Ending Net Neutrality Will Hurt Startups and Small Businesses

By: Michael Rummel

The FCC is preparing to cripple the greatest information and media revolution since the printing press.

As a place for unfettered access to knowledge and connections to people and ideas from around the world, the internet gave rise to entire segments of the economy once completely unforeseeable and now utterly indispensable. Businesses small and large rely on internet freedom. Repealing net neutrality hurts everyone from small business owners to netflix users. Internet providers could, and would create a tiered internet service that would provide preferential treatment to larger corporations that could pay more for access, or for content created by the internet providers themselves.

Major news outlets have done some great reporting on this, but it has been largely overshadowed by the deluge of news and scandal that has become the norm of the Trump Administration.

Part of this comes down to how doggedly Ajit Pai’s FCC has pursued repealing the regulations currently in place on telecom providers. While the news cycle whips the nation’s focus from one headline to the next, Pai has kept his sights trained on Title II restrictions. Essentially, these regulations ensure that broadband companies provide fair and open access to all sites and platforms, rather than charging different prices for packages, like they do in the television market (A more detailed explanation can be found here).

An ideal world with true competition between internet providers would likely render the regulations unnecessary, but we don’t live in such a world. Most Americans have few or no real choices for their internet, particularly in rural and underserved areas. These regulations are likely the only thing keeping companies like Pai’s former employer, Verizon, from exploiting their oligopolic control of the market.

There is also no real need profit wise, as broadband companies are far from struggling. Comcast reported $2.5 billion in profits, Verizon $3.45 billion, and Time Warner 1.2 Billion. It’s naked greed that’s driving this move, and it will hit everyday Americans in both their wallet and their access to information. Claims from these companies that they wouldn’t seek to extract profits and limit access are demonstrably false.

A rollback of these regulations could also be devastating for startups and new organizations like The Common Courtesy. We’ve invested our own money and considerable time into getting our site running and producing content. We view our ambition – to provide a platform for bi-partisanship, independent thought, and reasonable debates to try and create common ground in a toxic political environment – as a noble and necessary one. However, we are reliant on a free and open internet to spread our message and content.

How can our site, and those of other dreamers and entrepreneurs, expect to expand, grow, and contribute to the economy and the nation at large if access to our site and ideas are hobbled? Repealing net neutrality will only further entrench the power of current media conglomerates, and limit new perspectives and voices. The concern here is one that will only grow larger, as nearly 40% of Americans use the internet as their main source of news, and that number is only increasing.

This proposed rollback manages to tie the three issue of monopolies/oligopolies, freedom of speech, and small business entrepreneurship in one. A vote to end it would empower these monopolies and oligopolies, hinder free speech, and inhibit entrepreneurs. To be honest, I can’t think of anything more anti-American.

I urge anyone that values innovation, free speech, and economic competition to call, write, and/or email your congressional representatives. If you can, join organizations fighting to keep net neutrality, and attend protests to ensure the FCC and members in Congress know how the American public feels about this.

We live in a time of media madness, exclamatory chyrons, and ceaseless “breaking news” updates, but no amount of hyperbolic rhetoric could come close to expressing the severity of this situation.

The future of the American internet is at stake.      

Walker Marlatt also contributed to this article. 

1 thought on “Ending Net Neutrality Will Hurt Startups and Small Businesses

  1. Hey guys, love the site, and I’m rarely shy about criticizing the Trump admin, but unfortunately, I think the arguments proffered in this article are a bit specious.

    First, the tendentiously monikered “Net Neutrality” was enacted a mere two years ago, well after “the greatest information and media revolution since the printing press” was demonstrably doing just fine and at a time when it was incontrovertibly great to be an Internet consumer.

    Second, the FCC’s decision doesn’t give ISPs carte blanche; in fact, it actually increases the requirements strengthens the govt’s power of oversight by restoring the authority of the FTC (the anti-competition cop that patrols the rest of the US economy, making it the logical choice, and the very same agency which actually brought the largest net neutrality charge to date in, 2014 AT&T Mobility) to regulate ISP’s business practices (including consumer privacy, which was stripped by the FCC’s 2015 regulation). Moreover, this reversal will once again allow the FTC to work in concert with the Department of Justice and State Attorneys General, as well as the FCC, which the Obama-era decision made impossible. Given its considerable prowess in enforcement (some 500 actions against ISPs) and consumer protection (its ability to recover funds for consumer), the restoration of the FTC’s authority to police the internet should be welcome.

    Third, claims that ISP’s will attempt to threaten 1st Amendment rights are alarmist and hyperbolic. Broadband providers have never blocked content with which they disagree, and any attempt to do so would undoubtedly face public condemnation. Likewise, concerns about ISP’s favoring their own content are overstated, as the current stance is to block “vertical” mergers between providers and content creators, e.g., the recent decision to block the Time Warner-AT&T deal (remember, anti-trust laws still apply). Moreover, broadband providers have strong counterincentives not to block or degrade content, because the more content a consumer can reach online, the more valuable the connection is, and the more the consumer is willing to pay for it. Are there still other countervailing incentives? Sure, but luckily…

    Left out of most news coverage is the fact that the FCC’s decision will actually strengthen the most important pillar of “Net Neutrality”: TRANSPARENCY. Under the new proposal, ISPs have to disclose information about their practices to consumers, entrepreneurs and the commission. So, worst-case scenario, we show a little restraint and regulate as needed.

    Which brings me to what is really the strongest argument against “Net Neutrality”: As a general rule, preemptively regulating hypothetical problems out of existence is bad public policy, if for no other reason than because it discourages broadband providers from investing in innovative business models. Case and point, the the FCC’s 2015 ruling prohibited prioritization that actually could have benefited consumers. Different applications have different sensitivities to congestion; a marginal delay in packet delivery may be imperceptible to someone browsing the web but can erode the quality of a video stream or a telemedicine app. Prioritizing these packets could improve the experience for Netflix users or rural doctors, without adversely affecting users of congestion-insensitive services. But the FCC’s heavy-handed regulation enjoined such pro-consumer traffic optimization out of fear of anticompetitive abuse.

    Furthermore, on a more fundamental level, preemptive, heavy-handed regulation is just bad microeconomics, in that it will likely rob both producers and consumers of possible ‘surplus’, or the personal utility they derive from providing and consuming the good/service in question. Think about an allegorical example: Think about it: forcing providers to run every packet at the same speed for the same price, instead of allowing the ‘invisible hand’ of free market supply and demand to organically set the price, effectively amounts to an artificial price ceiling – which, as any UGA economics major could tell you, causes suppliers to reduce quantity supplied relative to quantity demanded, thus by definition creating a shortage and a concomitant loss in utility for both parties.

    I’ll use a great Georgia company, UPS, as allegorical example to demonstrate how well-intentioned but poorly planned regulation like Net Neutrality is inimical to consumer interests. When you’re sending a package through UPS, you can pay the standard rate, and you will receive the standard delivery service of a few days; of course, if you really need your package to get there quickly (i.e., you VALUE the speed more than someone who’s not in a hurry), you can pay a higher rate and UPS will happily oblige, because the price is commensurate with the service they are providing. Now imagine if the U.S. government, with its heavy-handed self, decided to step in and classify package delivery not as a regular service but as a utility, thereby stripping the FTC’s regulatory authority over UPS (and its competitors, like Fed Ex) and handing it to the FCC, who was not only poorly equipped to handle the job but who also decided that package delivery companies had to offer every service, including express delivery, at the same rate, regardless of the fixed and marginal costs they incur while providing those services. What would happen? Well, UPS would make the rational decision to discontinue offering high-speed deliveries, or at least to quit delivering to high cost (i.e., rural) areas, and if things got bad enough it would likely shut down.

    While there are, of course, notable differences between package delivery companies and ISP’s, the fundamental principle still applies — and with remarkable similarity. Contrary to conventional thinking (i.e., the popular media’s superficial coverage of a very complicated issue), which asserts that poor, rural Internet consumers will suffer from the FCC’s policy reversal, in reality the opposite is true. Even before 2015, ISP’s were reluctant to provide high-speed Internet to sparsely-populated areas, because the costs (i.e., heft investments into necessary infrastructure, like high-speed fiber optic cable, etc.) simply outweighed the benefits, hence the reason so many rural folks still use Internet services like dial-up (yes, I said dial-up). Net Neutrality only exacerbated that problem.

    However, as the associated costs naturally diminish, as the U.S. government hopefully makes long-overdue investments into infrastructure, and as ISP’s continue to grow, innovate, and experiment with new business models that offer personally-tailored plans that allow consumers to pay the price at which they value the services provided (e.g., Sprint’s low-cost wireless plan with unlimited talk, text, and access to the social media plan of the subscriber’s choice, likely an ideal option for children whose parents would rather not pay for unnecessary services, but which Sprint pulled in response to Net Neutrality).

    Of course, in practice these things are rarely as simple as an econ 101 example on the white board, and even the most learned economists’ analyses sometimes fall flat. But again, tI refer you to my previous points, namely the re-empowerment of the FTC and the still intact requirement for transparency. If the government waits for the market to run its course, it will still have all its cards to play in the event that my analysis was wrong. Hastily playing those cards through heavy-handed preemptive regulation, however, eliminates that possibility.


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