Tiering would end net neutrality

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The Internet as we know it may be on the verge of changing.

So far in this digital age, nimble entrepreneurial companies such as Amazon.com and Zappos.com could launch with a whim, but a precise purpose and vision and quickly grow in scale based on the merits of the value they provide, even if they did not begin with a lot of capital investments behind them. The Internet did not play favorites. The concept is widely known as net neutrality.

However, the Federal Communications Commission (FCC) recently voted to open up recently proposed rules concerning the future of the Internet for public comment. The changes could end net neutrality.

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I asked each of the large law firms based in Wisconsin to explain the controversy over net neutrality to our readers from a legal perspective. Most of the firms declined, citing conflicts of interest or fears that they might lose out on future business opportunities if they were perceived to be picking a side in the debate.

The one attorney bold enough to step up to the task and provide independent, non-partisan analysis about the debate was Rob Marchant, director of governmental affairs for Michael Best Strategies.

“Fundamentally, the debate is a fight between the suppliers of the Internet pipeline (think AT&T or Comcast) and those who use the pipeline to reach consumers (think Google). The users of the pipeline want their cost of providing content or services to consumers to be as low as possible. The suppliers of the pipeline, though, want to protect their business interests and their ability to make further investment in infrastructure,” Marchant said.

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Marchant says businesses are generally falling into one of three camps in the controversy.

Opponents of the new FCC rules say the changes will create a tiered Internet, one in which the well-capitalized will be able to pay for faster speeds and broader bandwidths. Entrepreneurs who are not privy to such resources would be at a distinct competitive disadvantage, the opponents say.

“Those opposed to tiering argue that creating a so-called ‘Internet fast lane’ would permit cable and telecommunications companies to discriminate in favor of certain search engines or content providers, to the detriment of others. They argue that start-ups and companies that are less well funded could be particularly disadvantaged. They raise concerns about favoritism for subsidiaries or business affiliates of the providers, which could give rise to an unfair competitive situation. The end result, they say, could be less innovation, slower economic growth, and consumers with unmet demands,” Marchant said.

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Conversely, proponents of tiering argue that creating tiers would better support innovation and economic activity. 

“The additional revenue generated by charging a higher price to those willing to pay for the fastest service could be used to fund costly investment in broadband infrastructure. For example, revenues could be used to reach new consumers by further expanding broadband access. Without the ability to recover the cost of infrastructure improvements, it is argued, those improvements will be less likely to happen. The end result, they say, could be less innovation, slower economic growth, and consumers with unmet demands,” Marchant said.

Marchant said a third camp is making the argument that the free market should be left to sort out the future of the Internet.

“They point out that the Internet has developed into a critical economic resource with relatively little regulatory oversight,” Marchant said.

In other words, we’ve come this far without much regulation, so why impose any new rules at all?

Steve Jagler is executive editor of BizTimes.

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