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FCC Kills Net Neutrality: What It Means for Business

Mona Bushnell
Mona Bushnell

The FCC voted on party lines (3 to 2) to repeal the Open Internet Order on Dec. 14, 2017, and on April 23, 2018 the first set of rules went into effect. The ruling, which is called Restoring Internet Freedom under the Federal Register, makes it clear that the internet is no longer considered a Title II common carrier, which means its regulation does not fall under the purview of the FCC, but under the FTC, as was the case prior to 2015. In layman's terms, this officially marks the repeal of what many commonly refer to as net neutrality. On June 11, 2018, the final push by Democrats to block the overturning failed, when it did not pass the House.

Defenders of net neutrality lament the FCC's decision, believing it will threaten free speech and competition by pushing certain content in the "fast lane," banishing other content to the "slow lane" and blocking content at will. Meanwhile, supporters of the FCC's decision believe a lighter-touch approach to regulation will make it easier for large companies to innovate and for small internet providers to expand their reach in rural and underserved communities.

California's Attorney General Xavier Becerra said "As a result of this inaction, starting today internet service providers (ISPs) have the power to force websites to pay fees for faster internet speeds and limit consumers’ ability to access the internet content of their choice." And while they may have that power, enacting anything in the short term would likely create a publicity problem. 

If you're trying to play catch-up on what all this means and why it's making such big headlines, here's some background on how net neutrality came to be, what the internet was like before net neutrality and what you can expect moving forward.

The internet before net neutrality

Net neutrality is a casual term used to refer to the Open Internet Order (OIO), which was adopted in 2015. The aim of the OIO was to ensure that internet service providers (ISPs) enable access to all content and applications regardless of their source, without favoring or blocking a particular product or website. 

If you're wondering why the OIO wasn't passed earlier, it's because the FCC didn't have jurisdiction over ISPs. To pass the OIO, the FCC had to reclassify ISPs as common carriers under Title II. This means ISPs were classified under Title II as a public utility, like water, electricity and sewage. That action also brought them under the purview of the FCC and allowed for greater regulation to maintain net neutrality.

While this type of regulation of broadband to ensure the free flow of data had been previously considered, it was historically dismissed by Republicans and Democrats alike. For instance, in the Telecommunications Act of 1996, President Bill Clinton and Congress made a distinct separation between lightly regulated "information services" (ISPs) and heavily regulated "telecommunications services," such as phone carriers. They explained the rationale for this distinction by stating that "internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation."

This past decision is often cited by current supporters of the OIO repeal as a reason to deregulate the actions of ISPs. In fact, FCC Chairman Ajit Pai often points to the 20 years preceding significant FCC oversight, and the success of startups founded during that time, as proof that no additional regulation was ever needed, and supporters of the FCC's move reportedly refer to the OIO as a solution to a problem that didn't exist.

The birth of net neutrality

The desire for increased FCC regulation over ISPs was not born overnight. In 2007, Comcast was accused of (and subsequently found guilty of) throttling BitTorrent traffic. Two organizations, Free Press and Public Knowledge, filed a complaint with the FCC, claiming that by throttling service, Comcast violated the 2005 guidelines set forth by the FCC. 

The FCC responded by trying to enforce the order via a censure and stated that Comcast's methods violated federal policy. In 2010, Comcast took the FCC to court to fight the ruling, claiming that the FCC did not have adequate jurisdiction over ISPs and therefore couldn't enforce rules. The courts sided with Comcast, citing its designation under Title I as the reason the FCC had no ground. 

Following the 2010 ruling, the FCC set out to establish clearer broadband guidelines and published the first draft of the OIO. In 2011, Verizon sued the FCC, claiming it had no legal jurisdiction over an ISP and that the OIO was therefore unlawful. 

In 2014, the U.S. Court of Appeals for the D.C. Circuit upheld Verizon's assertions, stating that the OIO could only apply to common carriers and not to Title I organizations such as broadband providers. However, since the FCC was the organization that designated broadband providers as Title I in the first place, it was considered within its purview to change that designation. 

So, in 2015, the FCC officially made ISPs a common carrier, or Title II organization, which meant they were subject to the rules of the OIO. The OIO mandated that there be no blocking, throttling or paid prioritization by ISPs.

It's important to understand this chain of events, because proponents of net neutrality point to incidences like Comcast's throttling as evidence that more regulation was necessary, and that the OIO was a reaction to a very real need and not, as detractors often claim, regulation for regulation's sake.  

Small business outlooks going forward

As of April 23, 2018, ISPs became free to offer prioritized services to some clients and limit services to others, so long as such decisions are made public. In other words, a major ISP will be allowed to offer fast-lane service (at a price) to a large client, like Amazon, and then slow down service for all of Amazon's competitors.

The caveat of making such deals known publicly does little to assuage the concerns of the pro-neutrality set, as they fear that the details of arrangements like these will be hidden in the fine print of user agreements that largely go unread. There is also concern that pay-to-play ISP services will make it harder for startup companies to gain a foothold, and that free speech itself may be threatened.

For small business owners who are already competing against online goliaths, there is naturally much trepidation and confusion surrounding this prospect. Early reports of small business confidence surrounding net neutrality, like the Paychex Small Business Survey underscores this fact with 44 percent of respondents stating they believe the repeal of the OIO will negatively affect business. A matching 44 percent said they are not sure how these changes in policy will affect business, and just 12 percent of business owners said they felt that the FCC's move will be beneficial. Results of polls conducted of the general public, and not just business owners, ironically show a more stringent response; the highly publicized survey conducted by the University of Maryland found that 83 percent of the 1,077 respondents were opposed to the new changes.  

Those who support the FCC's ruling, like members of the U.S. Chamber of Commerce, believe very little will change for internet users, and that only major internet companies will be affected (by being forced to pay for the bandwidth they consume). Some people even argue that service will get better for users under the FTC's oversight of ISPs – that creating fast lanes for major bandwidth consumers, and secondary lanes for smaller consumers, makes sense economically and from a service standpoint. 

Only time will tell how small businesses will adapt to what may become an even more competitive online landscape, but one thing is certain: discussions surrounding ISP regulation are not over.

Image Credit: Shutterstock
Mona Bushnell
Mona Bushnell
Business News Daily Staff
Mona Bushnell is a Philadelphia-based staff writer for and Business News Daily. She has a B.A. in writing, literature, and publishing from Emerson College and has previously worked as an IT technician, a copywriter, a software administrator, a scheduling manager, and an editorial writer. Mona began freelance writing full time in 2014 and joined the Business News Daily/ team in 2017. She covers business and technology.