Why Online Retailers Should Care About Net Neutrality

Net Neutrality is once again in the headlines as the Federal Communications Commission (FCC) prepares to vote on repealing open internet rules on December 14th. With this vote, the previous rules set by the FCC may be overturned, revoking Net Neutrality, and allowing internet service providers (ISP) to prioritize web traffic and offer services based on the data being transmitted. While there has been quite a bit of coverage on how these new rules may impact digital content providers such as Netflix, we wanted to examine the impact that the new rules may specifically have on online retailers, and the steps that these businesses would have to take to stay competitive. At Avatria, we believe that a free and open internet is critically important to our clients and their customers, and we are committed to helping digital businesses navigate any challenge posed by a repeal of Net Neutrality.

What is Net Neutrality and What is Changing?

Net Neutrality is the concept that all data passed over the internet is equal, and therefore ISPs must treat all data the same regardless of source and cannot differentiate their services on the data being transmitted to their customers. As a result, ISPs are not allowed to filter legal content, are not able to set up a tiered system that offers “internet fast lanes” to companies that would pay more, also known as “paid prioritization.” In short, as the gateway to the internet for millions of Americans, under current FCC rules, ISPs must provide equal access to all data over the internet.

At Avatria, we believe that a free and open internet is critically important to our clients and their customers.

Shortly after becoming the FCC chairman in January, 2017, Ajit Pai proposed repealing the 2015 rules that classified ISPs as “common carriers,” paving the way for ISPs to set up tiered service that would allow companies with the appropriate resources to buy into an internet fast lane. Additionally with the proposed deregulations, ISPs could theoretically block and filter content that might hurt profits.

Experience, Engineering and Financial Considerations

There are several points to consider when evaluating potential steps to take in the wake of a Net Neutrality repeal. While these steps will be critical if the repeal passes through the FCC, they are also in line with eCommerce best practices, and should be considered regardless of the result of the vote.

In the last several years, a trend has arisen towards rich, immersive experiences. The keystone that lets companies provide rich experiences quickly is highly performant pages, enabled by faster average internet for consumers and modern web technology. As various ISPs introduce tiered bandwidth, companies that do not have the resources to pay into the highest performance tier should consider taking the following actions to help avoid significant experience degradation:

• Reduce the overall size of the page, including optimizing images.

• Load data asynchronously where possible.

• Streamline and consolidate web services.

• Examine third party marketing integrations that may impact page load times. Often times these integrations are unused, but haven’t been removed from the site.

There’s also a direct revenue impact of degraded page performance: studies have shown that for every additional second of page load time, conversion drops by about 7 percent.

Today’s websites often use many different integration points to provide services to customers quickly, rather than attempting to build the technology in-house. As an example, a basic eCommerce site will use a 3rd party provider for payment processing, tax calculation, address validation, just to name a few. In a paid prioritization web landscape, even if the online retailer pays into a higher performance tier, its 3rd party providers may not have the resources to do so, and content delivered via a public route would be impacted by new handling by the ISP. Additionally, ISPs could completely block content that is threatening to their business.

ISPs have claimed in the past that they will not implement paid prioritization, however there is evidence that such practices have already been tested:

• In 2011, Verizon blocked customers from installing Google Wallet, as it was a direct competitor with its own payment app, Isis.

• In July, 2017, Verizon admitted to throttling Netflix content on their network. Verizon claimed that the throttling was the result of a test on video optimization across the network, however it was clear from tests that the throttling applied only to Netflix. Verizon later expanded the throttling to all video over its network.

• Comcast, who had previously pledged to consumers to not set up fast lanes or other forms of paid prioritization, removed that pledge from its website the same day that the FCC proposed the new rules that would end Net Neutrality.

If Net Neutrality is repealed, online retailers should prepare for the eventuality of certain functionality being the target of throttling and outright blocks.

Competition

Another topic to consider is how a repeal of Net Neutrality would impact competition. The context here is important: many online retailers are locked in a battle against mega-retailers such as Amazon and Walmart. The upper echelon of eCommerce companies will almost definitely have the resources to pay into fast lanes, adding another dimension to the competition between small and large businesses. From a performance perspective, small or struggling businesses would have a hard time competing, and as discussed before, this would lead to a drop in conversion rate.

Another wrinkle is that ISPs no longer only provide telecomm services. Many of the largest ISPs have other elements to their business, introducing a conflict of interest. Hypothetically, an ISP that offers the same type of product as an online retailer could throttle service to that retailer in order to handicap the competition; Verizon did exactly that in 2011 and 2017.

There are also user experience impacts, in that a customer that visits a single site from 3 ISPs (one ISP from home, another on a mobile device and a third from work) could have three different experiences due to all three ISPs treating the same content and data differently.

This uncertainty leads to a number of questions for online retailers. It is unlikely that all ISPs will implement paid prioritization in exactly the same way if Net Neutrality is repealed. Companies should account for the possible discrepancy between ISPs when selecting vendors and partners, as they may use different ISPs. To combat the uncertainty and answer questions that arise during the implementation of paid prioritization, companies should allocate resources to track changes implemented by ISPs and react accordingly to develop suitable strategies to limit the business impact.

What Can Be Done to Preserve Net Neutrality?

If Net Neutrality is repealed by the FCC, it is likely that advocates for Net Neutrality will take the FCC to court over how the 2015 rules were repealed. Online companies that support Net Neutrality can file amicus briefs with the court(s) under which lawsuits are filed. These briefs offer support, as well as explain the impact that the case has on the party filing the brief. There are legislative solutions as well, however the road to Net Neutrality through Congress is unclear. Another tactic that many online content providers have taken is to educate their customers on the impact that repealing Net Neutrality could have on them directly.

What Can Be Done After December 14th?

Until it is clear how ISPs will act in the wake of a potential repeal (which may take months or even years), it’s hard to say how online retailers should react, other than following the developments in this area. It will be critically important to continue to place an emphasis on site performance, as well as tracking how ISPs are changing how they deliver the internet to Americans.