The Simple Truth About Net Neutrality for Your Brand and Business

I don’t know about you, but I grew up in an era when we were taught to avoid talking about religion, sex, and politics in business contexts—never mind that these seem to be three of the biggest ways to drive clicks to content on the web. And I still believe, as much as possible, that it’s best to steer clear of these topics.

So, why am I wading into the fight around net neutrality? And, more importantly, why am I encouraging you to do the same?

Simple. A failure by government—whether the FCC or Congress—to establish clear rules for what cable companies and Internet service providers (ISP’s) may and may not do with your business’s web traffic remains critical to keeping a level playing field online for businesses large and small.

The simple truth of net neutrality is that, unfortunately, a couple of large ISP’s have actively worked to limit consumers’ access to specific content and services, hurting both consumers and the businesses working to meet market demand. Plain and simple, that’s bad for those businesses, bad for consumers, and, ultimately, bad for you.

Let’s be clear. In no way do I welcome excessive government regulation when it comes to the Internet. In my professional life, an excess of regulation has caused as many problems as it’s solved. And, as anyone who has read this blog in the past knows, we here at Tim Peter & Associates work extremely hard to help our clients increase sales, revenues, and profits. I can’t imagine a scenario where we’d be viewed as anti-capitalist. In a perfect world, I’d love to see the market decide this one. But, it’s not a perfect world; for reasons I’ll get to in a bit, a market-driven solution simply isn’t an option right now.

I’ve made some of these arguments before, but it’s worth noting that—despite some expected and understandable disagreement on specific implementations of the rules—this whole net neutrality debate is not a partisan issue. It is about the ability of businesses large and small to compete effectively in the global marketplace. Right now, the FCC’s proposal is the only legitimate way to ensure continued open competition and access to consumers for every business. Congress can certainly act to come up with a better solution, but who are we kidding? At least at present, that doesn’t seem too likely.

If you want some simple background on the history of all this and what’s under consideration, The Oatmeal has a sarcastic, but kind of funny and very informative overview of the issue as does Economix Comix. Both are worth your time.

That said, let’s talk about why you want the FCC to take action and maintain a fair, open Internet for your customers and your business.

The (Real-World) Nightmare Scenario

Imagine that, like most businesses in your competitive set, you’ve built a website to market your products and services. Then imagine that, one day, you start hearing customer complaints about your website being really slow, especially compared with your largest competitor. You invest in improved servers or a faster Internet connection or both to improve your customers’ experience, only to find that it has no effect. Which would be a real problem, since it’s well established that faster websites rank better in search engines and enjoy higher conversion rates than slower sites. While all this is going on, you’re losing traffic, sales, and loyalty to your largest competitor—and there’s nothing you can do about it.

Finally, after weeks of frustration and plummeting sales, you find out that one of the largest ISP’s in the country—a major cable company serving a large chunk of the country—is actively slowing down traffic from your site to its customers, but has let your competitor buy improved access to the folks on its network. They’ll improve your speed, but only after you pay a substantial fee.

That would suck, wouldn’t it?

I know, you’re thinking, “Yeah, but that would/could never happen in the real world.” Unfortunately, it already has:

That’s a huge problem. Imagine if your retail store, hotel, or restaurant had to pay the same market rates as Amazon, Booking.com, or OpenTable just to continue appearing in search engines, achieve target conversion rates, and reach customers generally. If that’s not a nightmare scenario, I don’t know what is.

What About Letting the Free Market Decide?

As I’ve already said, I’m in favor of free market solutions. I think they’re undoubtedly the right answer in many cases. Unfortunately, when it comes to broadband access for consumers, the simple truth is that no free market exists.

As this incredible graphic originally posted on Ars Technica points out, about 5 out of 6 consumers in the United States only have a single option to choose from if they want to subscribe to the current state of the art in broadband service:

Another 39 million Americans only have one broadband Internet provider to choose from—period—regardless of the speed of access they want to buy. Compounding the problem, some ISP’s have even gone so far as to lobby state lawmakers to block communities from providing alternative Internet access in underserved markets.

Clearly, you can’t rely on the free market for a solution if there’s no free market. Your customers can’t choose to move from, for example, Comcast to Verizon or Cox because, in most markets, only one of those providers exists. If all the big ISP’s had to compete with one another by providing the best service to their customers, this kind of thing simply wouldn’t be a problem. And, again, you care because those individual providers, if allowed to operate as they’d like, have demonstrated they’re ready, willing, and able to act as gate-keepers, potentially preventing you from reaching your customers and driving up your costs.

Won’t “Regulation” Hurt Innovation and Competition?

I’m no fan of excessive regulation. In many cases, the market can solve any number of problems. Won’t net neutrality regulation hurt innovation and competition? Not even a little. Actually, the FCC proposal is designed to keep the big ISP’s playing by the same rules they’ve lived with for the last 20 years.

The simple truth is that these really aren’t new rules. The large ISP’s have lived with rules designed to maintain an open, fair Internet ever since the Internet first emerged. What’s changed is that several of the large ISP’s sued the FCC over the last few years, stating that existing FCC regulations—the ones that ISP’s, cable companies, and wireless companies had lived with for the first 20 years of Internet innovation—shouldn’t really apply now that they want to start limiting customer access to content and services. The court agreed that the current rules didn’t apply, though went out of their way to explain that the law permitted regulation only under a different format (what’s called “Title II”).

The new rules that the FCC is planning to vote on come on the heels of that loss and reflect the change the court recommended. Ironically, the very thing the ISP’s now are desperately fighting to prevent only exists because they didn’t want to play by the earlier rules. Be careful what you wish for, indeed.

Even better, though, is that the new rules really don’t hurt the ISP’s either. In a letter to FCC chairman Tom Wheeler, Sprint’s chief technologist, Stephen Bye wrote:

“When first launched, the mobile market was a licensed duopoly. This system was a failure, resulting in slow deployment, high prices and little innovation… It is absolutely true that this explosion of growth [in the mobile marketplace] occurred under a light touch regulatory regime. Some net neutrality debaters appear to have forgotten, however, that this light touch regulatory regime emanated from Title II common carriage regulation”

Verizon’s CFO Francis Shammo essentially confirmed this view when he told investors recently:

“…we’re going to continue to invest in our networks and our platforms, both in Wireless and Wireline FiOS and where we need to. So nothing will influence that. I mean if you think about it, look, I mean we were born out of a highly regulated company, so we know how this operates.”

In other words, all the growth and innovation and competition that’s existed in the mobile phone space for the last decade-plus occurred under precisely the same rules that the FCC wants to apply to ISP’s for broadband access.

And, the only reason the FCC wants to implement those rules is because those ISP’s want to make it tougher for you to put your content, products, and services in front of customers.

Shouldn’t an ISP Be Allowed to Set Its Own Prices?

One of the more complicated bits about this whole debate revolves around pricing. ISP’s should definitely be able to set their own prices. But the simple truth is that this current discussion doesn’t change that at all. Unless you’re curious about the really icky bit here—and, as marketers and strategists, I can sympathize if you’re not—feel free to skip to the next section.

Still here? OK. Here’s what’s going on: Today, you pay a hosting company to host your site or have your own datacenter where your site lives. One of the costs associated with running a hosting company or datacenter is gaining access to the Internet, typically through what’s called a backbone provider. Those backbone providers set their prices basically by usage and the FCC’s proposal doesn’t really change that (some regulations already exist here and aren’t affected by the current debate).

Similarly, your customers pay their local ISP (a cable company or telecom provider), for their Internet access. Again, those companies often charge varying prices depending on how much data those consumers use. Again, that won’t change under Title II^[1].

Instead, what’s really happening revolves around the connection between the company on one side of the backbone (someone like, for example, you) and the ISP delivering traffic to consumers (a telecom provider or cable company). The ISP’s want to charge companies an additional amount—much like Comcast did with Netflix—to carry traffic through to its customers. In effect, they want to get paid twice: Once by the consumer and then again by the company providing information, products, and services to that consumer. That’s the big problem, because, as it currently stands following the various lawsuits I mentioned earlier, nothing prevents those ISP’s from limiting the quality and speed of sites that don’t pay the ISP for access. That’s precisely what Comcast did with Netflix. And without the right protections, the same could happen to you.

The biggest players on the Internet—Amazon, Google, Apple, Facebook, Microsoft, Yahoo, Walmart, Expedia, and others—might be able to afford those fees. Could you?, MOre to the point, you’re already paying your freight for the bandwidth you use. Why should you, or anyone else, have to pay twice?

The Bottom Line

Again, despite what a handful of politicians are claiming, this isn’t a partisan issue, nor should it be. We’ve got a handful of ISP’s lobbying actively to change the rules of the game and the terms of the debate so they can restrict and/or profit directly from the sites your customers want to visit, quite possibly including yours. It’s only logical that intermediaries who own the roads will eventually charge you tolls to use them.

The public overwhelmingly supports net neutrality. The FCC received a record 3.7 million-plus comments on its last proposal—the overwhelming majority in favor of maintaining net neutrality. Several polls have found that greater than 80% of consumers support net neutrality, regardless of political party (given who’s leading the protests against net neutrality in Congress it’s ironic that a slightly greater share of Republicans in the survey supported net neutrality than Democrats).

Ultimately, this is an argument about maintaining an open and fair Internet—a level playing field for businesses large and small. It will never be easy to compete against the biggest players in retail, hospitality, e-commerce, technology, or any other industry. But the simple truth about net neutrality is that is without it, you won’t be able to compete at all. Don’t let a small number of ISP’s change the game.

What can you do to prevent that? Well, Tumblr offers a great tool to help you contact your local representatives and make your voice heard on keeping the Internet as open and fair as it’s always been. I still plan to avoid talking about sex and religion ’round these parts. But I strongly encourage you to take a stand and tell them to support the FCC’s action.

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If you want to learn even more about how your customers’ changing behavior shapes e-commerce and marketing, be sure an register to receive a special report I’ve produced in conjunction with hotel marketing firm Vizergy, “Digital Hotel Marketing in a Multiscreen World.” While it’s targeted specifically at hotel and resort marketers, the lessons apply to just about any business. You can get your free copy of the report here.

You can also check out these slides and video from my recent webinar, “Digital Marketing Directions: Three Key Trends Driving Your Marketing Next Year”:

And, finally, you might want to take a look at some of our past coverage of the e-commerce, mobile commerce, and digital marketing overall, including:

• 10 Key Posts about Millennials and Mobile: E-commerce Link Digest
• The Secrets Behind “It’s All E-commerce” for 2014
• The Zen of Digital Marketing Strategy
• 7 Steps to E-Commerce Heaven
• Today and Tomorrow: Mobile and The Changing Customer Journey
• Mobile Makes E-commerce Even More “Frictionless”
• Your 2014 Internet Marketing New Year’s Resolutions – Thinks Out Loud Episode 56

Note: Title II usage fees. This one gets a little more complicated because subsection 202 of Title II would prevent ISP’s from making “…any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services” [emphasis mine]. In theory, the FCC could regulate prices if they determined those prices were “unreasonable.” While the ISP’s have a legitimate reason to worry about this in theory, in practice, the FCC’s enforcement actions on “unreasonable” pricing under Title II have been, well, both pretty reasonable and largely uncontested in the mobile space. If the big telco’s haven’t griped overly much about it in the one area, I really can’t see where this would be an issue on the Internet access side.