What is Net Neutrality?

Imagine that the websites you access most often suddenly begin to charge subscription fees. Some of these fees you may opt into— online news subscriptions, video streaming, etc. Other fees you may not even notice you are paying— the shoes you want become more expensive as Nike is coerced to pay an increased fee for online advertising.

Net Neutrality is the idea that Internet Service Providers (ISPs) are forbidden from selectively restricting internet access or discriminating against certain users by charging a fee for certain websites or content. Under current net neutrality rules, all internet users have the right to an equal experience of the internet, independent of regulation. These rules enforce equal access to all brands online.

Why is Net Neutrality in the News?

Ajit Pai, current chairman of the FCC, is working to progress a proposal that will roll back existing net neutrality laws. If Pai’s proposal is passed, it will free ISPs to dictate internet speed based on the criteria of their choosing— meaning, users or websites who don’t pay to play are likely to receive a diminished experience. Essentially, the internet would be divided into “fast lanes” and “slow lanes.”

While this has obvious ethical and political considerations (ISPs could, in essence, disrupt the performance of sites that don’t align with their business or political interests), the focus in this writing will be to discuss the effect that the potential repeal of net neutrality would have on E-commerce.

E-commerce is More Than Just Internet Surfing

Since the dot com boom, E-commerce has evolved into a cornerstone of our economy. More than 50% of Americans have cited a preference for online shopping, while 80% of US consumers are estimated to have shopped online in the last thirty days.[1] Even traditional brick-and-mortar outlets are now incorporating digital elements into their in-store consumer engagement strategies— all things equal in regard to net neutrality, E-commerce shows signs of continued expansion.

How Would a Net Neutrality Rollback Affect My Digital Sales?

Just as a net neutrality rollback would allow ISPs to censor certain content, it would grant them power to set restrictions on access to any competitor services. Should this situation arise, organizations will face a definitive choice—play ball with the ISPs, or don’t.

Forgoing the Alliance with ISPs

For those organizations that decide not to align with ISPs, or refuse to pay the cost to operate in the “fast lane,” the consequences are material. There would be no regulations in place to prevent ISPs from throttling site traffic, forcing consumers to migrate to sites that have aligned with ISP demands.

The same study referenced above, conducted by Big Commerce and Kelton Global, has found that for more than 20% of all internet users worldwide, a slow, clunky, or inaccessible website experience would affect their decision to purchase a product. A separate study has shown that about half of a given website’s potential visitors will leave the site if their page doesn’t load in three seconds.[2] It results that a rollback of net neutrality would pose significant barriers to entry for entrepreneurs.

Aligning with the ISPs

Larger organizations who can afford to pay to play with ISPs will nonetheless be affected by a net neutrality rollback. Before we discuss, let’s make two key assumptions:

  • Said organization is not in direct competition with the ISPs in any way.
  • Upon contracting with an ISP, the relationship is such that the ISP will not enforce a “hostage situation,” in which the ISP demands increased payment in exchange for greater bandwidth.

Assuming the above are both true, E-commerce figures can still be affected. For one, as alluded to above in the hypothetical Nike example, an increase in costs associated with an organization’s online experience will result in the need to recover costs elsewhere. Even those brands for which cost is a competitive advantage will likely have to transfer these costs to consumers.. The more direct effect, however, lives outside of organizational control.

Open communication with other consumers is one of the most significant factors in influencing consumers to shop online. In fact, nearly a quarter of all shoppers have cited social media and online reviews as a significant source of influence in choosing where to spend.[3] Consumers want to hear from those they view as equals, and the internet provides an unparalleled channel for consumers to connect with each other and market on behalf of the organizations they support.

Alignment with an ISP can guarantee a good consumer experience once a consumer arrives to your website—it cannot guarantee that a consumer is piqued to navigate to your website in the first place.

How Should I Respond to the Net Neutrality Proposal?

The FCC is currently reviewing comments from the public on its proposal to roll back existing net neutrality regulations. If you’re interested in filing a comment, you can do so here.

Whether or not you choose to voice your opinion on the FCC’s proposal, it’s important that your organization stays abreast of this story, so that you can best prepare for any impact it may have upon your business.

 

For further discussion, contact Daniel at dkahan@wcapra.com.

 

[1] https://wearesocial.com/special-reports/digital-in-2017-global-overview

[2] https://blog.kissmetrics.com/loading-time/

[3] http://www.triplepundit.com/2017/07/net-neutrality-day-wasnt-just-internet-surfing/


How Net Neutrality Affects Your E-commerce Business
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