The Potential Business Impacts of the Trump Administration’s Proposed Net Neutrality Rollback

The Potential Business Impacts of the Trump Administration’s Proposed Net Neutrality Rollback

June 13, 2017

Net Neutrality Defined

The concept of net neutrality originated as a proposal to require internet service providers (ISPs) to treat all data equally. In its 2015 Open Internet Order, the Federal Communications Commission (FCC) memorialized the concept in a set of rules that include bans on blocking, throttling and paid prioritization. Currently, an ISP can’t prioritize one company’s traffic – including its own – over a competitor’s, nor can it slow down the traffic of a particular service or block the content of certain providers. To the extent an ISP controls traffic at all, its practices must constitute reasonable network management.

The Rollback Proposal

The current net neutrality framework may change following the release of the FCC’s draft Notice of Proposed Rulemaking (NPRM) – “Restoring Internet Freedom” – on April 27, 2017. Proposed by Ajit Pai, a long-time Commissioner appointed by President Trump to chair the FCC in late January, the NPRM opened a dialogue about whether to end the existing regulatory scheme, including whether to retain, modify or eliminate the bans on blocking, throttling and paid prioritization. Chairman Pai has consistently opposed the rules and voted against the Open Internet Order two years ago. Now enjoying a Republican majority, the FCC adopted the draft NPRM on May 18, 2017, voting 2-1 along party lines.

Potential Consequences of the Rollback

If the FCC suspends the rules, ISPs will be free to offer faster service to customers that can afford to pay more or to provide their own services at significantly faster rates. Whether the ISPs will take advantage of these opportunities remains to be seen. And, while much of the discussion surrounding net neutrality often focuses on impacts to individuals accessing the internet at home to watch movies, stream sporting events, and binge-watch an entire season of must-see TV in a single weekend, businesses should also be a part of the conversation.

Practically, deregulation may simply make it more costly for any business to purchase the host of internet-based services relied on by today’s businesses – voice over internet protocol telephone systems; cloud storage; website hosting; payroll administration; and credit-card processing. In determining whether to pay for access to the express lanes, small businesses, in particular, could feel the effects of a deregulated information highway.

A larger company with the resources to negotiate favorable deals with ISPs may not notice much of a change in its bottom line and, if it does, can pass those costs through to its extensive customer base. A small business, however, may not be able to afford the increased fees necessary to ensure prioritization for its data and will have to convince customers to bear the burden of those added costs. And, because prioritization also can impact what customers searching for products and services see first and most often, startups may encounter additional challenges in getting the next DropBox or Skype to market.

Across the aisle, proponents of the rollback object to the rules for favoring some sectors of the telecommunications market at the expense of others and argue against a government role in addressing minimal evidence of market manipulation or other behavior that would warrant regulating ISPs like public utilities. Supporters contend that market forces will work appropriately to maintain an open internet, just as they did before the 2015 adoption of the rules, and that antitrust laws will serve to address any marketplace failures impacting competition and, ultimately, consumers.

Join the Conversation

The NPRM, which has already received almost 5 million public comments, remains open for further comment through July 17, 2017. To join the conversation, click here, then click on “Commission Documents” to review the FCC’s proposal and related information and “+ Express” to leave a comment.

<< Back to White House Watch home