Net neutrality ruling could force pay-to-play with usage-based pricing

Are you ready to pay to play if the FCC's net neutrality ruling stands? #GRCchat participants share how a usage-based pricing structure could negatively impact small business and innovation.

Net neutrality as it currently stands offers SMBs the opportunity to compete on the same broadband playing field as larger organizations. But the pay-to-play concept proposed by the Federal Communications Commission (FCC) creates a usage-based pricing structure that could make it more difficult for small and medium-sized businesses (SMBs) to keep pace.

The proposed regulations would affect Internet service providers (ISPs) and niche businesses that offer streaming content. Netflix recently submitted a plea requesting that the FCC intervene in the company's dealings with ISPs, such as Comcast and Verizon. Netflix claimed these ISPs were intentionally letting connections deteriorate in order to force Netflix to pay for better service. If a large business such as Netflix is already having issues, how would the small fries compete?

In the latest SearchCompliance #GRCchat, we asked participants to share their net neutrality predictions:

One major concern is that ending net neutrality will ice innovation and force startups and entrepreneurs to rethink Internet service use. SearchCompliance Site Editor Ben Cole, tweet jam participant Brian Katz and SearchCIO Managing Editor Rachel Lebeaux expressed their concerns:

Lebeaux brought up an important point about pricing structures: Much is still unknown.

"Netflix accuses the last-mile carriers of 'double dipping,' or trying to get paid twice for delivering Netflix videos, "explained Wall Street Journal columnist Holman W. Jenkins, Jr. in a recent piece. The streaming media company said ISPs are profiting from high-speed broadband sales to Netflix users, and from Netflix itself. Whether or not Netflix is correct, there are certainly many questions regarding potential pricing models under new Internet regulations.

According to Jenkins, there would be a number of potential pricing models for broadband use if net neutrality were dissolved:

  • Flat-rate/linear pricing: This pricing structure charges a single fixed fee for a service, regardless of usage. In a flat-rate pricing structure, heavy Internet users are subsidized by light users.
  • Congestion pricing: This structured system bills broadband customers according to how much data they use and when they use it. Jenkins said: "It would produce lower average costs for users for the same reason that business travelers benefit when airlines fill up planes with backpackers and grannies on cheap tickets."
  • Metered/consumption-based pricing: This usage-based pricing structure charges broadband customers for what they use (bits), much like home electric or gas billing structures. Customers using larger amounts of broadband at home will pay more.

In this New York Times Business Day Live video, reporter Brian Stelter explained that usage-based billing is "concerning to startups and other companies that want to host really interesting new services on the Internet." Tweet jam participant Michael Elling shared other potential downsides to consumption-based models:

If high-volume users decide to limit their broadband usage, others could suffer, especially content delivery networks (CDNs). What other ways could ISPs, small businesses and customers suffer if a metered model were enforced post-net neutrality? Please sound off in the comments section below.

Join our next SearchCompliance #GRCchat Thursday, July 24, at 12 p.m. EDT. Until then, browse this month's conversation and add your two cents.

Next Steps

Read recent coverage on the FCC's net neutrality ruling on our sister site, SearchCIO, starting with this Searchlight on the firestorm of protest and a column by CIO Ravi Ravishanker.

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