Threat to net neutrality also threatens Canadian startups, says founder

Dec. 14 will be an important day for Internet users in the U.S., and for technology entrepreneurs north of the border. The Federal Communications Commission will vote on a draft set of proposals called the Restoring Internet Freedom Order, created by Donald Trump-appointed chairman Ajit Pai. They threaten many of the principles of net neutrality that have underpinned the Internet since it began.

The new order would repeal 2015 measures that regulated ISPs as telcos, instead reclassifying them as information services. It would also remove mobile broadband’s categorization as a commercial mobile service, instead classifying it as private, shielding it from some regulations.

It would eliminate the Internet conduct rule, also introduced in 2015, which let companies complain about ISP behaviour, and would erase the ‘bright line’ rules it also instigated that prohibited blocking, throttling, and paid prioritization of traffic. Instead, it effectively replaces it with a transparency clause requiring all ISPs to openly explain how they are managing their networks.

Finally, it would effectively abandon FCC regulation of ISPs, instead handing off oversight to the Federal Trade Commission.

Internet advocacy groups have been watching this issue for months, and already fighting hard against what they see as a fundamental erosion of consumer rights. Collections of liberal groups like this one are mounting petitions, but what are they worried about?

Tinkering with online traffic

Net neutrality embodies one important principle: that Internet service providers treat all traffic online as the same. By enabling Internet service providers to block or throttle traffic, critics worry that it could fundamentally change the consumer experience.

The worry is that ISPs could simply block content that they don’t like, or throttle some traffic that competes with their own. A cable firm offering online video content might slow down a competing over-the-top (OTT) service, or charge them to deliver traffic at the same speeds. Netflix and YouTube may have deep pockets, but smaller content services do not.

That’s potentially devastating for U.S. Internet users, but what about up here in Canada? The CRTC, which first published its net neutrality framework in 2009 and enforced them in its ‘zero rating’ decision earlier this year, seems heavily committed to net neutrality as a concept.

Canada’s pro-neutrality stance is only partially comforting for Leighton Healey, co-founder and CEO of Canadian startup Bootkik. The company, which hopes to launch its AI-powered online training program for would-be entrepreneurs in Q1, relies heavily on high-bandwidth video to deliver its product. Like any young Canadian content company, it has been eyeing the U.S. market as a growth opportunity.

ISPs that control what traffic gets delivered and at what speeds could place a chokehold on young companies, he says, and winds us back a few years for a hypothetical example. Let’s say it’s 2011, and Pai’s rules were in place. ISPs could throttle traffic to strangle young online businesses, he warns.

“It would be in the interests of an enormous hotel chain to purchase an ISP or make a sizeable investment so that they could block this fledgling startup called AirBnB that seemed to be taking all this market share,” he suggests.

Strangling innovation at birth

This is a very real issue for firms like his that are entirely bootstrapped and committed to keeping equity among the founders. Bootkik’s recent successful Kickstarter campaign illustrates its commitment to avoiding giving away equity in its early days.

He worries that this doomsday scenario could now happen with a young company like Bootkik. “It would be in the best interests of major institutions and content creators for Bootkik to not gain market traction,” he worries.

As an example, he points out that Verizon owns Yahoo, a content producer that targets the business community, among others.

“If there was an end to net neutrality and we gained serious traction, Verizon could decide that every Verizon user would either not be able to access Bootkik, or our content would be delivered at speeds so slow that we couldn’t deliver our central value proposition,” he says.

Just to be clear, there is no suggestion that Verizon is doing this or plans to do so, but the fact that an ISP could throttle his traffic leaves Healey feeling so uncertain that he’s meeting with his team to discuss future options. “As we realized it might happen, we’ve had to adjust market entry plans into the U.S.,” he says.

Changing the landscape for startups

He argues that small companies like his may need more investment to tackle the new realities of getting their content to U.S. audiences under the proposed rules. That, in turn, means handing over more equity to investors in the early life of a company and increasingly diluting the founders’ share – at which point, he says, many may ask themselves why they’re doing this at all.

He isn’t the only one to fret about the effects of net neutrality. The concerns are real, warns professor Michael A. Geist, Canada Research Chair in Internet and E-commerce Law at the University of Ottawa Faculty of Law.

“The possibility that Canadian companies could get stuck on the slow lane in the U.S. and struggle to succeed in that market is a very real issue,” he says.

In his rules, Pai says that he’s simply reinstating a more free-market approach to Internet governance, effectively rolling the FCC’s stance back to the Clinton era. “During that time, there was bipartisan agreement that the Internet should be free of burdensome regulation so that it could continue to flourish,” the FCC’s justification reads.

So aren’t net neutrality advocates overreacting? After all, the FTC regulated ISPs until the Obama-era FCC rules were introduced in 2015.

Don’t be fooled, says Geist; this is not a return to some pre-Obama era golden ideal. “The claim that these protections are new (dating only to 2015) is misleading,” he says. “There have been open Internet orders and policies in place for many years. The decision to roll back those policies goes beyond what many expected and certainly sets back policy earlier than the last few years.”

As for Healey, he hopes that Pai will wake up tomorrow and rethink his position. “Net neutrality doesn’t give us a guarantee of success,’ he concludes, “but it does allow us to at least compete on the same stage.”

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Danny Bradbury
Danny Bradbury
Danny Bradbury is a technology journalist with over 20 years' experience writing about security, software development, and networking.

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