The free ride is over: Net neutrality repeal looks set to empty advertiser’s pocket books

Is the free ride over?

If you listen to the lyrics of REM’s 'It’s the End of the World as We Know It (And I Feel Fine!)' it feels more like a prediction as we live through 2017. US net neutrality is for the chop, after today’s vote by the Federal Communications Commission (FCC) undoing 2015’s rules that stopped internet providers from blocking or slowing particular websites based on a tiered/paid system.

This is a highly contentious topic but despite being treated as a partisan one, it’s not. A University of Maryland survey showed 83% of Americans (and three quarters of Republicans) support keeping the status quo after seeing detailed arguments for both sides.

While internet service providers (ISPs) will have to make public any blocking, throttling or prioritization as well as limitations on apps or devices, the repeal allows ISPs pretty much complete freedom in deciding what people can see. As long as they notify the user, without net neutrality, ISPs will be able to regulate access to specific sites.

ISPs can block or slow down access to specific media outlets or apply premium pricing options to access content, for example social media, video streaming and e-commerce platforms. We are likely going to see ISPs introduce fast lanes where the websites able to pay higher fees have their traffic prioritized. The Washington Post, likened this to airport security where VIPs, pilots and those paying for a faster experience sail through and everyone else waits their turn.

At the same time, consumers are likely to see their cell and broadband contracts get more expensive and they will need to purchase additional plans if they use data heavy messaging, social media or video sites.

Beyond this, the end of net neutrality will have big ramifications for advertising, media and marketing. I suspect many marketers are in denial about just how big a deal it is. It’s coming like a freight train and life is going to get way more uncomfortable, and quickly. In anticipation of the vote, Comcast took down their statement about fast lanes last Tuesday. If we go by past experience of how ISPs and telcos have behaved, they have a track record of being fast to react to the changing business landscape to benefit their businesses.

The repeal will result in higher costs across the entire ecosystem, for advertisers, publishers and consumers. Brand advertisers will be impacted as publishers might be forced to shut down higher-bandwidth ads (rich media, video, etc) as consumers switch to ad blockers (something relatively new in the US) to save data usage. Right now, only one in five US consumers use ad blocking, half that of Asia-Pacific. We’re likely to see rapid increases in ad blocking as people look to conserve data. This will lead to problems for both publishers and advertisers.

As far as content is concerned, ISPs will also be able to charge more for specific content types and websites. Sites distributing video content will be hit particularly hard by the changes, as their product requires heavy bandwidth usage and fast connection speed. This will of course also affect video advertising and it will likely be de-prioritized.

Independent media owners are likely to face rapidly increasing operational costs as they find themselves having to pay more to ensure their users can see them. This could undermine their existence and we are likely to see many small publishers go to the wall. As a knock-on effect the cost of advertising is set to increase, with costs getting passed down the supply chain creating a domino effect.

So, we’ve established advertisers are going to see higher costs and that video campaigns in particular will rocket in price. But one overlooked element to the discussion is that because the web is global, often campaigns are too. So even marketers working for EU/APAC brands are going to be affected because their ads are displayed worldwide. These CMOs and their agencies need to start making plans now.

CMOs will end up having to give a lot more thought as to how they use digital advertising with their brands. Advertising creative teams are likely to be in for some major headaches as they will be forced to revert to less exciting digital formats, such as banners, rather than use the full toolbox they currently have due to bandwidth and data consumption concerns.

At the same time, the telcos will be going all 90s on us, putting effort into making their portals sticky to users. In the past ISPs were running portals that functioned as an entry point for navigation for the user and encouraged permanence by offering affiliated content and applications. Most ISPs in the US have big stakes in publishing companies, so we expect that the process, kicked off by the repeal, will make it so that each ISP will privilege its own affiliated content by slowing down other websites. These portals would become increasingly crucial as a channel for advertisers, as fast speeds encourage consumers to dwell.

One of the immediate consequences of this repeal will be an increased cost in data plans, this will affect consumers in a way that will force them to cut other costs, like cable TV. This might lead to third party companies (for example Google, Starbucks or retailers) using free WIFI access as a way to attract and retain customers in exchange for personal data tracking.

Long term, I’m optimistic that as an industry we’ll innovate beyond this bump in the road. We’re in for a rocky few months, and marketers and agencies need to pad their contingency budgets as prices may increase quickly.

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Andy Vogel

Andy Vogel is head of digital products at NewBase.

All by Andy