How Does Net Neutrality Affect Your Small Business?
Dan Levenson April 11, 2017
One of the biggest challenges facing small businesses is competition from large corporations, bigger businesses with more money for marketing and distribution, and those who offer the same products and services.
For example, if you’re a small startup that makes your own brand of sportswear, how do you compete effectively with Nike?
Adding to the challenge, there have been attempts by internet service providers (ISPs) like Verizon, Time Warner Cable, AT&T, and Comcast to give preference to bigger companies that provide content on the internet. Essentially, those ISPs have tried to block or slow down content from smaller businesses in favor of bigger businesses, some of which they have a financial relationship with.
In other words, ISPs, if free to do so, would favor bigger over smaller content providers to feather their own nest.
What Is Net Neutrality?
Net neutrality is the idea that the internet should remain free and open, that all content providers (large and small) should have an equal shot at putting their content in front of users, and that users have a right to see whatever content they want without corporate interference.
Needless to say, ISPs with a financial incentive to block net neutrality have challenged it in the courts. Their legal argument has been that the internet is a luxury, not a utility like an electric company, and that the Federal Communications Commission (FCC) therefore has no authority to regulate it.
Enter the Judicial System, and Victory for Small Business
Internet service providers were successful in advancing that argument in a U.S. Court of Appeals decision in 2014. The Court agreed with ISPs that the internet is not a utility, and that it does not therefore fall within the purview of the FCC. That decision essentially gave ISPs the ability to act as internet gatekeepers and make it exceedingly difficult for small businesses to compete fairly.
Fortunately for small business, that decision was overturned in a 2016 court decision. In that case, the FCC prevailed against internet service providers, convincing the court that the internet is, in fact, a utility, not a luxury, and that the FCC can regulate it and enforce net neutrality.
Of course, as is always the case, ISPs are free to challenge this most recent court decision, and some ISPs have already indicated their willingness to take the issue of net neutrality all the way to the Supreme Court.
How Net Neutrality Affects Small Business
For the moment, net neutrality is safe, as are the small businesses that benefit from a free and open internet. If, however, a higher court decides in favor of ISPs, small businesses will suffer, and some will disappear.
Without net neutrality, ISPs can charge companies for internet access. If the FCC can’t regulate the internet, ISPs could charge companies for increased access—for example, by giving higher speeds to those willing to pay, or even blocking entirely those who aren’t.
This cost would be borne by all businesses, large and small. By one estimate, a company like Netflix would incur additional annual costs from $75-100 million.
But Netflix can afford to pay those additional charges (perhaps by passing them on to their customers). Small businesses can’t. Having to pay for internet access could put some small companies out of business. Absent net neutrality, the internet playing field would no longer be even.
According to Forbes, 90% of business startups fail. They fail for a variety of reasons, from poor management to weak product/market fit. For many, the cause is lack of sufficient financial resources.
Small businesses need every advantage they can get to succeed, whether that means a business-friendly tax code, help in avoiding legal problems, or the ability to compete fairly with those larger businesses that have been around longer than they have.