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Area businesses have mixed feelings on effects of net neutrality repeal

Area businesses have mixed feelings on effects of net neutrality repeal

From #jcmo Inside Business

February 12th, 2018 by Philip Joens in Business

Julie Smith/News Tribune Derrick Smith explains the ins and outs of the headend facility which routes signals and allows them to travel faster on Midiacom's broadband Internet network. Smith is HFC (hybrid fiber-coaxial) supervisor for Mediacom.

About a month after the Federal Communications Commission decided to end net neutrality, Jefferson City businesses sat and waited.

Some could wait for months or years before feeling the effects of the change. Others contend nothing will change at all.

The FCC voted 3-2 Dec. 14 to repeal regulations which prohibited broadband internet providers from blocking websites or charging extra for higher-quality service. This reversed a 2015 decision to reclassify the internet as a telecommunications service rather than an information service. That decision effectively allowed the agency to regulate the internet like a utility.

Some businesses in Jefferson City said the change will harm them, but others weren't sure what effects it would have. Internet service providers in Jefferson City, meanwhile, said they felt burdened by the regulatory framework and will not change customers' services.

Net neutrality rules put in place by the FCC in 2015 attempted to create an open internet. The rules required internet service providers to provide neutral gateways instead of handling different content in different ways at different costs.

Then FCC Chairman Tom Wheeler said at the time the policy endured "that no one — whether government or corporate — should control free open access to the internet."

Repealing the 2015 rules transferred regulatory power over the internet back to the Federal Trade Commission, which governs information systems and not communications systems. Companies now may slow content, a practice known as throttling, and block content on their networks. If they do so, though, ISPs must disclose this to consumers and the FTC.

Throttling and blocking practices must stand up to anti-trust laws, which prohibit non-competitive practices.

Clayton Hicklin, director of business innovation at Jefferson City-based IT firm Huber & Associates, said in theory companies can slow down or block content. Companies will be required to report any anti-competitive practices like these to the FTC, though.

"When they do that, the FTC will make a ruling as to whether what they've done is anti-competitive in nature or not," Hicklin said.

Hicklin said the shift in oversight from the FCC to the FTC feels like the change which folks are most concerned.

"We don't know how honest, open and forthcoming providers will be with reporting that practice," Hicklin said. "I think the concern is that the FTC will be overwhelmed by the number of cases they need to review or err on the side of allowing providers to manipulate the traffic on their network and not be as critical as they should be."

Phyllis Peters, a communications director in Mediacom's Des Moines office, said the company believes the FTC can handle consumer complaints better than the FCC.

"If there's violations of federal law, the FTC can order refunds; it can order remedies beyond what the FCC could do," Peters said.

Debate surrounding net neutrality typically focuses on effects to consumers who use streaming services like Netflix, gaming and other entertainment systems at home. Still, businesses could feel impacts if they offer products that compete with those offered by a local internet provider, Hicklin said. Internet providers also could promote a local business it had a relationship with by throttling or manipulating the bandwidth of other businesses, Hicklin said.

"There's really no reason why businesses wouldn't be subjected to the same potential flaws with the system," Hicklin said.

Experts, businesses react

In the past, the U.S. Chamber of Commerce criticized the FCC for creating net neutrality rules. In mid-December, the chamber said it endorses net neutrality, but not in the form of rules created by the FCC.

"We encourage Congress to provide long-term regulatory certainty by enacting legislation that permanently preserves net neutrality and prevents federal agencies from stifling innovation through overly burdensome regulatory regimes," Neil Bradley, U.S. Chamber of Commerce senior vice president, said in a news release.

Christopher Mitchell, director of community broadband networks for St. Paul, Minnesota-based think tank the Institute for Local Self Reliance, said businesses and consumers likely will see prices rise because of the new power given to the oligopolies that run the telecom industry.

"Prices will be going up in general," Mitchell said. "Exactly how they go up is hard to predict."

In April, local entrepreneur Chris Harbert started Testery, which tests websites to make sure they work. Harbert said net neutrality rules ensured small and big companies on the internet stood on equal footing.

He feared entrepreneurs, like himself and others around Jefferson City, could be forced to pay more to access faster lanes of the internet to ensure their websites perform well, or so they can do the work they need to do. Because ISPs could alter the performance of entrepreneurs' websites for any number of reasons, Harbert said, that could alter the user experience on their sites and upset customers. Site performance and speed also affect listings for websites in web search results, Harbert said.

"Whether you can be found on the internet at all is survival for these small companies," Harbert said. "Starting an internet business is not easy already, so we don't want to make it harder."

Jamie Patterson, Jefferson City Medical Group vice president of marketing, fears the repeal of net neutrality rules could impact several small things for the physicians' group.

Gone are the days when JCMG used its own servers to host an internal email service. Now, JCMG uses an email system and other services hosted on the cloud by Microsoft Office 365.

Complicating matters, like many medical centers, several internet providers provide JCMG's remote locations with internet services so the failure of one network does not cause a complete loss of internet for the office. The group also wants to add more redundant providers at its main Jefferson City campus.

Right now, the physicians' group receives standard quality service, Patterson said. She doesn't know if the group's ISPs will make it harder to use essential cloud-based services because of their own business relationships.

"It's unclear exactly what the impact of this is going to be on that," Patterson said. "Is every ISP going to have different standards or quality of service?"

JCMG communicates with the public and patients via its website, email and a web portal for patients. Patterson said she's worried about whether patients will be able to access those platforms.

"If the internet becomes completely monetized and internet service providers start charging for access to different parts of the internet, I'm concerned about our lower-income patients being able to learn about us, access their patient information on the portal."

Physicians at JCMG use the internet for research and to access electronic medical records. The group's offices also have Wi-Fi for patients to use. Patterson acknowledged JCMG runs a lean but efficient operation.

JCMG Director of IT Aaron Hendrickson said the group simply wants to get the services for which it pays.

"If I buy a 200 (mega-bit-per-second) connection, I expect a 200 (mega-bit-per-second) connection," Hendrickson said.

Hendrickson also said most companies make investments in hardware to help them manage their websites. He added, though, they want to make sure the investments they've made pay off.

"That's how I see this impacting our organization," he said.

Other area business leaders hadn't thought much about the change.

Butch Ruprecht owns several McDonald's locations around Mid-Missouri.

At Ruprecht's store, customers can use mobile ordering systems to order online. During a recent renovation, Ruprecht's Linn store also installed self-serve kiosks, which allow customers to place orders with electronic payments on tall touchscreens.

Ruprecht's McDonald's stores use the internet at cash registers, for Wi-Fi provided for customers, and for things like email and office systems. While Ruprecht felt consumers of streaming services like Netflix would feel the effects, he didn't think it would impact his business.

"I have no idea how it's going to affect us," Ruprecht said. "I can't imagine it being as big of a deal as some would want to make it."

No change in service

Internet providers contend residential and business consumers will see no changes to their services. Rather, they say the repeal simply changed the rules back to the way they were before 2015 when cases of manipulating networks were rare.

For its part, the FCC said in the repeal order that the disclosure requirements, combined with consumer pressure not to throttle services or block content, will protect consumers.

"The transparency rule will require ISPs to disclose such practices," the FCC said in the order. "Coupled with existing consumer protection and antitrust laws will significantly reduce the likelihood that ISPs will engage in actions that would harm consumers or competition."

Of internet service providers in Jefferson City, two of the largest are Louisiana-based CenturyLink and New York-based Mediacom.

Peters, from Mediacom, said the 2015 net neutrality laws unfairly applied burdensome regulatory measures from a 1930s law about telecommunications to modern technology.

"We have always followed the principles of net neutrality, and we have no plans to change," Peters said. "We've never throttled or slowed down, or put any obstacles in the way of our customers' experience."

Peters added in 2016 the company began a $1 billion project to expand its broadband network to parts of rural America not served by other internet providers.

"It would be counter-productive to slow down if they just spent $1 billion to make sure our customers can use the fastest broadband speed," Peters said.

Ric Telthorst serves as president of the Jefferson City-based Missouri Telecommunications Industry Association, which lobbies state leaders on behalf of the telecommunications industry. Telthorst said ISPs don't have any incentive to change their customers' experiences.

"If they negatively affect their customers' experience, that's bad for business," Telthorst said.

One of the region's smallest telecom companies took a different view of net neutrality than its larger brethren. Like Mediacom, Columbia-based Socket said residential and business customers should see no change to their service. The company officially has no position on net neutrality, but Socket Marketing Manager Allie Schomaker said the company supports a free and open internet.

"The company standpoint has always been, this is how we're going to treat our customers," Schomaker said. "To us, it doesn't change anything."

In December Mitchell, from the Institute for Local Self Reliance, published a study that claimed 177 million Americans live in areas only served by providers that previously violated net neutrality rules. That map showed at least one option exists in Jefferson City for customers who want broadband service from a company that has not previously violated the spirit of net neutrality.

Mitchell said CenturyLink and Mediacom never violated net neutrality rules. Given the size of the companies, though, he does not expect them to abide by the spirit of net neutrality in the long run.

"The incentives (to violate net neutrality) are stronger now because there's no recourse," Mitchell said.

Mitchell said the cable and telecom industries became more consolidated from 2015-17.

"It's one thing if you live in Kansas City where Google disrupted the market and you have more investment and choices," Mitchell said. "But in Jefferson City, you don't have that."

A CenturyLink spokeswoman did not return requests seeking comment.

Free markets

Net neutrality proponents and opponents both want free markets. Proponents see a free market as an internet open to all players, with rules that dictate equal access for all. Opponents see a free market in economic terms, a market free of restrictions that lets companies decide their own best business practices.

At the issue's core, opponents and proponents of net neutrality also take two different views of regulation. Opponents say the FCC took a heavy-handed approach by regulating actions not yet taken by companies. Proponents say the FTC tends to be reactive, acting only after ISPs harm consumers.

Telthorst, from the Missouri Telecommunications Industry Association, said the heavy-handed approach stifled innovation.

"Some would say that heavy-handed approach had the effect of prohibiting certain new services from being tried because people were unsure what the reaction of the FCC would be," Telthorst said. "The internet marketplace will develop and grow and be more creative than it would be otherwise."

Peters from Mediacom said net neutrality gave an unfair advantage to large tech companies. Mediacom simply wants all players on the internet to be treated fairly.

"Not everybody was treated the same way," she said. "We don't want the thumb of a government regulatory agency to be weighted in favor of one set of players or giving others a disadvantage."

Before the net neutrality rules took effect in 2015, Peters said, some of the greatest innovations in the internet's history took place. Using "light-touch" regulations allowed companies to innovate and businesses to flourish.

Under net neutrality, Peters said, consumer concerns about telecom companies creating fast or slow lanes on the internet were overblown.

"They were hypotheticals and potential problems that weren't based on reality," she said. "It wasn't what we were doing, and it wasn't what we had plans to do."

FCC Chairman Ajit Pai repeatedly claimed investment in internet infrastructure fell after implementation of the net neutrality rules. The repeal order also states the rules are heavy-handed.

"Close examination of the examples of harm cited by proponents of (net neutrality) to justify heavy-handed regulation reveal they are sparse and often exaggerated," the FCC said in the repeal order. "Economic incentives support internet openness."

Schomaker said Socket never felt like the net neutrality rules stopped expansion.

"We don't feel like the rules were stifling any innovation or expansion on our part," Schomaker said.

Mitchell said, though, allowing large providers to influence rule-making hurts smaller providers like Socket.

"When AT&T and Comcast make the rules, that's very bad for smaller providers that are trying to compete with them," Mitchell said.

As a small-business owner and internet consumer, Harbert, from Testery, felt left out of the discussions surrounding the internet's future.

"Consumers and small businesses don't really have a seat at the table when it comes to these types of things," he said.

Harbert said fewer regulations create a less-free market for small businesses by making it harder for them to access the market.

"A lot of people who are in favor of few regulations do so because they believe in the free market," Harbert said.

He went on to say net neutrality creates a world where small businesses can operate in a free market unencumbered by threats from large ISPs. Patterson said she also prefers a free-market in this sense.

Waiting game

For now, all sides continue to wait. It will take weeks before the FCC finalizes the rules.

On Jan. 16, 21 states and the District of Columbia sued to block the repeal of the net neutrality rules. The Internet Association, which represents tech giants like Netflix, Facebook and Google, also indicated it plans to sue to stop the repeal.

Several states, including New York and California, indicated they could enact legislation creating statewide net neutrality laws in an attempt to shape the broader internet through statewide legislation.

If the FCC's actions survive appeals in court, though, state laws likely would have little effect because of federal supremacy laws. For now, much remains unknown about the web's future. While it could take years for court battles to play out, area businesses wait for the dust to settle.

"We haven't seen any impact yet," Patterson from JCMG said. "We haven't met about it and worried about it. It's a theoretical 'What if?' scenario."

Click here to view the full February 2018 edition of #jcmo Inside Business.