The Net Neutrality Ruling and Small Business

By Pedro Hernandez | Posted January 24, 2014

Network neutrality is dead. Or is it?

The "Open Internet" is back in the news after The U.S. Court of Appeals for the District of Columbia sided, on technical grounds, against the U.S. Federal Communications Commission (FCC) open network rules governing Internet traffic. Should small businesses, particularly those that earn their money online, be worried?

Common Carriers Versus Internet Service Providers

First, it helps to examine what led to this situation.

FCC regulations require that common carriers (utility companies such as phone service providers) treat all the data packets traversing ISP networks equally. However, in response to an appeal by Verizon, the court's judges determined that the FCC could not impose those same regulations on Internet Service Providers.


"Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such," stated the court's Jan. 14 ruling. Bottom line: ISPs are classified as providers of "information services" and not classified as common carriers.

Thus, on what is generally considered a technicality, the court struck down the FCC's authority on the matter. "Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order," stated the court.

Randal Milch, executive vice president, public policy, and general counsel for Verizon, declared in prepared remarks that "the court found that the FCC could not impose last century's common carriage requirements on the Internet, and struck down rules that limited the ability of broadband providers to offer new and innovative services to their customers."

The court, however, did nix another of Verizon's argument: that the FCC lacks the authority to govern broadband ISPs. Milch prefaced his statements by saying that the court "rejected Verizon's position that Congress did not give the Federal Communications Commission jurisdiction over broadband access."

The aftermath of this legal case could be game-changing, even if it hasn't quite materialized yet.

Will Companies Have to Pay to Play?

One of the biggest concerns among businesses, both big and small, is the fear that broadband providers will charge businesses a premium to guarantee that their traffic rides in the fast lane, so to speak. Companies with modest budgets could, hypothetically speaking, be relegated to the slow-poke lane, and their customers subjected to a choppy slideshow instead of a fluid product video or other streaming media.

Another fear is that gutting the FCC's net neutrality provisions could potentially give rise to anti-competitive practices. ISPs could, for instance, ink exclusivity deals and slow or limit the traffic of organizations that directly compete with their top customers.

In effect, the Internet economy's low barriers to entry could become a thing of the past. How can a mom-and-pop storefront compete against deep-pocketed megamarts?

Small businesses aren't the only ones that may feel the impact of an ISP industry that is not beholden to Open Internet rules. Streaming giant Netflix is a strong proponent of net neutrality.

"In principal, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide," stated Netflix CEO Reed Hastings and CFO David Wells in a Jan. 22 letter to investors. "The motivation could be to get Netflix to pay fees to stop this degradation."

If such a scenario would come to pass, the popular streaming company plans to fight back. Netflix's executives said "we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver." It is the company's position—and undoubtedly that of many companies that rely on the Internet for their revenues. "Netflix and consumers are best served by strong network neutrality across all networks, including wireless."

Net Neutrality: What Happens Next?

Verizon's Milch said in his statement that the court's "decision will not change consumers' ability to access and use the Internet as they do now." His company, he added, "has been and remains committed to the open Internet, which provides consumers with competitive choices and unblocked access to lawful websites and content when, where and how they want."

Of course, Verizon doesn't speak for all Internet Service Providers. FCC chairman Tom Wheeler, however, has a message for the industry at large.

The FCC "is not going to take over the Internet," or for that matter, "do anything that gratuitously interferes with the organic evolution of the Internet in response to developments in technology, business models, and consumer behavior," said Wheeler in a written statement. He added that his agency "is not going to abandon its responsibility to oversee that broadband networks operate in the public interest."

The agency, he made clear, will use its authority to combat discriminatory and anticompetitive actions. The FCC "will not disregard the possibility that exercises of economic power or of ideological preference by dominant network firms will diminish the value of the Internet to some or all segments of our society."

"My intention is to employ any necessary means among the wide variety of them given to the FCC by the Congress to sustain our jurisdiction," said Wheeler. "That the jurisdiction exists is not debatable," he added, echoing the court's findings.

In a nod to businesses that rely on net neutrality, Wheeler recounted a recent speech he delivered in Silicon Valley. He told those in attendance that he was "committed to maintaining our networks as conduits for commerce large and small, as factors of production for innovative services and products, and for channels of all of the forms of speech protected by the First Amendment."

For the moment, the industry is in somewhat of a holding pattern. Wheeler's comments indicate that the FCC will pursue ways of maintaining a level playing field on the Internet, which may take a while. Stay tuned.

Pedro Hernandez is a contributing editor at Small Business Computing. Follow him on Twitter @ecoINSITE.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

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