The FCC Repeals Net Neutrality: This Changes Everything
Anticipated for months, the Federal Communications Commission (FCC) voted yesterday to repeal the Obama-era ‘Open Internet Order’ enacted in 2015. Despite public outcry across social media over the anti-competitive nature of the decision, the regulatory agency led by Ajit Pai has enacted a decision so far reaching – effectively weaponising content distribution, it will affect how millions access the internet and have significant consequences for the digital economy.
In essence, the FCC’s decision means US Internet Service Providers (ISPs) and Telcos have been appointed as gatekeepers to digital success. Whether you are a streaming service or a cryptocurrency exchange, your fate is now theoretically influenced by an exclusive group of companies. Here are a few of the immediate implications:
The streaming space is about to become a lot more crowded
If you thought Netflix and Amazon were already triumphant in the SVOD wars, then the FCC’s decision has abruptly crashed the party. ISPs now control the pipes to content distribution, and could now easily launch their own services, using preferential speeds for their own content.
Venture capital and start-ups now face an additional hurdle to success
In the short-term, expect immediate reverberations around the entire digital sphere, notably for Venture Capital funds and bedroom start-ups who now have an extra regulatory hurdle – one that did not exist for their internet forbearers – to undertake. If enacted, streaming services such as Spotify may simply see no way out than to be acquired by a Verizon- or AT&T-like entity, especially given its time-frame for an IPO, after the debt financing round of 2016. On the investment front, VCs may be forced into a period of panic sells and bearish investment, as they await greater certainty on what the repealing of net neutrality means for the additional costs incurred to digital investments. This will subsequently extend to other areas of the digital value chain such as accelerator institutions, which may find themselves customers of the ISPs that control their company’s route to market.
Whilst many will point out that such a ruling by the US will not have immediate worldwide implications, the US often leads the way in global tech regulation. Whether this decision is passed through congress and has the effects envisioned, as one of the first major strikes against the internet, it could well implore both Brussels and Washington to take greater action against tech companies. Given the negative publicity the big four (Google, Amazon, Facebook and Apple) have received, there’s an increasing likelihood that regulators will come after at least one of these companies through anti-trust suits.
The FCC’s decision is a timely reminder to digital disruptors that you can’t outrun regulation forever. Equally, established entities whose business models have been decimated by technology, are not always willing to go quietly into the sunset of obsolescence. If the Comcasts and Verizons of the world throttle data and play kingmakers in the digital economy, this is just one potential ramification of the FCC decision. The internet’s vulnerability has been exposed and big tech may yet heed the consequences.