Why the loss of net neutrality will kill residential and small business cloud users


A federal court has struck down FCC’s rules that prohibit Internet service providers (ISPs) from restricting access to some Internet services.  This debate, and fight, has been in the works for years, as Internet service providers, most of whom own cable TV companies, seek to levy tolls on some Internet distributed content.

“The ruling is the latest development in the long-running battle over net neutrality — the principle that all sites on the Internet be equally accessible. Net neutrality advocates want to preserve the Web’s status quo, in which providers such as Verizon and Time Warner Cable can’t auction off priority traffic rights to one site over another, or impose tolls for high-bandwidth sites such as video streamers Netflix and Hulu.”

The best analogy that I can think of is that we all use the same highway, with everyone having equal access.  Now they want to put a tollbooth on that highway and pick out who will have to pay the toll.  Of course, this limits access to the highway and drives prices up for who depend upon that highway to provide a free and reliable way to get from point A to point B.

“[T]he biggest broadband providers will race to turn the open and vibrant Web into something that looks like cable TV,” Craig Aaron, president of the advocacy group Free Press, said in a statement. “They’ll establish fast lanes for the few giant companies that can afford to pay exorbitant tolls and reserve the slow lanes for everyone else.”

Of course, the ISPs argue that a few media streaming services (a.k.a., Netflix) are hogging the bandwidth on their network.  Thus, they should be charged for access to account for the extra costs of building and maintaining a reliable network for homes and businesses.  Sandvine says “that during the Web’s primetime hours, Netflix accounts for 33 percent of “downstream” traffic in North America — much more than any other single site or service.”  The figure below shows the break out of traffic in 2013.

Internet Use

The problem comes in when you consider the conflict of interest.  ISPs typically own media services, such as cable TV services (e.g., Verizon, Time Warner, etc.).  Thus mega-streamers such as Netflix are typically in direct competition with them.  So, if you have a legal way to poke your competitor in the eye, why wouldn’t you?

However, not all are pushing against net neutrality.  “Broadband provider Comcast said Tuesday that it supported the FCC’s Open Internet rules, and would continue to abide by them for at least six more years regardless of how they are judged in the court system.”

You also need to look at other cloud services that are focused more on the retail user, such as DropBox, iCloud, Google, or, on small business, such as AWS, Rackspace, and Salesforce.com.  If the ISPs start charging access fees for these guys, they will have to raise prices to pass along the access fees to their customers who can least afford it.

So, cloud services that may have been free in the past could cost a few more dollars a month.  While that does not seem like a lot for large businesses, small businesses could end up paying thousands more a month for cloud services that were relatively economical before.

Thus, if the services cost more because of new access fees, and we’re leveraging cloud services to save money, then the use of those cloud services becomes far less compelling for retail and small business users.  Moreover, the strategic benefits of cloud computing, such as agility and scalability, are not as important or valuable when you’re running a small chain of flower shops, or even a large retail store.

Larger corporate users won’t feel the pinch of these access fees, considering that they typically leverage huge pipes to the Internet using specialized ISPs that won’t charge these fees.  Moreover, many use direct connections into cloud computing providers, bypassing the open Internet all together.

The logic here is a bit flawed.  If I’m paying for my Internet connection, then I’m paying for the services that I select to use that connection, whether it be Netflix for nightly entertainment, or AWS to drive my business.  So, I’m not sure why the ISPs feel they are entitled to charge the provider as well as me.  They are serving me, and not the provider.


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