Net neutrality: Will new laws kill your small business?

Business, Money, News, Politics

Establishing your small business can be stressful enough. What’s your business plan? How will you finance it? What licenses will you need? And, of course, you’ll need to get that website up and running ASAP for a competitive online strategy.

But soon there will be a new variable in play: Net neutrality—or, rather, the lack thereof. On July 19, 2017, the Trump administration endorsed preliminary action by the Federal Communications Commission (FCC), which is now under Republican control, to undo the net neutrality rules it had approved in 2015.

Cutting through the underlying technobabble, here’s what net neutrality means—and why it’s important to your small business.

Competitive disadvantages

With net neutrality, all data—especially ecommerce data—share the same “pipeline.” No one company can send data faster than any other. You’ve probably heard net neutrality compared to the way electricity and other utilities are delivered. These analogies contend that the internet is as vital to your business as are power and water. And often, that’s absolutely the case.

Take away net neutrality, as the FCC is now proposing, and internet service providers can direct data transmissions into fast lanes and slow lanes, charging a higher fee to businesses that opt for the speedier advantage. And that will give bigger enterprises a competitive edge over small businesses, many of which will be hard pressed to pay a premium fee for faster internet commerce.

“Net neutrality allows small businesses to compete against the largest, most profitable corporations,” former FCC chairman Tom Wheeler co-wrote in a Washington Post op-ed in April.

The rise of Amazon

Think about the early days of Back in 1994, before net neutrality was even a thing, financial analysts dismissed the fledgling bookseller, expecting well-established brick-and-mortar bookstores, like Borders and Barnes and Noble, to eventually get online and wipe Amazon off the map. We all know how that turned out.

Way back then, Amazon founder Jeff Bezos had no worries, because, even with a 2400-baud modem, you could access as easily as you could access any other website in the world. The internet truly was a free-for-all, and scrappy Amazon took advantage.

Fast forward a dozen years to 2016 and we find Amazon accounting for 43 percent of all U.S. online retail sales—a market share that’s expected to grow. How can a competitor emerge without net neutrality?

If you’re selling jewelry and watches, you may have a shot. This was the fastest-growing ecommerce category as of April 2017. But what if Bezos decides he wants to buy into the internet fast lane, allowing Amazon shoppers to complete their jewelry and watch transactions much faster? Statistics demonstrate that users prefer faster websites—and so do search engines, which give higher result rankings to speedier sites.

Recently, Verizon Wireless was busted for throttling Netflix traffic, one of its content competitors. Verizon blamed the slowdown of Netflix traffic on network testing, but in a world without net neutrality, such throttling could become the norm.

What should you do?

So, what’s a small business owner to do? To be clear, ending net neutrality does have its defenders. Many believe that government regulation of internet speeds stifles innovations that might occur in the marketplace. So do your own research and make your own decisions about what’s best for your small business.

Whatever you decide, your best move currently—beyond putting aside money you may need in order to get competitive download speeds—is to contact your congressional representatives, as only congressional legislative action can override the FCC’s plans to zap net neutrality.