By: Dmitri Pestrikov – Vice President, Client Services
Yesterday marked a historic day for the way we consume online content. The FCC voted to repeal a rule they adopted in 2015 to classify broadband as a Title II communications service, with providers being “common carriers” rather than “information providers.” In plain-speak, it is to determine whether your connection with the internet will continue to be a utility or a service, does your internet service provider (ISP) have a say into what kind of connections (and at what speed) they will allow you to have, or do they have to treat every packet of data neutrally?
One of the major controversies that occurred prior to the 2015 ruling was between Netflix and Comcast. Comcast recognized that a large portion of their traffic was Netflix data, which they chose not to open-up to additional peer ports in an effort to purposefully congest and effectively throttle (slow down) Netflix content. Comcast provides not only broadband services, but also a subscription to cable television, which has been consistently losing subscribers in favor of Netflix, Hulu (owned by Turner), Amazon Prime Video, and HBO Now. This strategy by Comcast was not a one off, with Verizon participating as well. It all ended in a backroom agreement with Netflix paying Comcast an undisclosed sum to end their throttling. Learn more about this issue here: https://consumerist.com/2014/02/23/netflix-agrees-to-pay-comcast-to-end-slowdown/
What Can Repealing Net Neutrality Do To You?
If the repeal of the 2015 Net Neutrality rule were to succeed today, the internet landscape as we know it will change, with an immense amount of power and control being passed to ISPs. A few common examples include:
- An ISP can choose to throttle (slow down) traffic you happen to enjoy, including at the website-level
- Hulu (Turner) can reach an agreement with Verizon/Comcast to throttle Netflix while keeping Hulu at full speed. They can also run ads about how slow Netflix is and offer discounted subscriptions to Hulu
- Comcast/Verizon can offer their own competitive streaming service while throttling all other streaming services
- To the super-nerds out there, VPN encryption will help you for a time, but the volume of data is not an encryptable concept, throttles can be placed on data stream volumes (which will capture any HD streaming service under its umbrella for throttling)
- An ISP can choose to package certain services together under separate data plans
- A standard internet package can be around $25 per month, while Social (Facebook, Twitter, LinkedIn, Google+) can be an additional $10 per month
- Pornography streaming websites can be packaged into “adult entertainment” for $x more per month
- ISPs can define “heavy users” of Social sites and charge an additional premium for things like Reddit, 4Chan, Discord, etc.
- The entire internet can become packaged ad-hoc, costing you far more than you currently pay for unrestricted access; all because ISPs are now selling you “information” rather than a utility
- An ISP can choose to block certain websites completely
- If a new streaming service begins to gain traction, they can be completely blocked by an ISP as “unsupported” as it will congest their traffic for more favorable streaming content like YouTube Red or Hulu (Turner)
- A new social network can be stymied by a wealthy Facebook, looking to maintain its dominance in the space by paying an ISP for “their spot”
- ISPs can begin to charge online shopping channels like Amazon, Ebay, or Newegg per transaction, increasing the cost to the end consumer (not to mention you’d have to potentially pay for a “Shopping Package” to unlock this content to begin with)
What Can Repealing Net Neutrality Mean For Advertisers?
This is the question of the day – how does this impact what we do as marketers and advertisers? Well, a significant amount of advertising power will pass from Google/Facebook to Verizon/Comcast. ISPs can create their own advertising channels and block existing services. The Wild Wild West of the digital landscape today will become even wilder.
Imagine serving an ad through DoubleClick on some informational website like ESPN.com (under a separate sports package the end-user is paying extra for) but Comcast/Verizon have effectively preempted the placement, and at less cost, as their advertising platform is favored. Naturally, you begin to run digital ads through the ISP directly, at this lower cost, but as they grow larger and larger in their footprint, they are now incentivized to charge more for this channel being that they are the only game in town.
On top of this, Comcast/Verizon may not want to run any advertising at all that competes with one of their services (think of DISH/DirecTV ads running all over cable).
The power Verizon/Comcast would wield would be unprecedented in this space. No matter the size of your advertising, your “business account” to serve ads to different websites (as well as paid search) can come at a monthly premium; sort of like a retainer because you are an ad server. You have no choice but to pay the amount specified, as the ISP can target and block any ad you serve should you not pony up. Keep in mind, it’s no longer a utility and is under their complete content control.
While the decision has been made to repeal, this is not a referendum vote, but rather a Republican-led internal vote within the FCC. This decision will almost certainly be challenged by Congress (separate vote), and then ultimately in the courts in nearly every state of the union. This is the first action, but certainly not the last.