While the FCC’s most recent decision on net neutrality will predictably continue to be very polarizing between entrepreneurs and Internet service providers (ISPs), the ruling should ultimately prove to be a win for all parties involved.
Though it’s unlikely that the ISPs are celebrating right now, champions of innovation, large and small, startup and corporation, certainly should be.
While net neutrality will offer entrepreneurs and startups unbridled freedom to innovate, at the same time it will challenge previously complacent ISPs to develop new business models and alternative revenue streams, requiring a greater commitment to innovation and resulting in greater industry advancements.
That’s not just good for business; it’s also great for consumers. The future of innovation in a net neutral world is bright from all viewpoints:
First and foremost, net neutrality is crucial to preserving innovation. One of net neutrality’s key benefits is that it will help preserve and maximize the ability of digital entrepreneurs to operate and innovate without being vulnerable to the preferential practices of very powerful ISPs. It will put a stop to the specter of so-called “fast lanes” that would allow ISPs to throttle the Internet speeds of companies without the ability to pay extra for the privilege of fast or equal service.
The fact of the matter is that high-speed Internet access has become a mainstay of our world’s culture and economy and is, by its very nature, a communications utility. It should be classified as such. While the new classifications as set forth by the FCC last week are accurate and just, the FCC’s ruling represents a tipping point in the maturation of the telecom industry. As a product or service becomes a commodity–and no longer a luxury available to only a select few, such as electricity or running water–it should become less profitable. It simply has to.
Wired ISPs charge their customers–both end users and the businesses transmitting data–for the two-way transmission of data at an agreed-upon speed. Without regulations to enforce net neutrality, ISPs would be free to effectively tax data-based service providers for high-speed transmission, despite the fact that their customers are already paying the ISPs to transmit the data.
This additional cost could mean the difference between a startup becoming the next Facebook or Google, or struggling to scale due to incremental costs.
Net neutrality regulations protect consumers, entrepreneurs, and content creators from potentially being charged for optimal pathways beyond the service they’re already paying for, which could hinder their ability to operate and endanger the future of innovation.
This is more important now than ever, as we live in a world where companies are becoming increasingly digital and relying more and more heavily on data being transmitted safely, effectively, and efficiently.
The net neutrality rules that were announced last week are an obvious win for consumers, entrepreneurs, and content creators. But contrary to popular belief, it’s possible for ISP supporters to also be fully supportive of net neutrality.
It’s important to distinguish the fact that ISPs will not lose an existing revenue stream; they are simply losing the prospect of a potential future revenue stream.
But rather than focus on what they may have lost, ISPs should focus on other things they can do to support their bottom line as a way to grow value for their shareholders.
The best example of a company that is already doing this is Cablevision Systems, with its recent launch of Freewheel, a low-cost mobile service that runs on its Wi-Fi network. They brilliantly identified the opportunities in the market, realized the power they have within the competitive landscape, and launched a service that takes advantage of their existing cable plant.
This is an example of innovation at its best and serves as a precursor of the type of innovative pivots that ISPs will be motivated to make post-regulation. The focus was on Cablevision’s consumers, who want inexpensive mobile communications, but the future benefit to the ISP’s shareholders is immeasurable.
As another testament to the fact that innovation can flourish in the face of adversity–be it government regulation or simply consumer behavior–we can look to the trend of TV consumers demanding time-shifted viewing options when online video content allowed them to watch on their own time.
Cable companies responded with vastly increased on-demand options, as well as DVRs that they could charge a monthly fee for, opening up a new revenue stream and preserving their customer base at the same time. These offerings now seem standard, but they were and are part of a sea change in how people consume TV and movies at home.
It’s the job of the business and product development teams within the ISPs to identify new ways to grow, much like Cablevision did when it launched Freewheel; with doors closing right and left, Cablevision simply opened another. All great innovations are borne of necessity. ISPs should see this not as a loss but as an inspiration.
And if ISPs need one more reason to accept–or even celebrate–net neutrality, we can cite the fact that the Comcast, Time Warner Cable, Charter, and Cablevision share prices are all trading up over the last six months and are currently at or near their 52-week highs. This means a few things:
- The market does not believe net neutrality is a bad thing for ISPs
- The announcement of Chairman Wheeler’s intentions removed uncertainty in their stock prices
- The market believes in the future of these companies and their ability to innovate to better serve consumers’ evolving needs
Yes, net neutrality marks the beginning of a more challenging path for ISPs, who must remain more motivated than ever to provide new products and services at reasonable prices to consumers, but the challenge will likely result in greater, longer-lasting innovations that will benefit the consumer.
The constant disruption in the media and communications industries means that now is a better time than ever for content companies and ISPs alike to create robust innovation practices within their organizations to ensure a prominent place in the market going forward.
Christophe Jammet is director of Social Media and Mobile at DDG, a consultancy that builds startups inside Fortune 500 companies to ignite innovation and growth. Scott R. Singer is managing director at DDG.