California Apparel News

The Federal Communications Commission approved proposed changes to net-neutrality rules on May 15, and e-commerce executives are seeing big roadblocks to their booming business.

The newly proposed rules would allow Internet service providers to charge extra fees for “fast lanes” on the Internet. It will be several months before the FCC makes a final decision. E-commerce executives and other content providers who stream video on the Internet have mostly voiced support for net neutrality, or the current policy, which requires all Internet traffic to be charged the same rate.

They believe smaller companies will be priced out of business if rates increase. Cable companies such as Verizon and Comcast have been lobbying for more than a decade to change those rules. Change has been on the horizon since January, when the U.S. Court of Appeals for the District of Columbia nullified much of the current policy. With Internet traffic skyrocketing, cable companies say that they have financed the construction of Internet routes for years, and they need to charge higher rates for some users.

Greg Selkoe, chief executive officer of Boston-headquartered Karmaloop, one of the largest pure-play e-commerce retailers in America, said that he strongly opposes the loss of net neutrality. Business will not change in the short term with the newly proposed rules. However, rates might increase in the future, and that might put the whole e-commerce business into turmoil.

“Big cable companies that provide Internet connectivity pushed this change because they want content services to pay more for streaming video content. If businesses don’t pay more for streaming video content, cable companies will slow their Internet speed down. That’s not the case with e-commerce yet, but it could be a real danger in the future,” he said. His business might be hurt if higher Internet fees force his customers to limit their Internet surfing habits. It also might cause the cost of running a website to skyrocket.

Josh Olivo of Fullerton, Calif.–based e-commerce retailer Ruche said the proposed rules could spell disaster for companies who cannot pay for fast Internet lanes. “It’s common knowledge that consumers avoid slow sites, and if companies have the power to charge a premium for faster-loading sites, what’s going to stop them from doing so and holding a company’s site speed hostage? Any time fees are increased to businesses, directly or indirectly, it’s reasonable to infer that there are more significant challenges to operating. No matter how you dice the onion—call it increased fees for hosting, or call it increased fees to customers to pay for a fast lane, or however else fees are increased—it only makes the landscape more challenging for e-com sites to operate,” he said.

Rob Wright, co-founder and chief executive officer of Las Vegas–based Bungalow Clothing (www.bungalowclothing.com), does not forecast business for luxury e-commerce companies will decline if rules are changed. “I don’t believe that consumers from higher household incomes will change their Internet-usage habits even if they are billed more for bandwidth,” he said.

If rules are changed, Wright believes, the m-commerce market will gain a big boost. “Higher bandwidth rates through cable/DSL may make mobile bandwidth rates more competitive, thus driving consumers to use their mobile devices more often. Mobile web usage has almost quadrupled over the last four years anyway, so this will make apps/mobile-ready websites that much more important,” he said.

FCC categories divide wireless devices from computers that use a wire, said Judah Phillips, an author of books on digital analytics and founder of Boston-area analytics consulting firm SmartCurrent. Wireless devices are exempt from net-neutrality rules. “If consumers and e-commerce brands truly want unrestricted, fast, speedy Internet access, then the only way to get it is to support net neutrality across both wireline and wireless,” he said. Phillips is an opponent of proposed fast lanes.

This issue is breaking as e-commerce skyrockets and shows itself to be one of the brighter spots in retail. Veteran Internet market-research group comScore released a study May 13 saying that the first quarter of 2014 marked the 18th consecutive quarter of positive year-over-year growth and 14th quarter of double-digit growth.

Digital commerce reached $63.4 billion in the first quarter. Desktop e-commerce increased 12 percent to $56.1 billion in the first quarter of the first quarter of 2014. M-commerce added $7.3 billion to the quarter, according to the Reston, Va.–based comScore.

In the past couple of weeks, e-commerce retailers across the board have registered opposition to changes in net neutrality. Last week, more than 100 Internet companies, including retailers Amazon.com and Etsy, signed a letter petitioning the FCC to not change net-neutrality rules.