How Repealing Net Neutrality Could Affect Your Ecommerce Business

By Matt Duczeminski on December, 14 2017

Stay up to date

Back to main Blog
Matt Duczeminski

A former teacher, Matt now specializes in R&D for ecommerce business owners and helps guide merchants in understanding the importance of this digital-first world.

It’s not a stretch to say that, as an ecommerce business, you owe your livelihood in large part to the internet.

More specifically, you owe your livelihood to the freedom the internet has provided your business. For all intents and purposes, it’s never been easier to expand your company’s reach, and to get your brand noticed by people all over the world.

That being said, if you’ve been reading up on the potential repeal of net neutrality, you might be a bit...well...scared.

On December 14, the FCC will vote on whether to or not to repeal net neutrality. With a voting board of five members - three of which are in favor of a repeal - things aren’t exactly looking too great.

But let’s back up a moment. If you don’t know exactly what net neutrality does, it essentially prohibits Internet Service Providers (ISPs) from interfering with the connection between a website and its visitors in any way.

Perhaps the best way to explain what net neutrality does is to illustrate some “doomsday” scenarios that potentially could arise if the law is repealed. Without net neutrality regulations in place, ISPs could:

  • Slow down - or completely block - connections to specific websites as they see fit
  • Force subscribers to pay an additional fee in order to access specific content, such as media via Netflix or Hulu
  • Promote content from partner companies by speeding up the user’s connection to certain sites (while also throttling the user’s connection to competitors’ websites)

Vice President of Global Communications for WP Engine, Eric Jones, had the following to say:

Anyone who has been on a train with both first and second class  has intuitively felt what is being argued about with net neutrality. Why should a few people be able to travel in relative comfort while the rest are crammed together in a tight space?
If the current net neutrality laws are revoked, bigger companies could potentially pay ISPs to prioritize their traffic above others. This will likely mean that smaller businesses’ traffic will be deprioritized, with business potentially suffering due to a diminished user experience as a result of slow load times.

Now, there’s no guarantee that any of this will happen if net neutrality is repealed - but there will be little in the way of ISPs that decide to make it so, either.

Though there’s been a lot of commotion regarding what the repeal would mean for your everyday internet user, ecommerce businesses - especially small to mid-sized ones - may also end up feeling the effects, as well.

How the Repeal of Net Neutrality Could Potentially Affect Your Ecommerce Business

Again, while the following scenarios are not guaranteed to happen, they certainly aren’t out of the realm of possibility, either.

As the old saying goes, the best course of action is to hope for the best - but prepare for the worst.

A “Pay-for-Play” Scenario

As we alluded to earlier, a lack of net neutrality would technically allow ISPs to show favor to certain companies by enabling users to quickly connect to their websites - and punish other companies by slowing the user’s connection to theirs.

Of course, in the world of business, the best (and sometimes only) way to gain the favor of a major corporation is, quite simply, to pay them. If your company can afford to appease a given ISP, you won’t have much of a problem. If, on the other hand, this additional business expense is way out of your budget, the ISP might punish you by slowing connections to your website to a halt.

Here’s how that might play out in real life:

Ecommerce Company A (ECA) and Ecommerce Company B (ECB) have been making final preparations for Cyber Monday for the past week. ECA’s budget is stretched to the max, while ECB has $5,000 to spare. ECB reaches out to ISP-X, offering the company this $5,000 to guarantee their website experiences zero downtime throughout the busy sales day (meanwhile, ECA’s customers face numerous disconnections and errors all day). At the end of the day, many of ECA’s customers have headed over to ECB’s website, and made purchases there - leading ECB to recoup the $5,000 numerous times over.

Now, we used $5,000 as a hypothetical number just for the sake of the example. But a more likely case would be that a major company (e.g., that big blue box store that shall not be named) would pay “ISP-X” millions of dollars to ensure they were the most convenient choice for any and all shoppers on Cyber Monday (or any other day of the year, for that matter).

As CTO of PromotionCode.org Mike Catania puts it:

The Googles and Amazons can shrug (pay-to-play) off, but small businesses that are at all reliant upon tech are attacked from all sides; what will it cost your company to pay for premium speeds? Will you even have that as an option? What will it cost your service providers? Will the APIs on which you rely disappear because it's now cost-prohibitive for the other companies?

Needless to say, this puts small ecommerce companies with limited budgets at a huge disadvantage (as if they were ever on equal footing with their conglomerate competitors, to begin with…).

Forced Alignment

If this “pay-for-play” scenario becomes a reality, the smaller ecommerce companies of the US might only have two choices: pony up, or go belly-up.

In other words, to stay afloat, ecommerce businesses might simply have to bite the bullet and pay whatever they can to an ISP in exchange for a guaranteed connection to their customers.

But this brings about another problem:

By “partnering” (and I do use that term incredibly loosely) with one ISP, your company may unintentionally become the enemy of a number of other ISPs. So, while customers of your “partner” ISP will have unlimited access to your site’s content, competing ISPs may block your content from their subscribers altogether.

To break it down, you may have to choose between the choice that will to the least amount of damage to your company. On the one hand, if you pay one ISP, you’ll ensure customers of that company will have full access to your site - but you’ll alienate customers of competing ISPs. On the other hand, if you don’t partner with any ISP, you run the risk of receiving less-than-stellar service from all of them - causing your customers frustration in the process.

Increased Cost of Business

Of the two choices mentioned above, you’d almost certainly opt for the former; providing top-quality service to one group of consumers is likely much more preferable than providing sub-par service to everyone.

Of course, that means you’ll be spending much more than you had previously been - without a guarantee of seeing an increase in revenue in return.

To make up the difference, then, you’ll probably need to pass the cost along to your customers - lest your profits be eaten away by the fees you pay to generate these profits in the first place.

Unfortunately, as many ecommerce companies operate with the mission of offering affordable alternatives to hugely-popular products, such a move all but negates their unique selling proposition. If an ecommerce company is unable to offer a better price than their more well-known competitor, they have little to no shot of staying in business for long.

It’s the Customers Who Suffer

Though we’ve focused on the effects a lack of net neutrality might have on ecommerce businesses, the main thing to realize is that the reason such deregulation could negatively affect your business is because it will have a major effect on your customers.

On the one hand, if you decide to “partner” with one ISP, your customers will ultimately end up paying more for the products you offer. On the other hand, if you don’t give in, the customers that remain loyal to your company will have to deal with the frustration of being disconnected - or even blocked - from your website.

Eric Jones, warns:

“Without net neutrality, the landscape for online businesses would forever be altered.”

Again: all of this is speculation; net neutrality has only been the law of the land since 2015, after all. That being said, there are definitely many cases of companies doing (or attempting to do) exactly what we’ve mentioned in this article prior to net neutrality becoming law two years ago.

At any rate, this may be the best time for you to remember who you are, first and foremost: entrepreneurs with innovative solutions to common problems. You’ve channeled your abilities to bring success to your ecommerce businesses before; now’s the time to step it up.

 

Stay up to date