“Net neutrality” is a hot topic in Washington. The Internet was developed with a guiding philosophy that Internet service providers would treat all traffic equally. The cable companies and telcos see a chance to generate huge additional revenue if they can discriminate – speed up traffic for paying customers, slow down (or stop) traffic for non-paying customers and web sites.

This is the kind of debate that will shape our world for decades to come. Keep your eyes on this one!

Legislation is flying around. The House started the process of giving away the Internet to the telcos a few weeks ago but the momentum appears to be shifting. A Democratic lawmaker just introduced a bill to protect net neutrality. The New York Times has a strong editorial about it today (online here but probably only available to subscribers).

If you’re new to this debate, this Slate article is a good place to start.

“The debate centers on whether it is more “neutral” to let consumers reach all Internet content equally or to let providers discriminate if they think they’ll make more money that way.

“The cable firms and the Bells have (to their credit, but under pressure) sworn off blocking Web sites. Instead, they propose to carve off bandwidth for their own services—namely, television—and, more controversially, to charge selected companies a toll for “priority” service. FCC Chairman Kevin Martin thinks there is nothing wrong with that. But critics say technological prioritization and degradation are the same thing—that given limited room on the network, whoever isn’t prioritized is by implication degraded.

“In trying to figure out who’s right, let’s forget about the Internet and look at KFC. The fast-food chain discriminates. It has an exclusive deal with Pepsi, and that seems fine to pretty much everyone. Now, let’s think about the nation’s highways. How would you feel if I-95 announced an exclusive deal with General Motors to provide a special “rush-hour” lane for GM cars only? That seems intuitively wrong. But what, if anything, is the difference between KFC and I-95? And which is a better model for the Internet?

“Two obvious differences are market power and the availability of substitutes. KFC is a small fry, relatively, locked in competition with the likes of McDonald’s and Popeye’s. KFC sells Pepsi? So what? McDonald’s sells Coke.

“It’s a lot harder to substitute for an interstate. And if highways really did choose favorite brands, you might buy a Pontiac instead of a Toyota to get the rush-hour lane, not because the Pontiac is actually a good car. As a result, the nature of competition among car-makers would change. Rather than try to make the best product, they would battle to make deals with highways.

“That’s what would happen if discrimination reigned on the Internet: a transformation from a market where innovation rules to one where deal-making rules. Or, a market where firms rush to make exclusive agreements with AT&T and Verizon instead of trying to improve their products.”

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