Net Neutrality: How the FCC Rulings Impact Digital Media Buys

(updated 4/14/15)

Last summer on this blog we explained the net neutrality debates and how it could impact marketers and how they make digital media buys. Last month the Federal Communications Commission voted 3-2 to adopt a proposal that would ensure that the Internet remains a fair and neutral place. In light of this ruling, we’d like to revisit the subject.

What is Net Neutrality?

With net neutrality, all content comes at the same speed and cost regardless of the user, destination, site provider, and/or content type. Think of it like a highway: anyone can access any road they want for free with the same expectation of speed, service, and traffic as everyone else.

In a non-net neutral world, however, drivers with more expensive cars who are willing to pay for it can access faster lanes on the same road with light traffic. They can avoid construction delays, and, even in some cases, block certain roads to other drivers so that they are not accessible at all.

The recent debate has focused on whether:

  • A neutral Internet should be law, or
  • Internet service providers should be able to provide faster connections for companies willing to pay for it.

How does the New Ruling Change the Internet

Initially the goal for some was the latter option, called “paid prioritization.” In a controversial ruling last year, the FCC allowed ISPs, or Internet service providers, to charge popular tech companies like Facebook and Google to deliver their content faster. The latest FCC vote, under Title II of the Communications Act, now reclassifies consumer broadband Internet service as a utility, which ultimately bans ‘paid prioritization.” It also prevents ISPs from being able to discriminate in who and how they provide service.

ISPs were invested in the outcome of cases like this due to the disproportionately large bandwidth and carriage fees incurred by video-heavy sites like Netflix and YouTube. The reaction has been mixed but some tech companies have publicly expressed their displeasure. Netflix initially supported net neutrality, but has since retracted. Verizon called the ruling outdated. They put out, what they called, a Throwback Thursday press release. It was dated for 1934 and written like it had been created on a typewriter.

What Does Net Neutrality Mean for Media Buyers?

Currently, there is no premium for content delivery speed. The website and advertising for Wal-Mart generally serves at the same speed as a mom-and-pop store (barring no technical issues). If additional site speed becomes a premium, ISPs could charge brands more for better-performing Internet with premium “fast lanes” that load faster, crash less, and deliver content more effectively.

The media buying equivalent to this proposed change can be found in TV media buying. Now, advertisers can pay broadcast channels more for access to a mass audience that is more diverse and less targeted, ultimately shutting out companies with smaller budgets.

The Impact on Digital Media Buys

Based on our media research, here are some examples of how changes to net neutrality may have negatively affected the way you market digitally:

  • Decreased conversions: Page load speed factors significantly into how well your website or digital advertising converts. This is particularly true if you are an e-commerce site. If you advertise on a site that has slower loading speeds, or if your own site is slower, your bottom line may suffer.

With the new ruling, ISPs can’t purposely speed up or slow down the Internet or act preferentially to some customers.

  • Higher cost to deliver content: Paid prioritization could mean that websites pay higher operational costs, such as new taxes and fees. Video and multimedia content tend to use higher bandwidth and may cost even more.

With the new ruling, There’s no guarantee that this won’t change. ISPs are still paying more to operate and deliver content and they may have to increase their rates at some point to remain profitable. Media buyers may experience a rise in their own expenses as websites pass the cost on and charge higher advertising rates.

One potential benefit of changes to net neutrality will be that they may open the door for new innovations in revenue models and inventory options. Advertising Age cited an example of brands subsidizing and sponsoring access to paid video sites like Netflix and Hulu Plus as a potential new ad inventory option for media buyers.

Capitol Media Solutions keeps marketers informed about technological and legislative changes that can impact how they buy media. Contact us about developing your digital media strategy.

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