Net Neutrality Repeal Expected To Drive Up E-Tail Costs
The Federal Communications Commission voted 3-2 to overturn the current “net neutrality” regulations. Opponents of the Dec. 14 vote said it could spell disaster for small businesses that might be charged higher prices to access the Internet.
“The more you place restrictions, the easier it is for existing businesses to dominate and harder for new businesses to be born. That’s bad,” said Greg Selkoe, chief executive officer and founder of Wanderset (www.wanderset.com), a West Hollywood, Calif.–headquartered e-commerce business using content such as video to sell men’s clothing.
The terrain of a post-net-neutrality world remains uncharted territory. “There is so little information on how it will work,” Selkoe observed.
Many believe the rollback on regulations will allow companies controlling access to the Internet to choose who has fast and who has slow connections. Internet-service providers would wield a lot of influence on how much customers pay.
In an open letter to the FCC, a group of 1,000 small businesses from around the U.S. wrote: “Without net neutrality, the incumbents who provide access to the Internet would be able to pick winners or losers in the market.”
Ajit Pai, the Republican chairman of the FCC, is a proponent of rolling back net-neutrality regulations, arguing that crucial innovation has been stifled because of the current rules during this age of major technological change. He believes a freer market will create the best environment to build future communications networks. Changes in rules also will allow Internet-service providers to negotiate payments from larger-bandwidth users such as Netflix and offer different prices and speed packages to consumers.
Syama Meagher, chief retail strategist of the Los Angeles–headquartered Scaling Retail consulting firm, anticipates that after an anticipated net-neutrality repeal, Internet-service providers will jack up prices.
Retailers unable to afford increased prices will lose out on some opportunities, Meagher said, especially in a rich-media environment increasingly focused on video. “If it doesn’t load in one to three seconds, people will lose interest,” she said. Consumers will move onto other e-commerce sites.
E-tail websites with slow loading times will ultimately find themselves dropping lower on search-engine rankings. It’s an unfortunate development for these businesses because most people don’t go further than the first page on a search engine, Meagher said.
If a rollback of net neutrality drives the cost of business higher, it could drive some smaller businesses out of the market, Meagher noted. Another consequence could be that businesses might revert to old-fashioned marketing techniques by resorting to print catalogues, mailers and flyers. Meagher forecast that if fewer dollars were invested in SEO (search engine optimization) marketing, businesses might invest in more experiential marketing like pop-up shops and “influencers” such as bloggers to tell their brands’ stories.
The repeal of the net-neutrality regulation could create new businesses. “There will be agencies that pop up that help companies to combat barriers put up by the government,” Selkoe said.
One outcome of rolling back net-neutrality rules could be that businesses will increase their prices for goods and pass it on to the consumer, said Judah Phillips, founder of SmartCurrent, an analytics and data-science consultancy headquartered in Boston.
“Consumers and businesses may not have an option. What are you going to do? Close down your Internet? The demand for the Internet always will be there. It’s similar to oil. People will always pay the price for oil because there often isn’t a substitute. They simply need oil. Similarly, there is no ‘alternative’ Internet,” Phillips said.