Armageddon, brought to you by the FCC

By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- Your Internet bill will go up $50 a month! You won't be able to access your favorite Web site! Your Internet connection is going to slow to a crawl!

That's just some of the rhetoric and doomsday scenarios flying back and forth over the contentious subject of "Net neutrality." Many of the sky-is-falling, self-serving arguments are standard Washington lobby shop speak, but the reality is quite different.

The talk heated up last week, after the Federal Communications Commission proposed regulatory changes that would give it a say in how the Internet is delivered to consumers.

Under the mandate, dubbed "Net neutrality," the FCC would require Internet providers, like phone and cable companies, to treat all Web content equally. That would prevent providers from restricting access to certain sites or applications, or even collecting fees to deliver some sites faster than others.

On one side, the Googles (GOOG, Fortune 500), Yahoos (YHOO, Fortune 500), Amazons (AMZN, Fortune 500) and eBays (EBAY, Fortune 500) of the world say Net neutrality is crucial because it would foster an environment where cool new things on the Web could develop, and it would prevent Internet providers from blocking access to sites like Hulu and YouTube that carry a heavy strain on the network. It would also prevent Internet providers that own media companies from favoring their own content over others'.

On the other side, the Comcasts (CMCSA, Fortune 500), AT&Ts (T, Fortune 500), Verizons (VZ, Fortune 500) and Time Warner Cables (TWC, Fortune 500) of the world say they have been able to provide very good and increasingly better Internet access to customers without any regulation from the FCC. They say Net neutrality would slow down their Internet service and that the costs would be too prohibitive.

Independent analysts say there are elements of truth to both arguments.

"There appears to be very little risk that broadband service providers would severely discriminate against traffic or content from competing companies," said Daniel Hays, partner at consultancy PRTM. "But the flip side of that is the reality that they want to be able to discriminate against applications and users that unfairly clog their networks."

Here's a quick look at some of the changes you might see if Congress approves the FCC's proposals:

Will my Internet bill go up?

Your broadband service probably won't cost more than the incremental amount your bill already goes up every year.

"It's unclear how any regulatory changes might get back to consumers," said Doug Williams, broadband analyst at Forrester Research. "That sounds like a lot of saber rattling on the part of the carriers."

But it's not just the carriers touting higher prices. An independent Frost & Sullivan study found that a Net neutrality law could raise consumers' broadband bills by $10 to $50 a month.

Here's why. Regulation would make providing Internet service less cost-effective for broadband companies, according to the study. That means companies would likely stop building out their networks. However, if the FCC decided to force carriers to continue increasing capacity and service, those costs would be passed onto consumers.

Cable and phone companies have been using the report to fight the FCC's proposal. But the study is based on the assumption that the FCC would propose broader and stricter regulations than the ones it actually has proposed.

In fact, historical precedent also suggests the Frost & Sullivan study is far fetched: After AT&T merged with Bell South in late 2006, the FCC subjected AT&T to a two-year Net neutrality rule. During that time, AT&T's broadband prices did not rise, and AT&T actually invested more in their infrastructure on their own volition.

"Empirically, it doesn't prove to be the case that increased regulations will result in higher consumer prices," said Markham Erikson, executive director of the Open Internet Coalition, a group that supports Net neutrality.

How would it impact my service?

Net neutrality would force Internet providers to provide their customers with access to any Web site. But that's what the broadband companies have been doing for years -- without any regulation.

It's an extraordinarily rare occurrence when a service provider denies its customers access to a Web site, app or program. Comcast's temporary block on some peer-to-peer networks that were clogging up its network in 2007 is one of the only examples. Some mobile companies have also instituted restrictions, like AT&T's ban of the Sling media app on the iPhone and Verizon's blocking of pro-abortion text messages in 2007.

"Excluding content providers does not make good business sense, especially with a growing number of alternatives, like 4G," said Mike Jude, analyst at Frost & Sullivan.

Analysts said it's much more likely that broadband providers will begin charging customers for the amount of data they download, just like wireless companies charge more for packages with a greater number of minutes.

Since a Net neutrality law would ensure that customers can download or upload whatever they please, some are worried that users will soon experience system bottlenecks that slow down their Internet speeds (think AT&T and the iPhone). But carriers, including AT&T, continue to spend billions of dollars a year improving network capacity, and the communications industry has been resilient about making improvements during tougher regulatory periods in the past.

"Ultimately, we're talking about very large broadband pipes out there, which can provide 100 megabit speeds," said Jude. "Is Net neutrality a concern? Yes, but that doesn't supercede the carriers' purpose of deploying the network in the first place." To top of page

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