Net neutrality: a runway for startups

The European Commission has launched an exploratory consultation on “The future of the electronic communications sector and its infrastructure”, where it makes clear its intent to make Content Application Providers (CAPs) contribute to the cost of telecom networks in the form of a Network Fee.

While well-intentioned, a network fee will inevitably have unintended negative consequences for the entirety of the internet ecosystem as we have observed in South Korea. These include raising costs for consumers, startups and SMEs, less investment and quality content. Perhaps more importantly, net neutrality (AKA free and open internet) is at stake. 

Why startups need to have a say in the debate: 

Net Neutrality ensures that Internet Service Providers (ISPs)  treat all Internet traffic equally. What this means in practice is that ISPs cannot decide to prioritise, slow down or block internet traffic. A truly borderless and barrierless internet that allows all actors to compete on the basis of their service or product, not the bandwidth that is afforded to them, and reach consumers worldwide. This principle is enshrined in the EU’s Free Internet Regulation and has made it easier to open an online business than a café. 

If ISPs are given free rein to charge fees to CAPs, it will incentivise prejudicial traffic management in which those who pay would have access to more or/and better bandwidth. In this scenario, startups and SMEs would be the biggest losers. Large platforms have the ability not only to pay ISPs for traffic but also to ensure a higher quality of streaming service.

This would put smaller actors with fewer resources at a competitive disadvantage. Net neutrality acts as a catalyst for market competition by enabling startups to compete based on the merits of their offerings rather than their ability to pay for preferential treatment. This dynamic fosters a vibrant ecosystem where startups can disrupt traditional markets, introduce fresh ideas, and drive industry-wide innovation.

ISPs and the Commission have insisted that only very large companies would pay this levy but this in itself causes two problems: The first one is that it opens the door to all digital players to have to contribute in the future, which would change the nature of the internet as we know it, making it very difficult for small business to start-up in the first place. In addition, it creates a glass ceiling for startups. Thresholds disincentivise startups from disrupting the incumbents, cementing their position, and disrupting fair competition. 

And finally, the threat of a two-tiered, or multi-tiered, internet will discourage investors, triggered by a highly unpredictable regulatory market. Any startup could be affected either by an ISP demanding payment or a throttled internet, creating a negative trickle-down effect on content creation, innovation, and competition. Just the threat of a two-tiered internet will discourage investment into startups, especially those that offer services competing against incumbents that will potentially pay a fee. 

Net neutrality is the cornerstone of a fair, open, and competitive digital landscape. For startups, net neutrality is essential for driving market competition by fostering innovation and leveling the playing field. By preserving net neutrality, startups can unleash their entrepreneurial spirit, create disruptive technologies, and build scalable businesses. It is imperative for policymakers, regulators, and society at large to recognize the vital role of net neutrality in shaping the future of entrepreneurship, ensuring a vibrant startup ecosystem, and reaping the benefits of a truly open internet.

If you'd like to hear more about this topic or any number of other areas Allied for Startups campaigns for on behalf of the startup ecosystem, join Allied for Startups at their booth at the Tech.eu Summit on the 24th of May in Brussels.