Repeal of Net Neutrality is a Blow to an Inclusive Digital Economy

By Melinda Jacobs
December 15, 2017

By Melinda Jacobs
December 15, 2017

Yesterday’s decision by the U.S. Federal Communications Commission (FCC) to repeal the net neutrality rules inspired one of our Project Advisors, Melinda Jacobs to share her opinion on the impact of these changes on inclusive growth and the digital economy.

An inclusive digital economy requires access to the internet and the free flow of information. These conditions have now been compromised. Yesterday, the Federal Communications Commission (FCC) of the United States repealed net neutrality. Put simply, net neutrality is the equal treatment of all internet traffic without throttling, control or other oversight by government or internet providers. Sometimes this is referred to as the “open internet,” and it allows users to have uninhibited access to lawful online content.
The FCC has been advocating for net neutrality for over ten years, culminating in the regulations introduced in 2015. The December 13th ruling was not a replacement of these rules, it was a repeal – once it is enacted, it will leave issues of internet access in the hands of commercial broadband providers who have fiduciary responsibilities to maximize profits.
Unlike cable television, when you buy internet access you get access to everything on the internet. Internet service providers (ISPs) are not allowed to discriminate among customers in the way that cable television is able to package what channels you have access to. The repeal of net neutrality will give broadband providers the ability to block or prioritize internet content (controlling what sites you can and cannot visit, regardless of their legality). They will also have the opportunity to create tiers of internet access, or “slow” and “fast” lanes. By controlling internet speed and impacting user experience, broadband providers will have more control in shaping consumer preferences and suppressing competition.
An inclusive digital economy relies upon equal and equitable access to the internet in its many forms: for users to create, share, and participate in online content. While net neutrality isn’t the only enabler of access – which also depends, for instance, on broadband connectivity – it is a key component. The internet is part of how Canadians access learning in and outside of classrooms, how they find and pursue employment opportunities, and how they build and market their businesses.
While net neutrality is regulated differently in the Canadian context, yesterday’s decision serves as a reminder of the importance of safeguarding Canada’s net neutrality.

Yesterday’s decision serves as a reminder of the importance of safeguarding Canada’s net neutrality.

Even with net neutrality in Canada, however, the Canadian market will be significantly impacted by the FCC’s decision. Canadian entrepreneurs rely on access to the American market via the internet: many Canadian small businesses rely on revenue generated by US traffic, or goods purchased by American customers. The repeal of net neutrality has the potential to make life significantly harder for Canadian businesses.
Without net neutrality, the speed of small business’ websites could be constrained. We know internet speed shapes consumer preferences and has an enormous impact on transaction volume – a slow website often means fewer viewers and customers. Companies won’t have access to a “fast lane” of the internet without paying extra, a policy that will stifle small business access to the American market. This increased cost of doing business on the internet could stop startups in their tracks.
Similarly, many products that Canadians rely on are built and priced based on market conditions in the US. Should market leaders like Amazon and Netflix have to pay broadband providers to guarantee the speed of their websites, those costs will be passed onto American and Canadian consumers alike. There is also a risk that American ISPs will see a business incentive to manipulate internet traffic in favour of their own digital properties, stifling competitors, existing or emergent.
We hear a lot about the internet “democratizing” innovation and access to digital opportunity. The internet is like electricity for a number of the most compelling consumer innovations of the last decade: the Internet of Things (IoT), voice over internet protocol (VOIP, like Skype and Zoom), Natural Language Processing (NLP, as seen in products like Amazon’s Alexa or Google Home) or any innovation that relies on an internet connection. Without an open internet, consumer use and business adoption of these innovations may be constrained. Broadband providers may choose to align themselves with one brand and block or impose “tolls” to access others.
Currently, 88% of Canadians have basic internet access. While some parts of Canada lack broadband access and costs remain high (with Canadian consumers paying far more for internet access than their international peers), once connected to the internet, Canadian users enjoy the same freedom to access and share information, and to turn their ideas into successful businesses.
The internet is foundational infrastructure for the digital economy. Realizing an inclusive digital economy in Canada will depend on preserving net neutrality.

For media enquiries, please contact Coralie D’Souza, Director of Communications, Events + Community Relations at the Brookfield Institute for Innovation + Entrepreneurship.

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