3 Ways the Net Neutrality Repeal Can Damage Your Business
Web traffic, conversions and operations will all be impacted.
Running a startup or a small business is hard, and with the Federal Communications Commission’s (FCC) net neutrality repeal, it’s about to get a lot tougher. The repeal affects internet-based startups, companies running ecommerce stores and all businesses with any web presence -- even just a static website.
On December 15, 2017, the FCC repealed its net neutrality rules of 2015, which had prohibited ISPs from blocking or throttling, or slowing down, any websites or apps, as long as the content was lawful. The 2015 rules also prevented ISPs from engaging in paid prioritization -- i.e., creating fast data transmission lanes for specific types of content -- in exchange for premium pricing from companies and consumers, and creating slow lanes for those who pay less.
Paid prioritization now gives ISPs the right to create differently priced internet packages based on the type of content consumers wish to access. Only consumers on premium packages would get to access all sites at normal speeds. Those paying less would only get access to a handful of sites at normal speeds and the rest will be slow.
From a business’ standpoint, paid prioritization means that ISPs can ask companies to pay in order to have their websites run at normal speeds. This might not make much difference to large corporations with deep pockets, but startups and small businesses would certainly find this challenging.
Here are three major ways in which the net neutrality repeal can damage your business.
1. Decrease organic and paid traffic.
Site speed plays a huge role in traffic acquisition. According to a study by Section.io, if your site takes 2 seconds to load, the average bounce rate is 9.6 percent, but at 4 seconds, the bounce rate almost doubles to 17.1 percent. Throttling or paid prioritization would slow down your website further, making most visitors leave even before it loads.
What if your primary source of traffic is ads? Unfortunately, paid prioritization would slow down your landing pages too. A large chunk of your advertising dollars would be wasted on visitors who click but leave after getting tired of waiting for your page to load.
2. Reduce conversions.
Several studies have indicated that slower websites lead to fewer conversions, directly affecting revenue. For example, it is estimated that a page slowdown of just one second would cost Amazon $1.6 billion in sales each year.
This is bad news not just for ecommerce businesses, but also for SaaS companies trying to get sign-ups on their websites.
3. Diminish performance and user experience.
Blocking and slowdowns will affect all internet-based software and mobile apps.
For instance, text messages were never explicitly protected by the FCC net neutrality rules. Karyn Smith, general counsel at Twilio, told me in an email, “Each year wireless carriers block over 100 million text messages consumers have opted in to receive. Carriers urge them to move to the short code system, which is 500 times more expensive. Once they pay for access to that fast lane, suddenly the messages that were being blocked go through.”
Smith believes the net neutrality repeal will now allow ISPs to engage in similar activities with other applications such as SaaS tools, audio/ chat/video communication tools, Internet of Things (IoT) applications, etc. Consequently, many applications would not perform optimally, or might even get blocked.
Before the net neutrality rules came into effect in 2015, there were several violations. AT&T had blocked FaceTime unless customers upgraded their plans and Verizon had blocked Google Wallet to promote its own payment service. The repeal will now allow ISPs to renew these practices.
When will this take effect?
The net neutrality repeal is not yet effective. The FCC’s new rules must first be published in the Federal Register -- which hasn’t happened yet -- after which it will take 60 days for it to come into effect. As Jon Brodkin from Ars Technica writes, “That means the current net neutrality rules could technically remain on the books until April 2018, although the FCC leadership won't be going out of its way to enforce them in the meantime.”
When the new rules come into effect, ISPs might initially take an indirect route to target small businesses. Ryan Singel, a media and strategy fellow at Stanford Law School’s Center for Internet and Society and founder at Contextly, told me in an email interview that ISPs will “most likely try to get access fees from intermediaries such as Level 3, Cogent, etc., that deliver traffic for thousands of other sites. These are companies that traditional webhosts contract with to connect to the larger internet and eventually to consumer broadband networks.”
Singel believes they will target intermediaries because “it's simpler to try to get payment from just a few players who then have to pass the costs backwards to web hosts and then companies.” Moreover, “these kinds of negotiations are typically behind the scenes and there's too much political pressure right now for ISPs to be caught trying to shakedown individual companies.”
Who is opposing it?
The good news is that the FCC and ISPs are now facing intense opposition on several fronts.
Twenty-two states including New York, California and Mississippi are suing the FCC over the ruling. The Internet Association -- a group of tech companies including Amazon, Facebook, Google and more -- is also planning a lawsuit.
The Governors of New York, Montana and New Jersey have made executive announcements that their states will not purchase contracts from any ISP that violates net neutrality. California has introduced a bill to uphold net neutrality and Seattle is about to follow.
The Senate is now shy of just one vote from overturning the FCC ruling. This legislation faces steeper obstacles in the House, and then if President Trump vetoes it, it will require a two-thirds majority in Congress. However, just the Senate vote can still be a victory because it can be interpreted by courts as the will of the people and is likely to influence judgments.
And finally, there’s public opinion. Eighty-three percent of voters, including 75 percent of Republicans, are in favor of net neutrality.
Rally more forces.
What can you do to support state governments, politicians, tech companies and advocacy groups to restore net neutrality?
Build more awareness about the issue by speaking to your local startup and small business groups. Educate your customers and social media followers on the implications of fast/slow lanes in simple terms like Burger King did in this video. Express your concerns to your local political representatives, support advocacy groups financially or join lawsuits.
The FCC repeal can cause substantial damage to your business, but you have to power to act and restore internet freedom -- and protect your company as well as millions of other American small businesses.
Entrepreneur Editors' Picks
Crypto Doesn't Have to Be Serious. Just Ask This Comedian Who Organized a Conference About Failure in the Industry.
Want to Succeed? Turn Your Fixed Mindset Into a Growth Mindset.
Google's CEO Is Asking Employees 3 Simple Questions to Boost Productivity
'Greatest Storyteller Wins.' Katy Perry on the Surprising Link Between Pop Stardom and Entrepreneurship.
The 5 Personalities You Meet in a Coworking Space
'Man's Best Friend' — and Investment: The Thriving Industry of Pet-Related Franchising