the network, a response to public uproar and threats to sue.

In 2015, the FCC introduced a new order, changing the classification of ISPs from information service to telecommunication service.

Even as Google and Amazon both promise they support net neutrality, Google continues to block YouTube from Amazon streaming products. Without strong net neutrality regulations and oversight, we can expect to see more competitive moves like this that block access and give preferential treatment to certain companies over others.

President Trump and FCC Formally Back the Removal of Oversight

The Trump administration and newly appointed FCC chairman, Ajit Pai, have long argued against net neutrality regulations. They predict, without government oversight and net neutrality laws, businesses will be freer to innovate and stimulate economic growth.

A net neutrality-free economy could increase business opportunities and spur development of new technologies, while also resulting in a wider variety of ISP service options available to both businesses and residential neighborhoods.

“We are helping consumers and promoting competition,” Mr. Pai said. “Broadband providers will have more incentive to build networks, especially to underserved areas.”

Another FCC commissioner, Brendan Carr, called the prior regulation "heavy-handed" and looks forward to a more competitive landscape for the growing internet industry.

Just Thursday, the FCC released the final text to the repeal of net neutrality in addition to Commissioner Mignon Clyburn’s full dissenting statement.

The biggest loss to the public in this monumental repeal are the regulations that used to prevent ISPs from blocking and slowing websites, creating those paid fast lanes of privilege.

While the White House Office of Budget and Management (OMB) will still have to give their approval before the order passes, it looks like Pai’s plan is soon to be put to the test.

New York and Washington state, among others are already poised and ready to take legal action against Pai’s plan to destroy our free and open internet. And Pai is reported to have pulled out from public appearances at the upcoming Consumer Electronics Show (CES) after threats to his safety.

“So many people rightfully believe Washington is not listening to their concerns, fears, and desires. It saddens me that with the release of this decision rolling back net neutrality, you can add the FCC to the list. In this document, the American public can see for themselves the damage done by this agency to internet openness. Going forward, our broadband providers will have the power to block websites, throttle services, and censor online content. This is not right. To make matters worse, the FCC’s broken and corrupted process for reaching this decision demonstrated extraordinary contempt for public input. In this decision, the FCC is on the wrong side of history, the wrong side of the law, and the wrong side of the American public.” - FCC Commissioner Jessica Rosenworcel

Activists Unite In Fight for Net Neutrality

Activists are demanding Congress issue a resolution of disapproval to put a stop to the FCC order. Under the Congressional Review Act (CRA) Congress has just 60 days to act and will need to secure a minimum two-thirds vote of support in both the House and the Senate.

The numbers are growing as more and more Americans take a stand against the order that would repeal net neutrality across our country. Protests are springing up from coast to coast and on popular websites including Netflix, Reddit, Github, OkCupid, 99Designs, Twitter and Y Combinator who are asking users to join the fight by contacting their local Congressional representative.

We’ve also seen a growth of grassroots efforts like Battle for the Net making it easier to understand the implications of a net neutrality-free internet and displaying live tickers of top activists and efforts.

There are a few politicians in favor of a sort of compromise on net neutrality that would likely include some concession of the laws to be repealed in a less restrictive manner than the previous 2015 law. While not yet clear, such compromise might include protections of ISPs right to charge for fast lanes and paid prioritization in addition to protecting the consumer’s right to access the internet.

There is Much Speculation as to How the Repeal of Net Neutrality Will Affect Startups

Startup founder, Ryan Singel strongly believes, “Pai’s short-sighted plan will crush dreams for future would-be founders.” When he founded startup, Contextly in 2012, Singel had a world of opportunity at his fingertips and paid very little for server space and website hosting.

If net neutrality is repealed per the current intention, it’s possible that businesses would enter a pay to play model that offers faster speeds only to the companies who pay for access to “fast lanes.” More storage and faster loading speeds may only be affordable to giants with deep pockets, leaving startups in the dust and unable to compete.

The death of net neutrality could be the end of opportunity for aspiring entrepreneurs.

Paid Prioritization

Paid prioritization is a major concern for startups. Net neutrality used to regulate an equal playing field where small town bloggers and young entrepreneurs could launch an idea overnight with just a computer and an internet connection.

Without net neutrality laws, we could see a trend of paid prioritization where ISPs charge higher fees to businesses in exchange for visibility. Essentially, ISPs could block small startups lacking funds to pay for prioritization from ever reaching consumers, regardless of the benefits and innovation they may bring to the table.

Paid prioritization could give ISPs like Comcast the ability to demand fees from heavy applications like Netflix in order to adequately run any video on any device powered by Comcast services. Businesses that choose not to comply with demands could see their websites blocked entirely or load at incredibly slow speeds that would ultimately discourage use.

And you bet, ISPs are loving this! Comcast has already removed several statements from their net neutrality page. They no longer promise:

  • Not to throttle speeds of content
  • Not to prioritize traffic or create paid fast lanes
  • Make internet accessible to low income families

Entrepreneurs Rally for Right to Compete

Entrepreneurs with bandwidth-hungry ideas and startups in-the-making have every right to be concerned. Larger companies will likely spend heavily for access to fast lanes, leaving startups unable to rise to the challenge.

We all know fast website load times are essential to hook consumers and keep them engaged. “Milliseconds of difference can leave you at a disadvantage when potential customers are evaluating your product,” explains Tom Lee , the head of policy at Mapbox.

More than 800 startups have already rallied in a formal letter delivered to Pai explaining that young tech companies need a level playing field in order to succeed. They argue, “Our companies should be able to compete with incumbents on the quality of our products and services, not our capacity to pay tolls to Internet access providers.”

“We disagree with commenters asserting that [paid prioritization] is likely to significantly burden edge providers by requiring them to negotiate with hundreds of ISPs because as discussed, paid prioritization is likely to be focused only on applications which require special QoS guarantees, and even among those providers, is likely to be limited to the largest players.” - FCC Report on Restoring Internet Freedom

Singel and others continue to argue that the FCC statement is flat-out wrong.

“Speed matters online. You have to be fast just to compete. Users bounce and customers don’t buy if sites or apps are slow to load or feel laggy. If there are fast lanes, every website, every startup, and every small merchant will have to be in them, not just those that need speed—a k a Quality of Service—guarantees.” - Singel, Contextly founder

Restricted Internet Access Create Unfair Advantages

It’s likely the average American will soon find it much more difficult to access information online. Startups will struggle to reach consumers, students will no longer have access to the wealth of research available for projects and papers, and we may not be able to quickly Google any question under the sun anymore.

Without the protection of net neutrality, ISPs could favor their own business interests, pushing their partner video streaming applications, websites and products over competitors’. Such business practices and favoritism could spell the end for small retailers and startups who may not be able to pay their way to reach consumers. ISPs could have the power to block competitor online stores or slow load times considerably to discourage purchases on certain websites.

Protesters are outraged at this possibility. ISPs are increasingly digging deeper and growing larger in their efforts to create their own original content and they could give preference to their own content over competitor or startup content.

An example is ISP giant, AT&T, and owner of DirecTV, who doesn’t charge its mobile users for data consumed while binge watching DirecTV shows and movies. In repealing net neutrality regulations, the FCC may no longer look into such unfair deals as they once did.

Huffington Post even goes as far as to speculate ISPs could block subscribers from searching for a new ISP, a serious threat to consumer choice.

Higher Prices

Removing FCC oversight on online business will likely result in higher prices for anyone who wants to access anything on the internet. Rule changes will give ISPs incentive to begin charging websites and businesses to reach consumers.

Consumers could be expected to pay a premium for access to Netflix, Hulu, web-based video games, social media and even porn.

ISPs will benefit from both ends, charging businesses for fast lanes and charging consumers for access and acceptable speeds. Such practices could widen the gap between classes in America by restricting and limiting Internet access for low income families and rural neighborhoods.

Under net neutrality, starting an online businesses was more or less unrestricted, providing anyone with the drive and passion the opportunity to see their dreams through to fruition. Internet-based startups may be required to pay a premium to reach ISP subscribers in addition to fast lane fees simply to keep them out of the slow and unprofitable lane. It may become difficult, or even impossible for budding entrepreneurs to get their ideas off the ground, limiting what used to be “The Land Of Opportunity.”

And it’s not just new startups who will suffer either. Existing and successful startup will also be required to pay to play, a move that will likely mean passing on costs to consumers in the form of more expensive subscriptions and add ons.

However, the FCC says that startups have nothing to worry about since venture capitalists (VCs) will pay the fast lane fees for them like they did in the early days of Google, Amazon and Facebook.

"While it is common to claim new entrants would not have the deep pockets necessary to implement such an entry strategy, new economy startups have demonstrated that capital markets are willing to provide funds for potentially profitable ideas, despite high failure rates, presumably because of the large potential gains when an entrant is successful." - FCC Report on Restoring Internet Freedom

But entrepreneurs know that VCs prefer to back startups with solid plans and proven success, not those begging for funds just to be online.

Why we must save net neutrality

The Potential for Increased ISP Options

In creating a more competitive landscape, it’s possible we may witness a growth of ISP options.

“Paid prioritization could allow small and new edge providers to compete on a more even playing field against large edge providers, many of which have CDNs and other methods of distributing their content quickly to consumers.” - FCC Report on Restoring Internet Freedom

Many startups rely on Content Delivery Networks (CDNs) like Amazon Cloudfront, Akamai, Fastly and MaxCDN because of their cheap and even free methods for reaching the masses. Startups are accustomed to scrappy means of acquisition and don’t need, nor can they afford, fast lanes. But, if fast lanes do become the norm, you bet startups will have to adapt and pay fast lane fees to simply avoid being slow.

Premium paid fast lanes could turn out to be just another way for big business to shut startup competitors out, by forcing young entrepreneurs to burn though funds quickly just to keep up

This method is not sustainable and could spell the end for the golden age of startups.

While repealing net neutrality, could, in theory, create more competition in the ISP market, chances are, it won’t. There simply isn’t enough competition between ISPs now and there are still many areas in our country with only one ISP option. It may be wishful thinking to trust the ISPs to offer the best service when they have little incentive to do so.

What Do the Telecom Companies Have to Say About Net Neutrality?

For now, the largest telecommunications organizations including AT&T and Comcast, promise consumers that the online experience currently offered will not change. They did not predict this landslide repeal of net neutrality and are therefore unprepared to expand or upgrade services just yet. But don’t expect that to last long.

A lack of net neutrality oversight unchains these telecom giants from previous regulation, allowing them to bring new packages to market, at will. In the coming months we may see options for businesses to pay for faster services, a cost that will likely translate directly to the consumer.

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