On December 14, 2017, the Federal Communications Commission voted to repeal net neutrality, a policy allowing internet users to connect to whatever content they wish without regulation. Also known as "open internet," the policy also prohibits internet service providers from speeding up or slowing down websites, leveling the digital market competition for large, small and start-up businesses.
Net neutrality's repeal has significant implications for business owners and consumers alike. Without the net neutrality rules, phone and internet companies have the power to decide which sites are publicly accessible…
…which means that businesses–small ones and start-ups, specifically–can't rely on the open internet to market their enterprises. They'll have to pay more for the same visibility they received before, an expense many were not prepared for. Ultimately, larger companies will be given precedence.
"I expect that internet service providers will try to find ways to increase their revenue by taking advantage of repealed net neutrality rules," says Gwanhoo Lee, Professor of Information Technology and Analytics at American University's Kogod School of Business. "Businesses-and consumers-could experience a higher fee for Internet connection and slower access to certain websites."
Lee, whose research focuses on digital leadership, governance, and public agencies' impact on the digital realm, emphasizes that net neutrality rules are universal: "Whether you are a small business or a startup, you can expect to compete against your competitors [in the digital marketplace]. This is a crucial foundation for the economy."
We sat down with Lee to get his insight into the policy change and its implications for businesses and consumers–in the present, and the future. Read more of our conversation below.
Kogod School of Business: What, in your opinion, are some pros and cons of the Federal Communications Commission's decision to repeal net neutrality?
Gwanhoo Lee: Proponents argue that net neutrality reduces investment in broadband infrastructure because internet service providers (ISPs) such as Verizon, AT&T, and Comcast do not get a good return on investment. Repealing the policy could spur ISP competition because they can experiment with new pricing models now. So, long-term, repealing net neutrality could actually benefit society because internet services will be offered at a higher level.
Opponents argue that net neutrality is consistent with the principles such as openness and equality that made the Internet a success in the first place. ISPs also gain unfair competitive advantages over other companies because they can block or slow down their competitor's services. It could repeal can disrupt a level playing field for businesses.
KSB: What impact do you anticipate repealing the policy will have in the business world?
GL: It creates a power shift in favor of internet service providers in the digital ecosystem. Service providers like AT&T or Verizon can block or slow certain websites and charge companies more for fast lanes, giving them greater bargaining power over other online companies. In addition, ISPs can launch new businesses, such as movie streaming services, and reserve faster lanes exclusively for their own services while slowing their competitors.'
KSB: Is there a type of business (non-profit, private, online) that this is likely to affect more? Why?
GL: Any businesses that include social media services such as Facebook, Instagram, and Twitter; online streaming services such as Netflix, Spotify, and YouTube; online retailers such as Amazon; and other popular online services such as Google and Gmail. These companies tend to take up large bandwidth of the Internet. For example, during its peak time, Netflix movie streaming accounts for a whopping 40 percent of the Internet traffic. Naturally, ISPs could be motivated to throttle such high-volume traffic.
KSB: Cybersecurity and information privacy is one of your key research areas. What does repealing net neutrality mean for this?
GL: It is likely to affect information privacy and cybersecurity negatively. The Commission now requires ISPs to adhere to consumers' privacy rules based on the definition of proprietary information. With the repeal of net neutrality rules, current US laws do not offer such protections for information privacy, so internet service providers could compromise information like social security numbers.
Another risk could come from virtual private networks (VPNs), which many companies use to protect employee's privacy. If ISPs slow user connection to VPNs, companies will likely limit their use and increase their use of unsecure networks. There's a lot of potential for compromised information.
KSB: What lies ahead for companies with these new internet restrictions?
GL: It's difficult to predict if and when internet service providers will take advantage of this new policy. And it's also possible it won't be around that long-some states, including California and New York, have already proposed laws against it. The future is very uncertain. Nevertheless, companies should conduct risk management by analyzing different scenarios and by developing contingency plans.
KSB: Anything else you'd like to add?In my opinion, the cons of the repeal overweigh the pros. The healthy growth of the digital economy depends on net neutrality.
Learn more about Gwanhoo Lee and his research here.