How Internet Neutrality Affects Online Innovation and Business

Editor’s note: This is a guest post by Mark Stanley from The Center for Democracy & Technology, based in Washington, DC, a non-profit public interest organization working to keep the Internet open, innovative, and free. For more on Internet neutrality, visit CDT’s Free Expression page.

Recently, Internet neutrality has returned to the spotlight amidst intense speculation. Last month, Minnesota Senator Al Franken boldly pronounced net neutrality as “the First Amendment issue of our time.” Franken might be right, and the real question is whose First Amendment rights will prevail: those of Internet service providers (ISPs) or those of content providers and individual users? When this question is finally settled, we could see innovation and online startups severely stifled.


Internet neutrality is about preserving what we have now: an Internet where users pay a fee to an Internet service provider (ISP) and have nearly unrestricted access to all online content. Market entry barriers for online innovators are relatively low: all you need is a connection of your own to reach all Internet users. An Internet operating outside the principle of Internet neutrality would allow ISPs to discriminate among different types of services, providing some kinds of Internet traffic with high priority (fastest delivery) while relegating other types of traffic to what essentially amounts to a “slow lane” on the Internet. An inherent danger is that this could open the doors for ISPs to act as Internet gatekeepers, making deals and playing favorites. An Internet where innovators had to negotiate with individual ISPs to be assured access to users would significantly raise barriers to entry, likely entrenching large Internet players and foreclosing competition.


ISPs: Comcast, Verizon, Time Warner, AT&T, others. These corporations are some of the communications titans that provide customers with access to the Internet. This list includes other, smaller companies.

Online content providers: Facebook, YouTube, bloggers, websites, startups. ISPs could decide which of these sites they want to make available to their customers or which sites will receive first-class delivery .

Rule makers: Federal Communications Commission (FCC), Congress


In April, the DC Circuit Court of Appeals ruled the FCC had not adequately made a case for its authority to enforce Internet neutrality principles. The decision also threw a wrench into the FCC’s plans to expand those principles into enforceable rules for ISPs. Meanwhile, several members of Congress have tried since 2006 without success to pass legislation definitively bestowing the FCC with authority to ensure neutrality. So the FCC went back to the drawing board, issuing a notice of inquiry on whether it should reconsider a series of decisions classifying broadband as a service over which the Commission has only limited authority. The notice asked if the FCC should reclassify broadband as a telecommunications service, an area where the Commission has clear jurisdiction. The carriers vehemently objected. In an effort to reach a compromise this summer, a number of high-profile companies from both sides participated in talks with the FCC, but they failed to reach a deal and the meetings were scrapped in August. Around this time, Google and Verizon, which had both been involved in the failed FCC talks, published a joint “legislative framework for consideration by lawmakers.” The framework was controversial because, while wired Internet networks would be subject to certain neutrality conditions, wireless networks would not. Neutrality advocates also argued that the rules that were proposed were inadequate to ensuring the Internet remained an open platform for participation, innovation, and competition. Negotiations and debate are ongoing on several different fronts. Finalizing an approach to Internet neutrality faces many political hurdles, particularly from those who bristle at the idea of government regulation of privately owned network facilities.

The future of the debate is far from certain, but the continued openness of the Internet hangs in the balance.


ISPs have advocated for what could be called the “the cable-ization of the Internet.” They argue they have a First Amendment right to exercise “editorial discretion” (to quote AT&T) over the online content users access on their networks, just as a cable TV operator does. But the Internet has always been different. Negotiation with communications carriers has never been necessary to introduce new and innovative tools and services on the Internet. If the purported right to editorial discretion is cemented, sites may have to lobby ISPs just to have their content accessible to the ISPs’ customers. Even giants in the content provider category – like Facebook and YouTube – were nascent sites at one point, and if they had to jump through hoops to have ISPs feature their content, they may never have grown into the cultural forces they are today.

There is a different vision of the First Amendment when it comes to the Internet, one put forward in the landmark case overturning the Communications Decency Act. In that case, the Supreme Court saw fit to give the highest level of free speech protections to Internet users, recognizing the benefits of openness to expression, competition, and innovation.

Which will ultimately win out: the right of ISPs to decide what content they will transmit, or the rights of Internet users and content providers to have access to each other? If the outcome favors the ISPs, online innovators will suffer. The rights of individual Internet users to broadly distribute content in the form of blog posts, comments, tweets, updates and videos will be threatened too. This means an Internet that is less open and free, and when it comes to innovation, that’s bad business.

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Hercules holds a B.Comm Finance from Ryerson University in Toronto, Canada. He is a Chartered Financial Analyst (CFA) level 3 candidate. He was previously a contributor at FiLife, a finance website owned by Dow Jones and IAC. Write to [email protected]
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  • Paul A.

    I’m not sure if consumers would be willing to pay more for access anyways which may hurt the content providers traffic. Of course this may cause content providers to have issue with the ISPs.

  • edwould

    Google, what the hell happened to do no evil???

  • Mwendy

    This is the first time I have read from any in the “public interest crowd” that ISPs have a 1st Amendment right. This fact has escaped many on the Left, and perhaps purposely so – it gets in the way of their argument that government can mandate speech on ISP networks. At least this post admits it.

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