Executive Financial Management

According to the pundits, the Dec. 14 move by the U.S. Federal Communications Commission to repeal existing net neutrality rules is either a major blow to free communication or a storm in a teacup. Perhaps the truth lies somewhere between these polarizing viewpoints.

It appears that those who supported dismantling the rules put in place to ensure equal access to the Internet (a concept usually known as “net neutrality”) and those who wished them to remain want the same things. Both sides say they are opposed to Internet Service Providers putting discriminatory practices in place to slow down or block certain content, and neither wants ISPs to charge users more to see certain websites. The disagreement appears to center on how fair play on the Internet should be enforced and who exactly does the enforcing. Not surprisingly, President Trump’s appointee to the FCC, Chairman Ajit Pai, believes less government regulation will be more beneficial, and that broadband should not be regulated as if it were a utility.

Most software companies disliked the FCC’s recent repeal of the Obama era regulations. Many small business owners and entrepreneurs also voiced their opposition to the repeal, fearing that the big ISPs will take advantage of their “gatekeeper” role. On the other hand, telecommunications companies were glad to see them repealed. The naysayers believe there are clear dangers in allowing market players to also be guardians of net neutrality. They argue that big telecom companies are already dabbling in preferential Internet usage practices to steer consumers to their sister companies and that Pai’s repeal opens the door for more ploys of this nature.

Here’s some of the history behind the headlines and some of the key issues to ponder:

• Before 2015, Internet Service Providers were governed by general laws regarding anti-competitive policies and consumer protection. In 2015, under President Obama, ISPs were classified as utilities and so-called net neutrality rules were put in place to stop ISPs from slowing down service, blocking access or requiring payment to favor certain content providers.
• When Ajit Pai, who had voted against the 2015 reclassification in his role as an FCC Commissioner, was nominated by President Trump to take over the top job, industry observers knew a reversal was on the horizon. Pai contends that heavy-handed government regulation inhibits innovation and investment.
• Net neutrality existed prior to launch of the 2015 regulations. It might be argued that now, in 2017, we are back to pre-2015 conditions and that there is no call for the alarmist clamor.
• On the other hand, Pai’s critics note that a neutral Internet is not guaranteed to last. Major companies already are deploying preferential usage patterns to boost sales – for example, AT&T customers who access DIRECTV Now (which AT&T owns) are able to do so without that access counting as part of their data package. AT&T competitors like T-Mobile and Verizon also have similar setups. This practice – zero rating – was scrutinized by the FCC under the Obama era regulations but, following Pai’s repeal, it isn’t any longer. Vertical integration by major ISPs is on the increase, and there could be a strong incentive for these industry leaders to favor their own content over all-comers.

Lawmakers have the power to overturn this recent decision, and to propose their own laws to provide some stability to the regulatory environment. Small business owners who want to see a fair and level playing field will want to continue to monitor this situation.