The Battle for Network Neutrality

The Federal Communications Commission is about to codify the open structure of the Internet. The FCC has presented a slate of suggested regulations and invited others to comment and fine-tune the rules.

In the red corner
Privacy and deregulation proponents like the Electronic Frontier Foundation tend to oppose the FCC regulating network practices at all. In part, they argue that less regulation is always better for the consumer. Moreover, the EFF doesn't think that Congress has endowed the FCC with the powers it would need in order to have any regulatory powers over Internet traffic policy in the first place.

On the other extreme end of the spectrum, you'll find companies like recent eBay (NASDAQ:EBAY) spinoff Skype. The online communication specialist just wouldn't function without open access to the Internet pipes, and management has filed a statement with the FCC saying as much. The proposed regulations are welcome to Skype, because they generally safeguard the status quo and stop service providers from throttling, tiering, or otherwise meddling with traffic.

And in the blue corner
It's no surprise to find Google (NASDAQ:GOOG) on the second side of the fence. Google says that its "interest in this proceeding is straightforward: to keep the Internet awesome for everybody." That means supporting the FCC's suggested slate, because it is a "balanced, flexible, and minimally intrusive approach to safeguarding the Internet's openness."

But Google also worked up a joint statement with Verizon (NYSE:VZ), which you might expect to sit in the "get your filthy regulations off the Internet!" camp. The companies disagree on finer points, but both generally like what the FCC is proposing.

Note that AT&T (NYSE:T) did not sit in on this draft; what's left of Ma Bell is reportedly working up tiered network pricing as we speak, which flies in the face of these regulations. Gotta do something to handle those bandwidth-hungry Apple (NASDAQ:AAPL) iPhone users, I suppose. Another alternative would be to put in a bulky order to someone like LM Ericsson (NASDAQ:ERIC) or Alcatel-Lucent (NYSE:ALU) for a fresh batch of 3G or 4G wireless network infrastructure, but that's definitely the expensive way out.

Other commenters of note include performing artists like R.E.M., Pearl Jam, and They Might Be Giants, who argue that their modern-style marketing and fan outreach tactics wouldn't work in the long run without regulation-protected Internet access.

While I don't expect the rock 'n' roll arguments to carry much weight with the FCC on their own, they could help build a grassroots movement, inspiring people to write in with support for the neutrality cause. And the argument largely applies to anybody who makes a living by promoting their businesses or activities over the Internet, all the way down to Aunt Edna's Wicker Basket eBay Shoppe.

What's next?
With more supporters than detractors, including supposed bandwidth Scrooges like Verizon, the FCC looks likely to pass openness regulations in some form. You won't notice a thing, because the Net will continue to work like it does today -- and that's the whole point.

Why should I care, then?
If you're invested in companies like Google, Skype (nice to see you, private equity dudes!), or Netflix (NASDAQ:NFLX), you will eventually come to appreciate this regulation, though. Expect the likes of AT&T to continue gnashing their teeth in attempts to get through the regulatory framework and impose their own restrictive ideas of network management. Allowing them to do so would be very bad for many online business models.

The FCC expects network traffic to quintuple in the next three to five years and grow a staggering 30-fold before 2020. The networking infrastructure and regulatory policies we have today were simply not designed for such massive bandwidth demands, and both need to evolve very quickly. I wish Google, R.E.M., Skype, and Verizon my Foolish best on the way to establishing a legal framework that could hold us over for the foreseeable future. And I sure hope that future is further off than "next Wednesday."