For many years there has been a vigorous debate on the pros and cons of net neutrality. On December 21, 2010, the nation took a technological step backwards when the Federal Communications Commission (FCC) voted to institute net neutrality rules on the Internet.

The FCC adopted three rules for an open Internet, which include: transparency, no blocking and no unreasonable discrimination. According to the FCC, “The first rule requires transparency by broadband providers, who must disclose information regarding their network management practices, performance, and commercial terms of their broadband services so that their subscribers can make informed choices regarding those services, and so that edge providers can continue to develop content, applications, and services. The second rule provides that fixed broadband providers (such as DSL, cable modem, or fixed wireless providers) may not block lawful content, applications, services or non-harmful devices. Mobile broadband providers may not block lawful websites, or applications that compete with their voice or video telephony services. The difference between the rules that apply to fixed and to mobile broadband providers is discussed below, and in the Open Internet Rule & Order [R&O]. The third rule establishes that fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service (emphasis added).”

In addition, “The Open Internet R&O provides that consumers and edge providers may file a complaint regarding any perceived violation of the open Internet rules pursuant to Section 1.41 of the Commission’s Rules. Consumers interested in filing a complaint are encouraged to do so.

Under the open Internet rules, any person may also file a formal complaint with the Commission. The procedures for filing a formal complaint are explained in the Open Internet R&O at Section V.B.”

The notion of equality on the Internet may sound reasonable, but net neutrality is instead an attack on private-sector business models. Proponents of net neutrality want the online world to be forced “open” at the expense of successful Internet providers, but fail to recognize the many tradeoffs to “openness” such as increased spam, fewer privacy controls, slower service, and, perhaps most importantly, decreased incentives for investment and innovation. In 2008, AT&T’s U.S. capital investments totaled $18 billion, the highest of any company.

The looming threat to limit what telecom companies can charge and to whom those charges will apply will undoubtedly discourage the large investments that have helped the Internet expand so rapidly. Forcing wireless carriers to open their networks to data-heavy applications (such as streaming video, graphic-rich games, and movie and music downloads) would only exacerbate the problem, slowing service and potentially causing other disruptions for customers.

The Internet has flourished thus far largely due to the lack of government interference. Telecom companies have been able to manage Internet traffic to ensure that certain applications do not hog too much bandwidth, slowing access for users. However, in 2008, Comcast was censured by the FCC for violating the agency’s net neutrality principles when it slowed traffic for some subscribers who were downloading big files that clogged the network.

The net neutrality debate stems from the ongoing battle between content providers and service providers. Companies like Google that support net neutrality create applications for the web and want customers to have easy access to their products. As a result, network owners such as AT&T, Verizon, and Comcast now find themselves constantly defending their traditional business models.

According to Free State Foundation President Randolph May, “The FCC insists on regulating Internet providers under the type of common carrier regime that was applied to monopolistic telephone and telephone companies last century. It does this even though the Commission doesn’t argue there is presently any market failure or consumer harm. In other words, the Commission demonstrates it is still stuck with an early 20th century mindset that seeks to extend its regulatory authority to new competitive digital age markets.”

The only good news is that more conservative members of the House of Representatives may have the ability to overturn or modify these new regulations.

-- David E. Williams