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How Would Disruption to Net Neutrality Hinder Startup Growth and Innovation?

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The Startup Poland Foundation recently conducted a research study titled “An open and free internet in the eyes of startups.” The report sheds light on the attitudes and concerns of startups in the Central and Eastern European region regarding net neutrality and potential changes in the EU’s Open Internet Regulation, initiated by telecom corporations. With 143 startups participating in the study, this comprehensive research provides valuable insights into the perspectives of CEE startups and their potential challenges.

What is net neutrality?

Net neutrality, the dogma that all Internet traffic should be treated equally, is fundamental to an open and free Internet. It means all online content, applications, and services should be accessible to users without barriers or restrictions. 

The report reveals that startups in the CEE region closely monitor net neutrality regulations, both national and European, and express concerns about potential changes, even in the absence of specific details.

What changes do telecom companies suggest?

Would the 2023 debate on Open Internet Regulation in the European Commission bury the Internet’s strength that lies in its global reach and interconnected nature?

It may be so since the proposed changes to the Open Internet Regulations, particularly introducing a “sender pays” model, could significantly affect the whole ecosystem. By requiring content providers to contribute financially to telecom operators’ infrastructure investments, there is a risk of undermining net neutrality regulations and creating an internet that favors larger tech companies. The increased costs for content providers may ultimately be passed on to consumers, resulting in higher prices for streaming subscriptions and other online services. 

The proposed changes require separate contracts between content providers and ISPs (internet service providers). As a consequence, users may only have access to services that their telecom provider has reached an agreement with. It would consolidate the power of big tech companies and limit user choice and access to a diverse range of online content. 

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In this context, startups fear that modifications to net neutrality regulations could impact their businesses negatively and create an uneven playing field. And it is increasingly more significant when the power disparity between well-established corporations and new startups becomes more tightly structured.

Startups thrive in a digital ecosystem with equal opportunities to compete with mature companies. They rely heavily on the Internet to develop innovative solutions, attract customers, and secure venture funding. 

Let’s dig deeper to understand how disruption to net neutrality could potentially hinder their growth and success. 

Understanding the startup landscape

We should start by recognizing the significance of startups in driving economic growth and innovation. Startups are often at the forefront of developing groundbreaking solutions, disrupting industries, and fostering job creation. 

In the CEE region, where innovation and entrepreneurship are vital for economic development, creating good conditions for startups to grow is necessary. The way startups operate may have an economic and social impact on the CEE area. For instance, startups are at the forefront of sustainability or cutting-edge medical technology. Net neutrality ensures they have a level playing field to showcase their innovative ideas and contribute to societal progress. Disrupting net neutrality could hinder the flow of ideas and limit startups’ potential beneficial influence.

Fundraising and development challenges

One of the key reasons why startups are interested in net neutrality is the potential impact on their ability to raise funds. Network fees imposed by ISPs could pose significant challenges for startups in accessing the necessary resources for their growth. The report reveals that 72% of startups foresee negative fundraising effects if network fees are introduced. Such fees would increase the operational costs for startups and create an uneven playing field, favoring larger companies with more financial resources.

Startups rely on equal internet access as a catalyst for innovation, enabling them to create and develop novel solutions that drive economic resilience. That’s why startups understand that net neutrality is essential for fostering a competitive environment. They believe that equal opportunities for all companies are crucial for bold and dynamic development without the fear of discrimination against their services.

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Another threat for startups is a potential shift from previously free-of-charge content to paid services. This may lead to losing clients accustomed to accessing particular services without additional costs. 

The crucial role of net neutrality in innovation

The report underscores the vital role that net neutrality plays in fostering innovation. Startups believe that an open and free internet is essential for creating and developing novel solutions. According to the report, 86% of startups claim that net neutrality substantially impacts innovation. 

Accessing information, collaborating, and competing equally are crucial for thriving startups. The neutrality of the Internet encourages startups to boldly and dynamically pursue their ideas without fear of discrimination or disadvantage.

Startups as drivers of industry solutions

The democratization of entrepreneurship is a key benefit of net neutrality. And it is not just a case of bringing innovation but also driving economic growth by allowing startups to introduce disruptive solutions and challenge traditional business models. 

Startups may shape a new world order, and challenging a status quo would be much more difficult, with even higher barriers to entry resulting from unequal net-related opportunities. The report emphasizes that net neutrality is essential for startups to continue being a driving force behind industry solutions. 

Preserving net neutrality

Overall, The Startup Poland Foundation’s report unveils that net neutrality is one of the baselines that startups in CEE need to keep the pace of growth with a positive effect on the region. Policymakers, industry stakeholders, and the startup community should pay close attention to these insights and work towards creating an ecosystem that supports net neutrality and empowers startups. By doing so, the CEE region can continue to nurture its vibrant entrepreneurial landscape, attract investments, and position itself as a hub for innovation and economic growth.

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https://therecursive.com/author/pawel-poltorak/

Pawel Poltorak is an experienced CMO and Strategic Advisor in the tech sector, driven by a passion to help founders, entrepreneurs, and investors to succeed. As an author, he explores and writes on CEE startups and new technology through the lenses of marketing, economics, sociology, and geopolitics.