Net Neutrality? Good Luck After These Elections

An angry electorate spoke loudly yesterday as the GOP regained control of the US House of Representatives and Democrats retain a thin majority in the Senate. In the world of high tech, that has one immediate implication: The entire discussion of net neutrality will be even more hopelessly deadlocked than ever before.

Such prospect, which would have seemed an impossible feat just a month ago, given how badly cooperation and discussion had gone, has become the likely future as a Republican House provides the last ingredient necessary for a batch of telecommunications concrete. And that will mire businesses and consumers in uncertainty.

In virtually every part of the greater high tech industry -- Internet-based services, telecommunications, software, and hardware -- and in all areas of media and entertainment, net neutrality is a huge issue. The question of who has the power in the relationship among carriers, ISPs, content creators, and service providers dictates who can reap the large share of customers' wallets.

Currently, cable and telecom carriers have nailed down positions as both major ISPs and primary gatekeepers for entertainment. If you want something electronic, you pay them for access. The problem is that the companies that provide services and products online also want to make money and charge people. Access costs so much that consumers have probably reached the limit of what they'll spend. (If they were willing to spend more, the carriers would have raised their rates.)

Carriers see money being made, so they want their share, particularly as some of the services, like streaming video, use a lot of bandwidth and force the carriers to invest more than they'd rather in upgrading their equipment. So the carriers want to charge the service and content providers by threatening to put limitations on their traffic if there are additional payments.

It's not as though the carriers are the only ones willing to play hard ball. The attempts by television networks to block their streaming web sites from Google (GOOG) TV and the slugfest that Fox (NWS) has with more than one cable company shows that everyone can trade blows.

But net neutrality really focuses on the ability of consumers and companies to use the Internet, so the focus has been largely on restraining the carriers and telcos from pricing beyond flat charges for data. In theory, that should be equitable. Use more data, like video services do, and you pay more. Additionally, the company that sends the traffic out pays on its side, and consumers who receive pay as well. And yet, the carriers, seeing companies that leverage the Internet explode in size, feel as though they're being required to invest hard money and then told how to run their businesses while other industries, like the content providers, can get away with heavy handed tactics in negotiations.

That is why net neutrality has been the subject of discussions, secret meetings, back room deals, court cases, regulatory end runs, and other tactics of public policy warfare that you might expect.

The FCC tried to tell carriers to refrain from pricing based on the type of traffic, which sent everything to court, where the agency learned that it did not have the authority to regulate broadband providers. This put everything into a stalemate, because there were still two options. Congress could have taken a stand and either explicitly granted the FCC power to regulate broadband, or the FCC could have reclassified broadband as a telecommunications service.

Which happened? Neither. Republicans in the House tanked an interim net neutrality compromise bill, which effectively made Congress punt the problem back to the FCC. Why? Partly because many Republicans think that net neutrality is a solution without a problem and partly because it is an election year and no politician wants to the telecommunication companies that historically spend tens of millions a year in lobbying and campaign contributions.

Given Republican control of the House, the legislative impasse is now cemented in place. Current House Energy and Commerce Chairman Henry Waxman said, "If Congress can't act, the FCC must." However, that, too, has now become practically impossible:

Republicans can stop any legislation giving the FCC power over broadband or addressing net neutrality.
Should the FCC act on its current authority, House Republicans could call hearings to question the agency's actions and slow activity to a halt.
House Republicans could also the annual federal appropriations process to starve the FCC of operating funds.

That might seem as though the cable companies and telcos have clear sailing, but that also isn't the case. FCC commissioners get 5-year presidential appointments. Obama appointed four of the commissioners and timing has them in office until 2014. The fifth commissioner, Michael Copps, is a Democrat whose term ends next year, meaning Obama will either reappoint him or another Democrat, as the commission is designed to be split 3 to 2 between the two parties.

In other words, the FCC is likely to come to the same conclusions on the issues as before and will likely attempt to push its agenda forward -- albeit at a snail's pace. So even if the various carriers tried to implement punitive pricing schemes, the whole mess is likely to end up back in court for years. And given that the Democrats still hold the Senate, the chance of Congress passing a bill that would explicitly restrict the FCC is nil. And so, any change in one direction or another on the net neutrality front is destined to be over before it begins, leaving consumers and businesses to wonder what will eventually happen.

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Image: RGBStock.com user TACLUDA, site standard license.

Erik Sherman

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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