The FCC's decision to eliminate Obama-era net neutrality rules is expected to face challenges in the courts and Congress.

When the Federal Communications Commission voted Thursday to abolish net neutrality rules, the reaction from e-retailers and other web-based companies was swift, negative and sometimes threatening. Lawsuits and proposed legislation are expected to follow.

Among e-commerce companies, observers expect the FCC decision to be especially hard on smaller players. But even e-commerce giant Amazon.com Inc., No. 1 in the Internet Retailer 2017 Top 500, is worried about what the end of net neutrality rules—which require internet service providers (ISPs) to treat all data the same way—could mean.

Darren Hill, CEO and co-founder of WebLinc, the parent company of e-commerce platform Workarea, says the abolishment of federal net neutrality rules—assuming it survives inevitable court challenges and opposition on Capitol Hill—could be terrible for small and mid-sized e-retailers.

The repeal of net neutrality could mean a removal of freedom on the internet and change the web forever.
Darren Hill
WebLinc

“The repeal of net neutrality could mean a removal of freedom on the internet and change the web forever,” Hill says. “For many retailers, [Thursday’s] vote by the FCC could cease equal access to the internet. The decision could result in slower page load times for retailers, which impacts bottom lines and metrics like conversions. With Thursday’s FCC vote, healthy competition amongst retailers simply cannot happen.”

The reason, Hill says, is that, while Amazon has the financial might to forge relationships with ISPs, many smaller or mid-size merchants won’t be able to match it.

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Marty Kamden, chief marketing officer of the online security firm NordVPN, agrees that smaller e-retailers could be hurt badly if ISPs set up “fast lanes” and then sell access to the highest bidders.

“With the repeal of net neutrality, ISPs will theoretically be able to prioritize the access to some websites over others,” he says. “This will directly affect both traffic and cash flow. Some online retailers will lose the benefit of fair competition, and their businesses will be drastically damaged.”

Even if, theoretically, it might gain a competitive advantage from net neutrality’s demise, Amazon has been a strong advocate for keeping it in place. Werner Vogels, chief technology officer for Amazon, was among those who tweeted disapproval of the FCC decision.

Over the summer, Amazon joined organizers of an online protest aimed at derailing the Republican plan to end mandatory net neutrality. Other participants included online marketplace Etsy Inc., (No. 22) Google, Facebook Inc. Netflix and Twitter Inc.

Etsy issued a statement that said: “Etsy and our sellers will continue to make the case for clear, simple, bright-line net neutrality protections in the courts and in Congress.”

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Graham Cooke, CEO and founder of web personalization platform, Qubit, which works with hundreds of retail brands, says the FCC’s decision could make a challenging situation even harder for upstart e-retailers.

“The entire e-commerce industry is already in a ‘David versus Goliath’ situation with Amazon, Walmart, Facebook, Google, etc. You have to ‘pay to play’ if you want your business to appear on page one in any major search category. That’s the current state with the existing rules. The repeal of net neutrality enables the ISPs to become Goliaths too,” Cooke says.

“Airbnb, Uber and TripAdvisor were once young and fragile. Without net neutrality, they may never have been able to get off the ground, and yet we can’t imagine our world without them,” Cooke says. “It’s imperative that we address the balance of power amongst all of these giants so that small innovative brands have a fair shot at success, now and in the future.”

Scott Galloway,  founder of L2, a research firm that studies the digital performance of brands, told Bloomberg News Thursday the end of net neutrality could destroy the ability of small companies to compete because they won’t have access to the same kinds of service larger players have. “The threat to undermine net neutrality is the most under-reported story of our day right now,” he says.

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In the end, the FCC decision was made by a 3-2 vote, with all three Republican FCC commissioners voting yes and the two Democrats voting no. In tweets, streaming television service Netflix and social media company Twitter were among those who vowed that the fight is not over.

The FCC vote also was criticized in Congress. Rep. Mike Coffman (R-Colo.) and Sen. Ed Markey (D-Mass.) have each promised to introduce legislation to counter the FCC decision, while others in both parties have criticized the move.

 

Advocates of the FCC’s action say the elimination of net neutrality will give ISPs an incentive to invest in their networks and develop innovative products and services. In a statement, House Speaker Paul Ryan said: “This new plan of action will open new avenues for telemedicine, distance learning, and future innovations.”

A statement issued by the FCC after the vote says: “The framework adopted by the commission today will protect consumers at far less cost to investment than the prior rigid and wide-ranging utility rules.” The statement also touted the new “robust transparency requirements” included in the revised rules it adopted Thursday. Under those requirements, ISPs will have to disclose their practices “including any blocking, throttling, paid prioritization” or prioritization of services provided by affiliates.

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This is not the end of net neutrality.
David Cohen
Comcast Corp

In a blog post the day before the FCC vote, David Cohen, senior executive vice president and chief diversity officer for ISP and cable TV giant Comcast Corp., urged calm. “This is not the end of net neutrality,” Cohen says in the post. “Despite repeated distortions and biased information, as well as misguided, inaccurate attacks from detractors, our Internet service is not going to change.”

A statement from Bob Quinn, senior executive vice president of external and legislative affairs for telecom giant AT&T conveys a similar message.

We do not block websites, nor censor online content, nor throttle or degrade traffic based on the content, nor unfairly discriminate in our treatment of internet traffic.
Bob Quinn
AT&T

“For more than a decade, under both Republican and Democratic Administrations, AT&T has consistently made clear that we provide broadband service in an open and transparent way,” Quinn says in the statement. “We do not block websites, nor censor online content, nor throttle or degrade traffic based on the content, nor unfairly discriminate in our treatment of internet traffic.”

Those kinds of assurances are not persuading net neutrality advocates to back down.

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On Friday, the Internet Infrastructure Coalition (also called i2Coalition), which represents hosting companies, data centers, registrars and registries, software services providers and related technology companies, pledged to work toward passing a “fix” through Congress.

“i2Coalition is not done demanding strong Net Neutrality rules. This fight isn’t over, it has turned to Congress,” the group said in a statement. “This is only beginning—and indeed the future of the free and open Internet is at stake.”

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