Net Neutrality and Its Effects on U.S. Business

Net neutrality has been the law since 2015. However, the Federal Communications Commission (FCC) now has proposed repealing net neutrality and the vote will occur in mid-December.  What is net neutrality, and what will the effect of repeal on U.S. businesses likely be?

Net neutrality may be repealed soon.

What It Is

Net neutrality is a broad term referring to regulations that do several things. According to the New York Times, the goal when the Obama administration passed net neutrality was to treat broadband cable service in a manner analogous to other utilities like gas and electric or water.

The rationale was that access to broadband cable was imperative for access to information, education, and economic opportunity such as jobs — that to be without internet access, or to have slow or intermittent service, was analogous to being without heat or water in the contemporary world

Second, broadband cable providers were prohibited from prioritizing their own content or services or from blocking other content or services.

Net neutrality has met with concerted opposition from large cable providers like Comcast and ATT, who argue that net neutrality disincentivizes them to invest in improved and innovative equipment and services.

Their arguments have met with favor in the current administration and the new FCC head. Both believe in deregulation. The current FCC head, in particular, would like to repeal the rules. Cable companies would be able to offer price-tiered services and they could prioritize their content and block other content, although they would have to disclose that they were doing so.

What Are the Likely Effects of Repeal?

Once you have this thumbnail sketch of net neutrality and the debate in place, you can see the likely effects of repeal.

Broadband providers like Comcast and ATT would benefit. They might invest more in innovating and improving their services.

However, other companies might be hurt by the repeal of net neutrality.

First, companies whose content is blocked or effectively deprioritized might see their access to an audience, and thus access to revenues, drop.

Second, a repeal may hurt revenues across the board for many companies that depend on the web. Even digital titans like Facebook and Netflix have come out against repeal.

Why? Well, many organizations that oppose repeal do so because they fear that repeal of net neutrality rules will cause broadband providers to institute pricing or access differentials that will eventually result in a two-tiered system. One tier will have broadband and rapid and complete access to the digital world. The other may not.

If that happens, large companies whose business is web-based, like Facebook, Netflix, Amazon, and Google, could see their customer base — and thus their revenues — reduced.

Third, a two-tier system and the potential of blocking would harm smaller businesses and start-ups disproportionately. Large tech companies may see falling revenues, but their revenues would still be robust. Smaller companies may not be so resilient. Start-ups relying on web-based customers may end up failing.

The climate for web-based start-ups may be less hospitable than it has been, so innovative from nimble smaller companies could be negatively impacted as well.

Fourth, people with less-than-affluent means may be negatively affected. They may lose or become unable to afford meaningful broadband web access. This is especially true for those in areas that lack competition among cable providers.

Net neutrality is a hotly debated issue. The rules establishing it face repeal soon, and the ultimate effects, if it is repealed, may benefit some U.S. businesses but hurt others.