Why Net Neutrality is Vital to America’s Small Businesses

net_nutrality_300x240Net neutrality, the philosophy of preserving the freedom and openness of the Internet, has been one of the most widely debated issues of the modern broadband era. Content providers, online businesses, consumer advocates and many major Internet application companies stand in one corner, supporting unrestricted access, while legacy telecommunications and cable Internet Service Providers (ISPs) stand in another, trying to prevent rules that would limit their ability to determine how and when content is delivered.

Although the original intent behind the creation of the Internet was that all traffic should be treated equally, regardless of source or ownership of content, certain actions and public statements on the part of the ISPs have raised concerns about the ability of broadband providers to use their last mile infrastructure to block Internet applications and content, particularly those of competitors. Unlike the early years of the Internet, ISPs no longer wish to agnostically pass bits of information across their network, but would rather look at the content and pass it along differently depending on what it is, where it came from, and where it might be going.  In addition, some of these ISPs are proposing to enter into agreements with content providers – the websites and applications that the Internet community uses every day – to obtain preferential treatment for “enhanced” content.  If allowed, this would result in an environment where consumer choice, business growth and innovation are limited and controlled by the companies that provide Internet access.

The Internet’s open, neutral architecture has proven to be an enormous engine for market innovation, economic growth, social discourse and the free flow of ideas,” said Vinton G. Cerf, known as the Father of the Internet. “As a result, we have seen an array of unpredictable new offerings – from Voice over IP to wireless home networks to blogging – that might never have evolved had central control of the network been required by design.”

The type of innovation that has served the net so well for decades was never intended to be guided by the business models of the access and content providers who provide and carry the bits across the Internet. Innovation more often than not comes from individuals with bright new ideas, many of whom work outside of these large service and access providers.  As we look forward, we must ask ourselves – what happens to tomorrow’s entrepreneurs who are not affiliated with the dominant access and content providers?  Will fresh, new ideas get the attention and the funding they need to come to market?  And if they do, will consumers have free & easy access to them, or will they be spoon-fed as part of next season’s business plan and programming lineup?

Recent Developments

The most recent manifestation of the ongoing net neutrality debate occurred on April 6, 2010 when a U.S. Federal Appeals Court ruled that the FCC lacked the authority to regulate how an Internet provider handles network traffic. The case stemmed from an FCC order issued in 2008, under former Chairman Kevin Martin, prohibiting Comcast Corporation from blocking BitTorrent traffic. At that time, the FCC found that Comcast used unreasonable network management when it blocked access to peer-to-peer sites like BitTorrent. Comcast appealed that decision and won, arguing the FCC did not have the right to issue such orders.

This Federal Appeals Court decision not only challenges the fundamental principles of net neutrality, it also raises questions about the execution of the FCC’s recently announced National Broadband Plan, which includes “recommendations aimed at accelerating broadband access and adoption in rural America; supporting robust use of broadband by small businesses to drive productivity, growth and ongoing innovation; and lowering barriers that hinder broadband deployment.”

Proponents of Net neutrality believe it is necessary for Congress to step in and give the FCC the authority it needs to employ regulations that protect the health and openness of the Internet. Representative Anna Eshoo (D-CA), who co-sponsored the “Internet Freedom Preservation Act of 2009” with Representative Ed Markey (D-MA), said in a statement, “The Internet has thrived and revolutionized business and the economy precisely because it started as an open technology. This bill will ensure that the non-discriminatory framework that allows the Internet to thrive and competition on the Web to flourish is preserved at a time when our economy needs it the most.”

Impact on Small Businesses

Nearly all businesses have become dependent on quick access to the Internet to develop, deliver and distribute their services to customers. A free and open Internet gives small businesses, in particular, the opportunity to find customers affordably and efficiently, whether it’s a neighborhood plumber or a nationwide limousine company.

In a recent San Jose Mercury News article titled “Why net neutrality matters to one Sunnyvale company,” columnist Chris O’Brien wrote, “If you want to understand why consumers need strong rules ensuring all traffic on the Internet is treated equally, look no further than a Silicon Valley telecommunications company called 8x8.” O’Brien’s example of Voice over Internet Protocol business phone service provider 8x8, Inc. as a business whose very survival is contingent on the practices of the ISPs applies not just to Internet content and application providers, but to all businesses with an online presence or dependence on the Internet. “How big can 8x8 get before a telco decides it’s a competitive threat or is using too much bandwidth,” O’Brien adds. “And at that point, would a service provider throttle back the service, degrading its quality, or demand more money to transmit its services?”

The recent U.S. Court of Appeals ruling rejecting the FCC’s authority to regulate Comcast’s network management practices has triggered a flurry of responses from net neutrality proponents. In an editorial response to O’Brien’s San Jose Mercury News article, Representative Eshoo called for immediate clarification of the FCC’s governance authority for regulating access to the Internet and ensuring that broadband applications and services continue to flourish. Eshoo wrote, “An open Internet combined with expeditious broadband rollout is essential to maintaining our place as a leader in both telecommunications innovation and technological development.”

Without net neutrality regulations, entrepreneurs like those who make a living on eBay may find it difficult to upload images and sell products online over slow moving  Internet connections.  Businesses who rely on “hosted” IP-based communications services, such as those offered by 8x8, to reduce cost and enhance productivity may not be able to choose the provider they wish or may experience degradation in voice quality if their ISP starts “managing” VoIP traffic. Will venture capitalists be willing to fund new Internet startups if their destiny is in the hands of self-serving ISPs?

“While telecommunications services companies like 8x8 are squarely in the center of the net neutrality debate, all businesses and consumers that rely on the Internet are impacted by the Comcast vs. FCC ruling,” said 8x8 Chairman and Chief Executive Officer Bryan Martin. “Large chunks of our lives require unimpeded access to the Internet as a vital component of our everyday communications and tasks. Look at the volume of e-commerce transactions that take place everyday over Internet services such as PayPal or the hundreds of thousands of Apple iPad owners who require wireless Internet connectivity for the device to function.”

An unrestrained Internet is not only essential to the growth of the small business economy and associated labor force, it is a requirement for sustaining the free marketplace of ideas that have emerged over the years. The laws that protect this free market are network neutrality rules. Without the rules, innovators are at the mercy of the network owners saying who can and cannot succeed.

“The best, and most interesting Internet applications were invented by entrepreneurs with great ideas who had freedom to develop and run these applications on the Internet.  Given the opportunity, a free market will always find a better way to do things, just as VoIP phone services have improved consumer choice, costs and functionality over what is available from legacy phone services,” added Martin.

Demand for Increased Bandwidth

Premium content applications like voice, video, music and gaming are creating the need for more bandwidth and tiered services, which add fuel to the Net neutrality debate. And, things are only going to get more crowded as these applications increase in sophistication.

“Today, new video-on-the-net applications and video playback capabilities on cell phones are starting to accelerate the social shift that will bring Internet video applications to the mainstream,” said Martin.  “New and innovative applications in the gaming industry will also affect the need for greater bandwidth and better services.”

When these evolutions materialize, the need for more resources across IP networks will increase.  The good news is that there is a tremendous amount of idle bandwidth available to consumers.  Countries like Korea have figured this out, and are able to provide their consumers with more than 10X the bandwidth for less money than what consumers pay in the United States.  “The unused fiber stored in the ground will provide the capacity we need in the years ahead, so bandwidth availability isn’t necessarily something to worry about,” states Martin.

Conclusion

The essence of the Net neutrality argument centers on the principle that Internet users should be in control of what content they view, what applications they use, and all of these choices should be equal.  The determination of what content makes its way to consumers first, fast, and consistently should not be made by an access provider.  More importantly, access providers should not be permitted to use their power to discriminate against competing applications or content – just as phone companies should not discriminate which calls go through, which calls get blocked, and which calls receive acceptable levels of voice quality.

The Internet has followed this neutrality principle since its earliest days.  Indeed, it is this neutrality that has allowed many companies to form, expand, and innovate.  The desired solution to today’s net neutrality debate must strike a balance between the conflicting interests of access providers and consumers, and incorporate a mix of business, technical, and legislative contributions.  In the end, the ultimate goal is to protect the type of innovation that provides consumers with more options, and more value, because it is this type of innovation that will usher in the next generation of voice, video, and other new and enhanced applications that we haven’t even begun to think of yet.

Bryan Martin

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Bryan R. Martin is Chairman of the Board and Chief Technology Officer at 8x8. With over two decades of service to the Company, including 11 years as Chief Executive Officer, Martin has been a key figure in 8x8’s growth, leading the company from its early days as a VoIP pioneer to becoming the leading provider of Unified Communications as a Service solutions. [...] Read More >