Net Neutrality: Should web businesses be concerned?

Net Neutrality: Should web businesses be concerned?

by Stephanie Morrow, December 2009

A debate has been brewing in Congress, in the business world, and on the Internet over a basic concept called "net neutrality." Advocates for net neutrality believe the Internet should remain a vast plethora of information that is accessible to anyone with a mouse and a connection. Others feel that Websites should pay telecommunication companies in order to obtain a higher rate of service. But, what exactly is net neutrality and what is all of the fuss about?

Net neutrality, which is the basis of today's Internet, means telecom companies provide the same broadband access to all Internet content providers. Whether you use Google, Yahoo, or Amazon, the information you find and the speed in which it is found is the same for each provider. Eliminating net neutrality would allow telecom companies to charge these content providers for the use of their bandwidth, giving those who pay a fee higher bandwidth and better delivery of their content than those who do not pay a fee.

The Advocates and the Opponents

Those against net neutrality are the telecom companies and cable providers like AT&T, Comcast and Verizon, which argue that they need the additional revenue in order to make necessary updates to the Internet's infrastructure. According to the American Consumer Institute, network providers such as Comcast, AT&T, Verizon, have greater sales, but lower profit rates, market valuations, returns on invested capital and cash flow multiples than many content providers, such as Google, Microsoft, Yahoo! and eBay.

The advocates for net neutrality claim that Websites that pay the telecoms large fees would get priority service over everyone else. Fighting to keep net neutrality are content providers such as Google and Amazon, claiming that Websites that refuse to pay a fee to the telecoms will be punished with lower bandwidth, making the load time for these Websites unbearably slow. In addition, net neutrality advocates also fear that Websites that refuse to pay a fee to telecoms will possibly be blocked from Internet users, allowing only the Websites paying the additional fee to be available.

The Legal Debate

At the center of this debate is the current legislation; net neutrality supporters argue that the current legislation is too weak and should better protect net neutrality, as they may not prevent telecoms from charging fees to content providers in exchange for preferential treatment.

Congress has been considering revising the Telecommunications Act of 1996, and network neutrality regulations have been included in several Congressional draft bills. Both advocates and opponents of net neutrality continue to lobby Congress, and net neutrality legislation is pending in both the House and Senate. Net neutrality proponents say the legal language is not strong enough to protect net neutrality, and they claim that legislation is necessary to protect net neutrality and prohibit broadband service providers from charging Web companies.

In fact, Eric Schmidt, CEO of Google, Inc., posted a letter to Google Users on net neutrality and a House vote this past May that essentially does away with net neutrality, saying, among other things, that "The Internet as we know it is facing a serious threat...We're asking you to take action to protect Internet freedom." Advocates for net neutrality also state that, if legislation passes abolishing net neutrality, costs could become substantially higher for Internet users.

Opponents argue that telecoms have invested billions of dollars in new network infrastructure, which essentially gives them the right to operate the network without government interference. They believe that, by imposing regulations that protect net neutrality, they would not be able to improve Internet access for their customers or develop new technologies, possibly leading to higher prices for their customers.

Affecting the Little Man

How would this possible change affect Websites? If Websites are forced to pay telecoms a fee in order to be more easily accessible, many say the smaller business owners who could not afford the fee would end up with Websites that are harder to access, slower to navigate, and could even be blocked from Internet users.

Recently, an Internet Access Task Force has been created by the Federal Trade Commission (FTC) to investigate the need for net neutrality. The FTC plans to evaluate the need for net neutrality legislation, along with the possible consequences. The FTC has not said how long the task force investigation is likely to take and the debate over net neutrality will more than likely rage on.