The U.S. Federal Communications Commission (FCC) has been in the news recently for its plan to eliminate the Obama-era net neutrality rule. This rule ensured that all internet content was treated equally in regards to transmission speeds and access. This meant your service provider couldn’t decide what you could access online and couldn’t make some content faster or slower. With the FCC’s official repeal of that law last week, nothing will stop internet providers from altering your internet access.
This isn’t good. For example, your service provider could make a deal with a company like Yahoo to make it easier or faster to use its search engines over rival Google, whose parent company is Alphabet Inc. (NASDAQ:GOOG)(NASDAQ:GOOGL). No such deals have yet been made, but they could happen.
How does this affect Canadian companies?
Canada still has some of the best net neutrality laws in the world, but that doesn’t make us immune to this decision. One, it could encourage Canadian service providers to push for changes similar to those in the U.S. For example, when the CRTC strengthened some of its net neutrality laws earlier this year, both Telus Corporation (TSX:T)(NYSE:TU) and BCE Inc. (TSX:BCE)(NYSE:BCE) opposed the move, while Rogers Communication Inc. (TSX:RCI.B)(NYSE:RCI) supported it. Rogers claimed providers shouldn’t act as the internet’s gatekeepers. These companies could be emboldened to push for more changes that benefit themselves in light of the FCC ruling.
The move could also stifle Canadian companies’ access to the U.S. market. For example, Shopify Inc. (TSX:SHOP)(NYSE:SHOP) is a cloud-based company that allows clients to set up online stores. If U.S. service providers decide to slow down or deny access to companies using Shopify for their stores, it hurts those companies and Shopify. It’s too early to know how many Canadian stocks could be negatively affected by the change. (Here’s a recent analysis on Shopify.)
For a look at another stock that may be affected by the ruling, read Fool contributor Ambrose O’Callaghan’s recent article.
One of the things that has made the internet great is everyone’s equal access to everything on it. The FCC ruling means service providers can cherry-pick what you get, sort of like the packages your cable company offers you. This could have a chilling affect on users and companies on both sides of the border.
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Fool contributor Susan Portelance has no position in the companies mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, and Netflix. Tom Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Netflix, and Shopify. The Motley Fool owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, Netflix, Shopify, and SHOPIFY INC. Shopify is a recommendation of Stock Advisor Canada.