Next month may mark a pivotal time for Internet providers. At the end of February the Federal Communications Commission will decide on a new set of rules that might increase regulation on Time Warner Cable (UNKNOWN:TWC.DL), Comcast (NASDAQ:CMCSA), Verizon Communications (NYSE:VZ) and other Internet service providers.
The companies are obviously not in favor of this. In May, CEO's from many of the major Internet providers wrote an open letter to FCC Chairman Tom Wheeler warning that new regulation would decrease innovation and hurt consumer choices. If that weren't enough, Verizon has argued that new regulations won't stop the company from making the deals it wants.
At the heart of the debate is whether or not Internet providers should be reclassified as "common carriers" in which the government has a bit more regulatory control over. One of the reasons why the FCC is doing this is because of Netflix's current deals with Comcast, Verizon, AT&T, and Time Warner. The streaming giant pays the top Internet providers to deliver its movies and TV shows at faster speeds than other content -- what many refer to as "paid prioritization."
Under the new regulations, the FCC would have much more oversight over these deals (or try to eliminate them) and could even set reasonable rates Internet providers can charge for them.
At the International Consumer Electronics Show this week, Chairman Wheeler all but confirmed the government is moving toward regulated Internet providers under what it calls "Title II." In an interview at CES, Wheeler said the FCC doesn't want any paid prioritization, unless it's for government communications during emergencies.
So what does all this mean for millions of American's with broadband Internet? Nothing, for right now. The FCC vote won't happen until Feb. 26 and even after that it'll take time for any new rules to get implemented.
Even if the FCC passes Title II and is able to restrict Internet providers from getting paid for priority content, Internet in the U.S. will essentially be the same as it's always been. Under the potential rules, the Netflix and Verizon-type deals may change, but in theory it should keep the Internet working in much of the same way we've always used it.
And that's the FCC's main point. It wants to make sure American consumers don't end up receiving slow connection speeds to websites because that company couldn't afford to pay an Internet provider for faster delivery. On the flip side, Internet providers fear the rate regulations could hurt profits and stifle broadband expansion.
In their May letter, the CEO's wrote, "As demonstrated repeatedly, the future of the open Internet has nothing to do with Title II regulation, and Title II has nothing to do with the open Internet." (emphasis theirs)
Considering that American consumers categorize Internet service providers as the most hated industry, it's going to be hard for companies to convince customers that they have their best interests in mind.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Netflix and Verizon Communications. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.