The net neutrality debate can be viewed as the next battle between the netheads and the bellheads; providers of broadband access on one side and Internet content and application providers on the other side. Frieden (cited Orlowski 2006) states that the Bellheads are investing heavily in fiber capability which will solve a problem that the “Netheads” have proved themselves unable or unwilling to tackle, that of high quality video over IP.

Given that US government is keen to facilitate the rollout of universal and affordable broadband[1].  It can be argued that the aggressive fiber rollouts could suffer if network operator shares continue to lose value making it difficult to blame the companies if they did slow down roll out. The companies, after all, have a duty to shareholders to pursue maximum profits not necessarily to fulfill the goals of Internet advocates (Drucker, 2006).   However one has to be careful in analysing the market as forces in telecommunications can be misleading. Telephone companies, for example, get billions of dollars in federal and state subsidies for rural service.   Access charges are designed to compensate network providers for the use of their facilities and the compensation scheme is in part funds universal service.  Additionally, these companies may be claiming more in the depreciation and the value of their assets. 

Regulators may therefore seek to eliminate access charges by allowing rates to rise to cover network cost if not service providers should pay access charges.  This is however difficult to implement politically on the basis of public interest.  Additionally, it is equally difficult to expect new entrants to pay access since the avoidance of access is, at least in part, the source of their perceived competitive advantage. 

Historically, the FCC has not regulated the Internet or the services provided over it. However following the 9/11 terror attacks in the US, security is a key government priority.  Consequently, open access to the Internet articulated in the FCC “Four Network Freedoms”, is subject to legality of content and needs of law enforcement (Frieden, 2006)    The FCC is thus constantly reviewing mechanisms[2] to implement important social objectives, such as public safety, law enforcement access, consumer protection and disability access, as communications migrate to Internet-enabled services.

On Wednesday, 28^th June 2006 the Senate commerce panel voted against amending the telecommunications bill by attaching the net neutrality provisions that would prevent operators from blocking, degrading or prioritising service on their networks (Orlowski, 2006).  The defeat of the amendment could herald the return of the vertically integrated incumbent firm providing services along the whole value chain.  Despite the fact that the access network has been considered a natural monopoly area as a single firm could presumably construct and provide local services at a lower average cost than two or more firms (Spulber, 2002)[3], Sir Tim Berners-Lee, the creator of the web, views the defeat of the net neutrality legislation as the entering a “dark period” for the Internet, if access suppliers were allowed to choose which traffic to prioritise (BBC, 2006). 

The higher costs of a “tiered Internet” levied content providers will simply be passed on to consumers, directly or indirectly. As there is no “free ride” on the network, and consumers will bear the costs of network development through higher access charges and higher prices for online goods and services[4]. Moreover, a “tiered Internet” will further concentrate the market power of the cable modem and DSL duopoly, eliminating competition in the conduits and leaving consumers with no escape from content discrimination.

The potential return of the two tiered Internet may further widen the digital divide between developed and developing countries.  It may be argued that successful internet organizations should contribute to the cost of internet infrastructure either through Internet settlement agreements or contribution to universal access funds.  This argument is based on the fact that these companies are providing functional equivalent services, thus there is a need for operators to maintain network integrity and for governments to guarantee national security, and I concur.