MSP Fears: Net Neutrality Rules Could Stifle Innovation, Hurt Small Businesses

Small Internet content providers could be at a new competitive disadvantage, and their small-business customers could suffer from future losses in service, if new Net neutrality rules proposed by the Federal Communications Commission become finalized, according to MSPs who are closely watching the FCC decision.

The new FCC rules also could stifle innovation as startups in the future might either not have access to higher Internet bandwidth or would need to raise more startup capital to acquire higher bandwidth, MSPs told CRN.

The FCC Thursday said it would advance a proposal that would allow Internet service providers to charge Web content providers to gain access to higher-speed bandwidth to deliver their content.

The FCC is opening a four-month period during which it will accept comment from the public regarding the proposed rules and is expected to finalize the rules by year-end, although they could be rewritten by then.

[Related: Death Of Net Neutrality Will Hurt Cloud Adoption, Say Partners ]

Today's ruling was very disappointing, said Jeff Juszczak, CEO of Thirteen Guys Named Ed, a Safety Harbor, Fla.-based MSP.

Juszczak said the proposed changes will make it difficult for smaller content providers to compete against their larger peers.

"This will have a chilling effect on companies and people trying to provide content," he said. "So for me, if I get something from YouTube, it will be faster than content from my favorite podcast provider, TWiT.TV."

This also will have a chilling effect on Internet startups, or on people trying to create their own content, Juszczak said.

"One of the benefits of the Internet so far is its egalitarian nature," he said. "That may no longer be true if the new rules are implemented. If that happens, ISPs will jump on providing faster broadband to those who pay for it right away. And users will gravitate to companies who pay for the fast lanes. They don't want the inconvenience of decreased speed."

Several news reports quote FCC Chairman Tom Wheeler as saying Thursday that, while ISPs may charge more for higher bandwidth, they will not slow down the bandwidth for those who do not pay extra.

Juszczak scoffed at that notion.

"I don't buy it," he said. "There's no value proposition otherwise. If I'm an edge provider, and Comcast says I can pay for faster content but doesn't provide some extra value compared to content providers who don't pay for the faster bandwidth, then it's moot."

Larry Velez, CTO and founder of Sinu, a New York-based MSP, also said he does not believe that bandwidth won't be throttled under the proposed Net neutrality rules.

"Is the FCC doing anything to ensure that?" Velez said. "Can they commit to the speed not falling in the future? I think the answer is no. Unless someone makes a commitment and measures the outcome, no one can say there'll be no changes."

Velez said a major concern over the proposed Net neutrality rule is the potential stifling of innovation and startups who have benefited from equal access to the cloud.

"Small businesses disproportionately benefit from the cloud," he said. "Large businesses can spend millions of dollars on infrastructure and monitoring. Small businesses can't. For the longest time, small businesses did without the cloud, and got by using Excel spreadsheet and ACT accounting software. Now they have Salesforce.com, which is accessible to them starting at $25 per month."

If cloud providers are forced to pay new "tolls" for the bandwidth highway, startups will suffer, Velez said.

"Now, potentially every startup's costs will jump," he said. "They can't just raise $1 million to get started. They might need $4 million to help get the needed bandwidth. This could hurt IPOs as well if Wall Street gets nervous about Net neutrality. We could see another dot-com bust."

Velez also said that the cloud has been a huge benefit to people who use providers such as Square to access things such as fast credit card services.

"If you are trying to buy a bracelet at a street fair, and the vendor says, 'Sorry, it takes two minutes to finish the transaction,' the vendor could lose customers," he said.

Sinu, which provides cloud-based backup services, could be directly impacted by the proposed Net neutrality rules, Velez said.

"We provide remote backup services to a lot of customers over the Internet," he said. "All of a sudden, if costs go up for a company like Mozy, it limits our services. Remote backups have brought a lot of good to small businesses."

PUBLISHED MAY 15, 2014