When the Federal Communications Commission (FCC) voted to repeal the net neutrality rules set during the Obama era in December, there was not only concern among the general public about how the ruling would impact its use of the Internet. There was also concern about how it could impact the real estate industry, according to the Williston Financial Group National Title Insurance Company.
The vote ended the 2015 Open Internet Order that regulated how Internet Service Providers (ISPs) treated content. Net neutrality rules required Internet service providers to treat all online traffic equally and prohibited providing “fast lanes” for favored sites.
The FCC said in a statement it was, “Returning to the traditional light-touch framework that was in place until 2015.”
While FCC chairman Ajit Pai stated the Net Neutrality rules rollback would help customers because broadband providers like Comcast and AT&T could provide people with more service options, there is concern about how the repeal could impact the real estate industry.
The open Internet rules are to take place on June 11, but those concerned were given a glimmer of hope of a reversal when the U.S. Senate voted to reinstate the Obama-era net neutrality rules. The measure still has to pass in the House of Representatives, which is a long shot, and many Republicans believe President Trump would veto the reinstatement measure if reached his desk.
The debate is expected to go on for months. If the House votes against the reinstatement measure and the repeal remains as expected, here are four ways an unregulated Internet could affect commercial real estate companies, building owners and others who work in the industry.
- Smaller real estate companies may struggle to compete financially.
As Russ Cofano, a Washington state-based real estate industry veteran for more than 25 years, explained real estate is a business run by small business operators. Many real estate brokers and individual agents are small businesses. When a small business goes against a bigger one, like a broadband provider, the larger business wins in terms of both cost and usability.
Repealing Net Neutrality could make it more expensive for smaller real estate businesses to compete or even put people at a competitive disadvantage when working with customers. For instance, a larger firm could negotiate a deal to ensure its speeds aren’t hindered on their sites, versus some of their smaller competitors.
“It’s conceivable that could happen, but repeal of the net neutrality rules are eliminating FCC regulation, but not antitrust,” Cofano told WFG.
- Real estate technology could be threatened.
The Property Technology, or PropTech, industry had been thriving under Net Neutrality, but there’s some worry that won’t be case with a repeal. Roelof Opperman, an associate with VC firm Fifth Wall Ventures believes the repeal will impact start-ups that use a direct-to-consumer business model.
“Half of real estate technology is pure Internet software as a service, delivered to customers,” he said, using Compass and Zillow as examples. “Anytime there’s less regulation an a telecommunications behemoth could throttle (speeds) based on what you’re paying them, that’s an issue. It definitely hits innovation on the consumer end.”
There’s also an unknown element with the repeal, like how telecommunications companies will take advantage of the power they’ll now have, according to Opperman. He believes if ISP’s begin to throttle Internet speeds, they’ll start with bigger companies like YouTube and Netflix first before moving on to smaller companies which will feel the impact in terms of cost and the services they can offer customers.
“If you had two sites that were exactly the same or slightly differentiated, and one was much slower than the other, then why would you go to the other?” he said.
- Opportunities for new Internet networks could open.
Although there is concern about how the Internet regulations rollback will affect real estate companies, the ruling could open doors for alternative Internet networks, according to WFG. These alternative networks could become more common, and access to them might be an additional selling point for commercial and residential buildings.
“A lot of buildings are thinking about connectivity in a big way,” Opperman said. “Connectivity is basically the number one thing people look for when moving into a new building or office.”
Opperman recognizes the repeal could create opportunities for non-conventional networks like dark fiber (additional cables and bandwidth laid down for broadband that owners could use for their private, ultra fast networks) to brand themselves and say, “Hey, we don’t do this.”
- Smaller businesses could find themselves at an innovative competitive disadvantage.
With the Net Neutrality repeal, smaller businesses won’t just find themselves unable to compete financially with larger companies; they could also find themselves falling behind creatively, too. Arie Barendrecht, CEO of WiredScore, a startup that gives commercial real estate tenants information about their building’s connectivity, believes the repeal will impact business like his.
“We are a startup, so we understand the hard work that goes into building a business,” he said. “(The) ruling is a big loss for a lot of small businesses and an impediment to the growing innovation economy. The repeal of net neutrality just stacked the deck against smaller companies in favor of big business.”
Racquel Russell, senior director, government relations and public affairs at Zillow also believes the rollback hurts companies like hers that are providing the real estate industry with valuable information.
“The FCC’s changes to net neutrality create an (uneven) playing field for consumers and small-business owners, including many of our real estate partners,” she said. “An open Internet empowers consumers with information, helps small businesses grow and spurs innovation.”