Net Neutrality Faces a Political Gauntlet, and the Fall-Out Will Hit Tech Firms

Last Updated Dec 2, 2010 10:23 AM EST

Tech firms think that the good times are back as many start-ups ramp up employee perks. Of course, that's nothing compared to Google's (GOOG) massive across-the-board pay bumps. However, tech companies large and small may want to wait for a moment.

An FCC proposal to institute a form of net neutrality already faces political assault. Whether the plan moves into effect or is scuttled by a Republican House majority only changes the cause of the pain for tech corporations. They will find that new strategy is necessary as we undergo significant reshaping of how business is done on the Internet.

FCC chairman's wish list

Yesterday, FCC Chairman Julius Genachowski circulated a set of draft net neutrality rules to the other agency commissioners. They include:
  • Broadband providers would have to tell consumers and businesses how they manage their networks.
  • Consumers and businesses have a right to send and receive lawful traffic, so broadband providers could not block content, apps, services, or the connection of devices.
  • No public or private entity could unreasonably discriminate in transmitting traffic so as not to effectively decide which businesses would win or lose.
  • Broadband providers would have flexibility to manage their networks and to implement usage-based pricing, something that they've wanted for years.
  • For now, it would be hands off wireless broadband other than requirements for transparency and a no-traffic-blocking rule.
Genachowski attempted to invoke Republicans and Congress as a whole as having advanced similar views. He clearly wants compromise and a way to move things forward -- and suggested what was probably the only way to strike an economic balance.

Net neutrality? DOA

But the chance of this going through is iffy. The remaining four commissioners are split -- the Democrats are for it and the Republicans are against, with Robert McDowell calling it "highly interventionist" and Attwell Baker urging a halt to any progress until the new Congress has had time to address the issue.

Yup, good luck with that. Contenders to become chairman of the House Commerce and Energy Committee, which has oversight on these issues, oppose the suggested rules and the way Genachowski wants to adopt them. The talking point mantra, reflected in statements both by House Republican Whip Eric Cantor and McDowell, is that the FCC has looked only at "bad" (Internet regulation) and "worse" (reclassifying broadband as regulated telecommunications services) options.

Of course, the fact that high tech often favors Democrats, while telecommunications typically leans towards Republications, has no influence in the situation.

Tech screwed either way

At this point, you might also call bad or worse the likely options for high tech. If Genachowski has his way, consumers will end up paying more, and that will make them more conscious about usage and likely cause them to scale back. That's bad. Worse would be groups in Congress blocking net neutrality. Such a move would make carriers into king makers with the power to advance some companies over others, depending on what they were willing to pay. The sums would likely be chicken feed for a large business like Google and prohibitive for start-ups. On the one hand, we'll see consumers pull back. On the other, innovation gets bruised. Either way, it would require some significant strategic rethinking by many companies.

Related: Image: RGBStock.com user Gramps, site standard license.
  • Erik Sherman On Twitter»

    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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