Marketers Are Mired in Middle of Heated Net-Neutrality Debate

As Media Giants Jostle Over Open Net, Buyers Fret Over Whether Tiers Could Stifle Advertising

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NEW YORK ( -- Google and Verizon set off a heated round of debate over the contentious issue of net neutrality last month when the two media giants jointly announced a proposal for an open internet.

On one side, bloggers and tech adopters attacked the statement with a religious-like fervor because a section left open the possibility of a closed, or tiered, internet. They saw Google, which has publicly backed the concept of net neutrality, as a turncoat. On the other side, telecommunications giants argued that emerging infrastructures, such as mobile data networks, need the ability to ration and monetize bandwidth as they see fit.

In the middle? Marketers. While several of the country's largest ad spenders are lobbying against net neutrality, some online-advertising buyers worry that a tiered internet would stifle innovation and new forms of online marketing may never see the light of day.

Net neutrality is a tacit tenet of internet commerce that suggests all content should be treated equally by carriers. Net neutrality advocates, which count academia and online businesses among their ranks, support legislation to ensure that will continue; the opposition, largely telcos and cable operators, oppose such a law and favor allowing private enterprises to decide how to regulate bandwidth and traffic.

"One way to see the net neutrality battle is to see it in terms of the fact that the carriers are trying to get a piece of the internet advertising revenue -- now they get zero," said Tim Wu, a Columbia Law School professor who coined the term "net neutrality" in an academic paper in 2003. He chairs Free Press, a nonprofit that has lobbied Congress for net neutrality, and has also consulted FCC Chairman Julius Genachowski.

In recent years, telecommunications giants like Comcast that supply access to the internet have groused about the commodity-like fees they receive to supply that access, while behemoths like Google have reaped billions in profits for businesses built on broad internet access.

The telcos have also earned a pretty penny in the internet age, but the costs of maintaining the infrastructure to support the internet's growth has also risen, prompting the carriers to lobby for more dollars. But echoing Mr. Wu's sentiments, some marketing executives have expressed concern for what a tiered internet may mean for advertising.

"The creation of a biased internet would stifle innovation in this channel," said Scott Susskind, chief technology officer of the IPG Media Lab. "We're still in a burgeoning industry. The loss of net neutrality would unnecessarily create friction on the creation side as well as for distribution."

More specifically, the concern among marketers is that limiting, or tiering, access to publishers and content limits choices for brands and narrows the audience. "The internet is the influential channel it is today because of access and the ability to create innovative experiences that work across all digital touch-points," said Colin Kinsella, president of Digitas North America. "Without net neutrality ... fees to create and promote experiences will increase as properties pass on usage fees, and we would see limits on supply and audiences." The barrier to publish on the internet is low, making it a fat source for innovation. Facebook was born out of a Harvard dorm room; Google from a garage. The two biggest sites on the internet are also two of the biggest distributors of online advertising, which suggests the industry as a whole may not even have taken shape had carriers started differentiating content.

"Consider the impact of Foursquare to yesterday's Google," said Sean Finnegan, president and chief digital officer of Starcom MediaVest Group. "That likely was dependent upon a free and open source, without limitations to connectivity. It would be unfortunate if certain costs were to thwart innovation."

Some argue that there are potential benefits to a semi-closed internet. "If the traffic is prioritized to some video sites where consumers can get high-bandwidth video, it would increase traffic there and would give advertisers more potential to target them with more robust ads," EMarketer analyst David Hallerman said. Or big portals could sign sweetheart deals with carriers, allowing them to secure more of the online audience.

Some of the country's largest marketers have stayed mum on the issue, despite the effect on online advertising. According to people familiar with the matter, some ad industry execs don't want to offend two of the biggest spenders, namely AT&T and Verizon, who oppose net neutrality. They, along with other carriers, are members of the Interactive Advertising Bureau. The telcos are perhaps the most aggressive and successful lobbiers in Washington, which means net neutrality may become an ongoing issue.

"This cycle has happened before," Mr. Wu said of the emergence of a few key corporate players dominating the legislative process. "It's going to be a struggle."

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