Nivedit Majumdar Nivedit Majumdar

Net Neutrality and its Impact on Startups

Let me begin this article by saying that this one isn’t related to a specific trend, or a particular arena of technology. This article focuses on a much more serious issue, which pretty much has the power to further influence technology in various sectors and also the growth of businesses.

Yep, I’m talking about net neutrality.

Discrimination on the type of content available online, on the basis of who pays for what data plan and opts for which particular package: this basic fundamental is the major crux of my article here. But more than going over what net neutrality is all about, I’ll be focusing on how it can impact small businesses and startups. In an ecosystem conducive for startups to grow, net neutrality plays quite an important factor, and I’ll be discussing about this very point in my article here.

A LITTLE BACKGROUND FIRST

Net neutrality has been a topic of discussion for quite some time now. Two years back, there was a flurry of interest in the U.S, where the topic of net neutrality and its effects first came into a major limelight. Fierce debates involving the FCC, telecom companies, big tech corps and the general populace grabbed most of the headlines.

Just a couple of weeks back, the question of net neutrality was also raised in India, with massive support on social media in favor of making the Internet a place where information and content was freely available to all, irrespective of what data plans they opted for. Like the case in the U.S, this issue featured some of the biggest names in the telecom sector in India along with a government body.

STATISTICS

Now, before I delve into how net neutrality impacts startups, let’s take a look at the current scenario.

First off, the number of Internet users in the world is on a steady rise. If we look at the statistics from 2004 upto 2014, we see that the number of users has been growing at a tremendous pace. As of 2014, the number of Internet users worldwide stood at 2.92 billion people, up from 2.71 billion in 2013.

emberify_number_of_internet_users_worldwide_2004_to_2014
(Data Source: Statista)

This growth has been largely fuelled by the development of hardware which can be used to access the Internet. In this case, I’m nodding at the smartphone and the tablet markets, which have made the Internet accessible to millions of people worldwide. Moreover, there is the advent of eCommerce sites and social networking sites, which has given people more reasons to come online.

Speaking of mobile devices, it is interesting to note the growth of the Internet in the arena of mobile connectivity. Here’s the graph depicting the forecast for global mobile data traffic in exabytes per month. As evident, in 2014 the data traffic was 2.5 exabytes per month, which is expected to rise to 4.2 exabytes per month in 2015. This is further projected to grow to 24.3 exabytes per month in 2019, at a compound annual growth rate of 57 percent.

emberify_global_mobile_data_traffic_2014_to_2019
(Data Source: Statista)

Shifting the focus to India now, where the topic of net neutrality is still trending, there’s been a rise in the mobile phone Internet user penetration share. From a statistic of 7% in 2012, a figure of 14.1% was attained in just two years. It is projected that in 2015, 17.4% of the total population in India will use mobile Internet, and this number will grow to about 25.2% by 2018.

emberify_mobile_phone_internet_user_penetration_india_2012_2018
(Data Source: Statista)

Just to demonstrate how many people we’re considering here, let’s take a look at the number of WhatsApp users in India. One of the most popular mobile social networking platforms in the country, the app had a total of 70 million monthly users back in November, 2014.

emberify_number_of_monthly_active_whatsapp_users_india
(Data Source: Statista)

Social networking too is one of the most popular means through which a company reaches out to its audience. In fact, according to a research conducted by Statista, in 2013, the global Internet advertising revenue amounted to $117.2 billion, and this figure is estimated to grow to $194.5 billion by 2018.

All in all, the world is embracing the Internet like never before, which makes it all the more imperative for small businesses and startups to make their online presence more worthwhile.

IMPACT OF ITS ELIMINATION ON STARTUPS

Currently, sectors of online activity are governed by big corporations. Google, Facebook, Amazon and Asian players such as Baidu, Weibo and Rakuten have established their stronghold on the Internet, and this allows them to properly influence the customers’ behavior as far as buying patterns and Internet usage is concerned.

But the big companies are not the point of my article here. Coming to the million dollar question: How does net neutrality (or eliminating it) affect small businesses and startups?

COMPLICATION LEVELS: TOO DAMN HIGH

Now heaven forbid, we start paying for services on the Internet which are otherwise available freely. As a consumer, I would have to decide on an Internet plan which integrates all that I actually need from my data plan.

While that would be slightly cumbersome and expensive, it would fail in comparison to the complications that would be faced by a company. A company would have to evaluate which telecom provider provides the best services in a specific location. The company would have to change the viewpoint of its target audience, and generate content which would fit the bill for clienteles accessing all the data packages.

In a nutshell, the company would have to make multiple strategies depending on which stream it wants to utilize to reach out to its patrons. And that increases the complications manifold.

HIGHER COSTS: THE BIGGER COMPANY HAS AN ADVANTAGE

To illustrate this point, I’ll take the example of the net neutrality debate in the U.S. Everybody knows that Netflix is the leading video provider on the Internet, and as a result they have the ability (read money) to gain more customers.

How so? They would simply pay more to ISPs to provide customers with the content they want. And this money was estimated at astronomical figures – ranging from $75 million to $100 million in annual content delivery costs.

Smaller companies and startups would never be able to attain these figures to pay ISPs, and why should they? Funding and capital is extremely important for a startup or a small business, and blowing it all away just to have an online presence that would be recognized by all is just ridiculous.

EVEN PLAYING FIELD? NOPE.

Net neutrality basically is the thumb rule which governs the activities of all businesses – big or small. It also ensures that startups are able to compete with larger, more established corporations. Eliminating net neutrality would give the larger companies the upper hand as far as outreach to customers goes. And let’s face it, the ‘Promotion’ aspect of marketing is more important in case of a startup, as opposed to a larger corp.

WEBSITE SPEED AFFECTED

If ISPs have the control over the speed allotted, and the bandwidth attributed to content providers, they would allocate the largest bandwidth to the people who can pay for it. And that is plain unfair. Site speed is a key factor in search engine rankings, and sites which pay for faster speeds would have improves search engine rankings as well.

Big corps might have the resources to pay for higher speeds and ensure that their websites load faster, there are more conversions and less bounce rates than sites of smaller companies. Which once again, proves my point of how important net neutrality is for a startup.

CLOSING COMMENTS

In this day and age of constant cutthroat competition, it is important for companies to stand out. While the norm till now has been the basis of the quality of products and services, an important factor has also been the way the company reaches out to its prospective customers. Social media, in particular, has played the defining role in this regard.

Net neutrality ensures that there is an even playing field as far as the outreach over the Internet is concerned. Eliminating it would mean that larger corps are winning against smaller startups. It’s basically giving the bullies a free rein to run the school play yard.

Emberify too is a startup, and we rely on the Internet to reach out to people. One of the primary reasons we can do that efficiently and effectively is net neutrality, and that’s why we here at Emberify are all in favor of net neutrality.

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