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Solution Providers: The FCC's Net Neutrality Repeal Could Complicate Cloud Services

While broadband providers look forward to a less onerous regulatory environment following today's FCC vote to scrap net neutrality rules, some solution providers worry that they'll now have less control over the cloud-based services that depend on incumbent broadband networks.

The Federal Communications Commission voted 3-2 to eliminate net neutrality regulations on Thursday, giving telcos and broadband providers more power and control over the content that reaches consumers and businesses via internet connections.

For solution providers and the channel, the persistent worry is that lightly regulated broadband providers won't be motivated to deliver their software applications, cloud services, and other broadband-dependent services with the same quality of service as before – or they'll give preference to competitors paying for exclusive access.

"Will Salesforce.com pay the 'net neutrality tax' to perform better than competing products? And what happens with newer companies that don't have the deep pockets to pay that ransom for the bandwidth?" asked Allen Falcon, CEO of cloud solution provider Cumulus Global.

[Related: Partners: Trump Could 'Relax' Net Neutrality And Threaten Telecom Consolidation]

"The repeal of net neutrality is a threat to the channel in that carriers that are offering an expanding range of IT services will give their services preferential treatment over services being offered by other providers and channel partners," Falcon said.

What will happen, in fact, remains to be seen. Not all solution providers feel that telcos will necessarily use the new regulatory environment to prey on smaller companies.

"It should be an open and free market," said Mark Galyardt, executive vice president at XIOSS, an Atlanta-based solution provider who works primarily with Fortune 100 clients. "I believe the free market should be the final arbitrator. The internet is alive. It shouldn't be in play for any government agendas … Our current infrastructure is the best it's ever been. And it's not because of government regulations."

Galyardt said he agrees that repealing net neutrality could lead to some providers charging more for bandwidth used by third parties, but argued that the market would even it out.

"AT&T and Verizon don't want to be just the pipes anymore," he said. "They want to provide content. It's stickier with customers. But if the content they provide is not what users want, the users won't pay for it."

The FCC's new order, ushered in by today's vote, takes away the classification of broadband internet providers as "Title II common carriers." Previously ISPs were deemed as critical public utilities, and the Title II classification allowed them to be regulated as such.

In her dissent, Commissioner Jessica Rosenworcel spelled out the worst case scenario of the net neutrality repeal. "[Broadband providers] will have the power to block websites, the power to throttle services and the power to censor online content. They will have the right to discriminate and favor the internet traffic of those companies with whom they have a pay-for-play arrangement and the right to consign all others to a slow and bumpy road. Our broadband providers will tell you that they will never do these things," Rosenworcel said, "they say just trust us."

The nation's largest telecom providers, such as AT&T, CenturyLink, and Verizon, have been vocal in their opposition of net neutrality, and have categorically rejected the FCC's reclassification of internet service providers.

Many tech companies and content providers, on the other hand, are in favor of regulating broadband providers as utilities, per Title II, including Amazon, Google, Facebook, Netflix, and Twitter.


For his part, FCC Chairman Ajit Pai said he plans on eliminating the core tenants of the net neutrality rules while preserving some requirements for internet service providers.

"Under my proposal, the federal government will stop micromanaging the internet," Pai said in a statement in November. "Instead, the FCC would simply require Internet service providers to be transparent about their practices so that consumers can buy the service plan that's best for them and entrepreneurs and other small businesses can have the technical information they need to innovate."

In his remarks on Thursday, Pai, a former Verizon executive, accused the internet giants that favor burdensome broadband provider regulation of being "not practicing what they preach." He noted that at the edge of the network, all content is subject to being blocked or elevated based on commercial relationships. "What else are accelerated mobile pages or promoted tweets," Pai asked.

Even if disclosed transparently, those who don't own broadband networks might suddenly find that they are at a disadvantage when offering competitive services. "[Internet service providers] could make their competition's products perform poorly enough to give themselves a competitive advantage," Westborough, Mass.- based Cumulus Global's Falcon said. That could be a thorny issue when dealing with cloud-based VoIP services and unified communications from smaller, niche providers.

"Those providers could face a challenge if they offer services that compete with larger carrier services," said Michael Knight, president and CTO of Encore Technology Group, a Greenville, S.C.-based solution provider. "The perception right now is that those providers won't get favorable routes, so I could see more companies looking at [carrier's] offerings."

Norm Shockley, president and CEO of Aplena, a Campbell, Calif.-based solution provider, said that from the partner perspective, the repeal of net neutrality could potentially make negotiations with carriers more difficult.

"The talks will become more legalistic," Shockley said. "People will have to have contracts that keep everyone's' interest in mind. And we'll need more tools for customers to monitor their bandwidth to make sure they are getting what they're promised."

Aplena's Shockley expects smaller companies and those who do not require a lot of bandwidth will probably have to accept the bandwidth they are offered.

"They are not going to understand how to negotiate things," he said. "But bigger companies will be better able to negotiate for what they need. And over time, there will be new opportunities for channel partners and lawyers to better understand how the products they are selling and positioning will be impacted by the net neutrality repeal."

Joe Kovar and Phil Harvey contributed to this report.

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