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Ask FERF about ... net neutrality.

Net neutrality" is a hot topic in the news and is the subject of potential legislation that could affect the way you use the Internet and how much you pay to use it. Should you be concerned? In a July 19 Web article, states: "Any business that relies on a public Web site for taking orders from the public or communicating with customers may be affected because, depending on the outcome of the debate, the business may want to pay extra for additional services and bandwidth."

So what is "net neutrality?" In "Broadband Regulation: Will Congress Neuter the Net?" published by The Heritage Foundation, James L Gattuso defines net neutrality as "any policy of managing content without differentiation, although in the current debate it more often refers to regulation to achieve that end. The concept is therefore more accurately termed 'neutrality regulation.'"

The current debate is about whether broadband network owners, such as telephone and cable TV companies, should be required by law to treat everything sent on the Internet equally, or "neutrally."

First Amendment of the Internet

Gattuso provides some history to put the current debate in context. "The basic idea of net neutrality was formulated in the early days of the Internet as an engineering concept often called the 'end-to-end' principle." This principle holds that the functionality of the Internet should be at the ends of the network, with only "dumb pipes" in between to transmit data without modification. This concept is the "First Amendment of the Internet," and is more elaborately discussed under "f.a.q." on the website.

The current debate over neutrality regulation began some years ago, when several cable companies began imposing restrictions on subscribers, such as limiting how much a customer could download per day. They argued that these restrictions were necessary because cable broadband service operates on a shared basis--the more bandwidth each subscriber uses, the less is available for others.

The Four Freedoms of the Internet

In August 2005, the Federal Communications Commission (FCC) responded to these restrictions, declaring in a policy statement that consumers are entitled to:

* access the lawful Internet content of their choice;

* run applications and use services of their choice, subject to the needs of law enforcement;

* connect their choice of legal devises that do not harm the network; and

* competition among network providers, application and content providers, and content providers.

This policy statement was based on four principles of neutrality articulated earlier by then-FCC Chairman Michael Powell, who called them the "four freedoms" of the Internet. A pdf of this FCC Policy Statement can be found under "Government and Court Proceedings" in the Net Neutrality Reading Room on the website of the Center for Democracy and Technology.

Pro Net Competition vs. Pro Net Neutrality

Gattuso notes that in recent months, "several major telephone companies announced their intentions to offer priority service to content providers for a fee that would enable these providers--such as Internet phone service operators, broadband video providers and others--to purchase express service." Although these priority services are not yet available, these statements have triggered a renewed push for neutrality mandates. There are currently two opposing groups, described by those opposing net neutrality as Pro Net Competition and Pro Net Neutrality. Each group has its own Web site, providing an abundant source of information and opinion:

Pro Net Competition Web Sites provides links to a number of research and economic studies, including Gattuso's article referenced above., the Web site of Hands Off the Internet, also provides links to research studies.

Pro Net Neutrality Web Sites

FreePress.Net provides the latest news articles on net neutrality. provides a map of the U.S., showing the stance of all U.S. Senators on net neutrality, and a comprehensive list of frequently asked questions (f.a.q.), also referenced above.

A Middle Ground

However, there is a middle ground, as described by Stephen H. Wildstrom in an article in the July 17 issue of Business Week, "The War for the Net's Future." In the article, Wildstrom writes, "The Center for Democracy & Technology (, a think tank on tech issues, argues for an approach that preserves the open nature of today's Internet while creating space for premium networks. This solution truly serves the interests of consumers and most businesses."

William M. Sinnett ( is Director of Research at Financial Executives Research Foundation (FERF).

contributed by FERF
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Title Annotation:resources; Financial Executives Research Foundation
Author:Sinnett, William M.
Publication:Financial Executive
Geographic Code:1USA
Date:Sep 1, 2006
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