Digital Commerce Looks For Clearer View in Net-Neutrality Fight

Obama-era net-neutrality Internet rules have been officially repealed, leaving businesses and average Internet users wondering what will happen next when they go online.

Ajit Pai, the Republican-appointed chairman of the Federal Communications Commission, said the repeal, which went into effect on June 11, would help pave the way for “better, faster, cheaper Internet access” by dropping cumbersome restrictions.

Jessica Rosenworcel, an FCC commissioner nominated by President Barack Obama, said the repeal would damage the online experience. “Internet service providers now have the power to block websites, throttle services and censor online content. They will have the right to discriminate and favor the Internet traffic of those companies with whom they have pay-for-play arrangements and the right to consign all others to a slow and bumpy road,” she said.

After the net-neutrality repeal, business chiefs such as Dave Watson, chief executive officer of Comcast Cable, insisted the business of watching a video on a computer or selling a dress online has not changed.

“I want to make sure our customers have the facts about their Internet service with all the recent news about an open Internet and net neutrality. Nothing about Comcast’s broadband service changes as the FCC’s recent net-neutrality order goes into effect today. Your Comcast service isn’t different today. And it won’t be different tomorrow,” he wrote in a blog.

Verizon said the FCC policy won’t cause rate changes. “Product and service rates are subject to change at all times, but a potential change has nothing to do with open Internet rules,” said Richard J. Young, a Verizon spokesman.

But some businesses and consumers are worried that changes are on the horizon. These include “zero rating,” or the policy of some sites being exempt from higher costs and extra fees being charged for visiting other sites. Internet service providers (ISPs) might “throttle” some sites or cause them to load slowly, which would make many people avoid the site.

In a fashion business that increasingly relies on digital commerce, changes to the Internet create confusion, said Syama Meagher, the owner and chief retail strategist of Scaling Retail, a Los Angeles–based consultancy. “There’s a lot of uncertainty,” she said. “It leaves a lot of brands in the dark.”

Some of her clients have asked how the repeal will affect posting content-rich media such as videos. But the majority of digital content for most fashion brands comprise still pictures on shopping sites, and these pictures don’t take up as much bandwidth, she said.

But many are concerned about how possible changes will play out. “Small to medium-sized companies have to push harder to get visibility in general. This will make it harder,” Meagher said.

Jeff Van Sinderen, an analyst for B.Riley FBR, said the repeal could favor bigger companies. “Some of the larger retailers arguably have the wherewithal to strike deals with ISPs to pay for fast access. Smaller retailers that do not have the resources could be at a disadvantage. We will see how it plays out, but the new rules certainly bring up some concerns,” he said.

Judah Phillips of the data and analytics consultancy SmartCurrent said the new rules can gnaw at a company’s bottom line. “For example, ISPs could charge retailers additional costs for making their sites work quickly on the ISP’s network. This cost could be passed through to consumers in the form of increased prices or reduced margins to shareholders. Additional costs could act as barriers to entry for new entrants in e-commerce where margins are already thin,” he said.

There’s enough concern about the repeal that state and local governments are exploring laws to preserve Obama-era rules. Mayors of 108 U.S. cities and Santa Cruz County, south of San Francisco, have vowed to require groups working with their cities or using city services to uphold net-neutrality rules, according to the National Regulatory Research Institute, a research division in Washington, D.C., for the National Association of Regulatory Utility Commissioners.

About 35 states have sought to preserve net-neutrality rules. The California Senate passed one such bill, Senate Bill 822, by a 23–12 vote on May 30. On June 20, a hearing is scheduled in the state Assembly on the bill, which could be voted on by August.

“Specifically, SB 822 prohibits any practice that hinders or manipulates consumer access to the Internet to favor certain types of content, services or devices over others,” Wiener said.

State and local laws, however, conflict with the FCC. A provision in the FCC’s repeal exempts states from making their own net-neutrality laws. Supporters of state and local measures contend that their laws will hold up on judicial review. In May, the U.S. Senate passed a measure to uphold net neutrality in a 52–47 vote. A similar bill was introduced in the U.S. House of Representatives. No vote has been taken on it.

The brewing legislative fight and the shifting ground has some apparel executives who rely on e-commerce in a quandary. One of those is Jeff Shafer of Bluer Denim, who is taking a wait-and-see attitude to see how it plays out. “It’s too hard to predict,” he said.