Net neutrality repeal: What does that mean for IT networks, the cloud, and the IoT?

The U.S. Federal Communications Commission is headed toward a repeal of net neutrality rules it passed just two and a half years ago, and many businesses fear their Internet traffic could end up in a slow lane. 

The FCC's rules prohibited broadband providers from selectively blocking or slowing web traffic, but they never covered enterprise-grade Internet service, which is typically offered through customized or negotiated arrangements. However, the regulations did protect small business connections.

Now, with the Republican-controlled FCC planning to change the rules, many small business owners and trade groups have called on the agency to reverse course and keep the regulations in place. In August, more than 500 small businesses and trade groups signed a letter in support of the existing rules, and in April, more than 1,000 startups added their names to a similar letter.

Many small business owners and tech startups fear their Internet connections could be throttled if the FCC repeals net neutrality, which also classifies broadband as a regulated common-carrier service.

With no regulations in place, Internet service providers would be free to manage the traffic over their networks by blocking or slowing traffic from services or websites. While many ISPs have promised not to block or slow legal web traffic, a repeal of the rules would mean they could block services they see as bandwidth hogs or slow traffic from services that compete with their own or their partners’ businesses.

Some critics say cloud computing and Internet of Things (IoT) business models could be threatened. ISPs could potentially slow access to the cloud or to IoT services, particularly those competing with their own or their partners' services, critics warn.

As more IT services move to the cloud, the ability to access it "free of gatekeepers is essential," former FCC Chairman Tom Wheeler said earlier this year.  

"If ISPs get to choose which applications and clouds work better than others in terms of access, speed, and latency, they will control the cloud future," he added. Without net neutrality rules, ISPs "can choke growth and innovation or at least demand tribute for passing over their network."

How small businesses will be affected

An independent investment advisor from Oregon filed one of more than 22 million comments to the agency during the current net neutrality proceeding. Speedy access is important to her business, she wrote: “While my business is small, it is part of the economy and any limitation on access or speed would hurt my access to the stock exchange.”

An even bigger concern for small businesses and startups is, without the regulations, broadband providers could adopt paid prioritization models, whereby companies with deep pockets could pay for fast-lane traffic on ISP networks and everyone else would be relegated to the slow lane.

Under a paid prioritization deal, an ISP would charge extra to a select group of web-based firms for faster service to the ISP’s customers. ISPs could also prioritize the traffic from their own services or the websites they own.

A bicycle shop owner from Washington state said he needs the same access to the Internet as larger websites. “I can't have a big website due to costs,” he wrote in a filing with the FCC. “I do need to be able to appear high on bicycle shop searches. Internet should not be pay to play.”

While small businesses and startups have been active in the net neutrality debate, a potential for repeal should worry larger businesses as well, says Matt Wood, policy director at digital rights group Free Press.

“Whether I'm an enterprise user or a small business user myself, I'm going to care if suddenly Comcast or AT&T or Verizon can block or throttle my traffic to hundreds of millions of customers, or if my competitor can pay for prioritized access to those retail broadband customers,” Wood says.

In addition to paid prioritization, many small businesses also object to so-called zero-rating plans, which are popular in the mobile broadband industry. Under these plans, select services are exempt from monthly data caps, but small companies have little chance of having their traffic included, critics say.

Paid prioritization deals and zero-rating plans will have a similar effect on small businesses as ISPs throttling their traffic, says Phillip Berenbroick, senior policy counsel at digital rights group Public Knowledge. Those ISP business models would relegate small businesses to slower connections, and customers would abandon them for faster-loading websites and services, he says.

“If you have no rules, if you allow paid prioritization deals, if you allow zero-rating deals, what ends up happening is the companies with deeper pockets, even if they came to the game late,” can copy the innovative services offered by small businesses and startups and drive those small competitors out of the market, he says.

“If I’m a small business, I’m worried, because there’s no guarantee, there’s no backstop preventing those companies from treating my small business and my traffic and my customers poorly, compared to how they might treat their own services,” Berenbroick adds.

Republicans, including FCC Chairman Ajit Pai, have long criticized net neutrality rules, saying they amount to needless and costly regulations on ISPs. Republicans have argued that the rules discourage investment in broadband networks, especially in pockets of the country with little or no access, partly because the regulations limit the kinds of business models ISPs can deploy.

Some ISP-funded studies have found small declines in investment since 2015, but studies by net neutrality supporters have disputed those conclusions.

The Democratic effort in 2015 to pass net neutrality rules addressed a problem that didn’t exist, Pai said in an April speech. “Nothing about the Internet was broken in 2015,” he said. “Nothing about the law had changed.  And there wasn’t a rash of Internet service providers blocking customers from accessing the content, applications, or services of their choice.”

Several broadband providers have promised that they will not block or slow Internet traffic if the rules are repealed. Some ISPs have called for the FCC to allow some types of traffic prioritization, however.

Comcast, for example, said that it would support revamped FCC rules that ban “anticompetitive” paid prioritization but that the agency should allow ISPs to explore other traffic prioritization models.

The FCC “should bear in mind that a more flexible approach to prioritization may be warranted and may be beneficial to the public,” Comcast lawyers wrote in a July filing to the agency.

Paid prioritization may have “compelling applications” in telemedicine and in autonomous vehicles, Comcast noted. “Black letter prohibitions on paid prioritization may actually stifle innovation instead of encouraging it,” the company’s lawyers wrote.

While many tech companies support the current net neutrality rules, vendors like Oracle and Cisco Systems have backed the FCC plan to repeal them. The regulations discourage investment in broadband, Oracle senior vice president Kenneth Glueck wrote in a letter to the FCC.

“What should have been a purely technological discussion of managing traffic on Internet networks has inexplicably evolved into a highly political hyperbolic battle, substantially removed from technical, economic, and consumer reality,” he wrote. The rules “threw out both the technological consensus and the certainty needed for jobs and investment.”

Net neutrality rules: Lessons for leaders

• The FCC is moving to repeal net neutrality rules, but the timeline is unclear.
• Many small businesses are worried about ISPs rolling out paid prioritization deals, in which select companies pay extra for faster connections to potential customers.
• With no net neutrality rules in place, broadband providers could also block or slow small business connections, although many have promised not to do so.