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Net Neutrality: What’s in It for Online Sellers?

Does net neutrality matter for online retailers?

Ask Brian Kilcourse, and you’ll hear a resounding yes.

Network neutrality has been at the heart of a long-simmering policy fight in the nation’s capital that appears once again to be nearing a boiling point.

But before your eyes glaze over, Kilcourse, managing partner at Retail Systems Research, would like to remind you that what might seem like a wonky debate over Internet governance could have real and potentially harmful consequences for online sellers.

“I think the threat is very real,” Kilcourse said.

At its heart, net neutrality is a simple enough concept. The idea is that Internet service providers shouldn’t be able to play favorites with the content traveling across their networks. Formulated into policy, that has translated into rules barring ISPs from blocking lawful content or unreasonably discriminating against the same.

The Federal Communications Commission has twice advanced rules along those lines, and twice a federal appeals court has thrown them out. Now, the FCC is trying again, announcing plans to put to a new set of proposed rules to a vote at a May 15 meeting.

The latest proposal is currently under review by the commissioners and their staffs, but has not yet been made public.

So the details are sketchy, but on a recent conference call with reporters, a senior FCC official outlined the scope of the proposed rules. The official declined to engage in hypothetical scenarios, but seemed to leave the door open, at least potentially, to paid prioritization agreements between Web companies and ISPs – exactly the type of pay-for-play deals that net neutrality supporters worry could lead to a tiered Internet with fast and slow lanes.

Kilcourse argues that in the ecommerce world, the potential for ISPs to charge Web firms tolls in exchange for prioritized delivery is of growing concern as retailers are adding more bandwidth-intensive rich media like video to their sites.

“What’s at stake here and my view is customer satisfaction, to the extent that rich content is becoming increasingly important in order to build a brand message in the digital space, the ability to deliver that seamlessly and reliably is really important,” he said. “The consumer has become accustomed to a fairly instantaneous response to these things. They have very little patience for websites that don’t respond well.”

If ISPs had the ability to broker side deals with Web companies for speedy delivery, Kilcourse envisions a scenario in which wealthier retailers, and certainly giants like Amazon, WalMart and Target, might pay a premium to ensure that consumers could load their sites with minimal latency, no video buffering and a general assurance of quality. Where would that leave the smaller independent retailers who don’t have the resources to pay for expedited delivery?

“Consumers are creating this expectation – they have the expectation of instantaneous response, and if they don’t get it, it leads to brand dissatisfaction,” Kilcourse said. “That’s a huge problem. It’s why retailers should be screaming about this. And curiously they’re not.”

Indeed, spokespeople for the principal retail trade group, the National Retail Federation, did not respond to multiple requests for comment. eBay, through a representative, declined to comment for this story, instead referring EcommerceBytes to its position statement on its Main Street site, which states, in part, that the company “supports net neutrality and opposes efforts to replace the current open Internet with “pay to play” private networks that would block, slow or otherwise discriminate against content and service providers that do not pay new bandwidth tolls.”

ISPs have expressed interest in opening new revenue lines through the collection of fees from so-called edge providers whose content travels over their networks. Net neutrality advocates like Kilcourse argue that lax rules could eventually mean a hit to online retailers’ bottom line, but the concern is not just hypothetical. Netflix, for instance, earlier this year entered into an agreement with Comcast to improve delivery of its streaming video content, and has reportedly since reached a similar deal with Verizon.

Netflix, which directly interconnects with those ISPs’ networks, rather than going through transit networks like Level 3 or Cogent, explained that the Comcast deal came in response to “an unacceptable decline in our members’ video experience” on that network. The FCC official who briefed reporters explained that those types of network interconnection or similar peering arrangements would not be covered by the proposed rules, which instead would seek to put a check on the more garden-variety paid prioritization deals between ISPs and edge providers that could potentially create fast and slow lanes for delivery of public Web content.

The FCC would evaluate any paid prioritization arrangements on a case-by-case basis, applying a standard of whether such deals are commercially reasonable, looking at factors such as whether the conduct is anti-competitive, bad for consumers or executed in good faith.

FCC Chairman Tom Wheeler addressed the issue in a recent address at the annual conference hosted by the National Cable and Telecommunications Association, a trade group that represents cable broadband providers and has been critical of strong net neutrality rules.

Wheeler emphasized the early stages of the rulemaking proceeding. At next month’s meeting, the commissioners will vote only on whether or not to formally consider the rules, setting in motion a process that would invite comments from the public and will inevitably draw close scrutiny from members of Congress.

But Wheeler also pushed back on the notion that the rules would throw open the door for paid prioritization agreements of the kind that have advocates like Kilcourse worried. Whereas now, after the most recent court ruling, there are no prohibitions against blocking or discriminating against websites, under the new rules the FCC would “look skeptically on special exceptions,” Wheeler said at the cable conference.

“Let me be clear. If someone acts to divide the Internet between “haves” and “have-nots,” we will use every power at our disposal to stop it,” he said. “We will not allow some companies to force Internet users into a slow lane so that others with special privileges can have superior service.”

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Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.