Representatives from various consumer groups and government agencies, as well as Internet and telephone companies, finished outlining their positions on net neutrality and other telecom reform issues before the Senate Commerce Committee on Tuesday. However, after three hearings and more than 14 hours of testimony, the committee is reportedly far from decided on whether to incorporate any additional net neutrality provisions into the massive telecommunications reform bill which is currently under consideration in the Senate.

The committee is currently reviewing the Communications, Consumer’s Choice and Broadband Deployment Act of 2006, a massive, 151-page telecommunications reform bill introduced last month by Committee Chairman Sen. Ted Stevens (R-Alaska). So far, the bill contains no provisions for safeguarding net neutrality – the concept that all people every where should have free and unfettered access to all the Internet has to offer and that broadband operators should treat all data traversing their networks equally. A section of the bill requires the FCC (News - Alert) to report back to Congress annually on progress on net neutrality issues - but, much to the chagrin of net neutrality proponents, it does not include hard and fast rules regarding network access.

The contentious issue pertains to whether U.S. phone and cable companies should be allowed to build new, high-speed tiers of service on the Internet and then charge content providers, such as Google (News - Alert) and Yahoo, extra for access to those tiers. Executives from AT&T (News - Alert), BellSouth (News - Alert) and Verizon, as well as some cable companies, have expressed their desire to build high speed tiers so as to facilitate the delivery of new digital services, such as VoIP and IPTV - but they say they will need to charge access fees so as to recoup the massive investments they are making in their networks.

Net neutrality proponents, however, view a tiered Internet as a dangerous thing. They argue that allowing the telcos and cable companies to charge for faster access will lead to them favoring those companies which can afford it, leaving the smaller companies which cannot in the Internet’s “slow lane.” They also see it as opening the door for “discriminatory practices” on the part of network operators, which could end up blocking websites or degrading the voice and video signals of service providers which don’t pay the access fees. As such, net neutrality proponents see it as necessary that Congress proactively enact net neutrality rules - and as soon as possible - so as to maintain a level playing field for all of the Internet’s players.

Meanwhile, the phone and cable companies say they have no intention of blocking content or services - and add that they would be foolish to do so because it could lead to a loss of customers. They are opposed to government regulation of the Internet because, first, there is no problem with discrimination as of yet, and second because allowing the development of new tiers of service will foster a greater degree of innovation and spur broadband penetration (where the U.S. is generally viewed as lagging behind the rest of the developed world).

Ben Scott, policy director for Free Press, was one of several speakers who came out in favor of net neutrality during Tuesday’s hearing.

“On the question of Network Neutrality, this bill applies the most important principle in communications law - nondiscrimination - indiscriminately, leaving out its most important application,” Scott said. “The firewall of Network Neutrality, which protects competition, maximizes consumer choice, and guarantees fair market practices, has been abandoned on the Internet space - endangering the most important engine for economic growth and democratic communication in modern society. Nondiscrimination made possible the grand successes of the Internet. Its removal can take them away.”

Scott conceded that the erosion of net neutrality might not happen immediately, however, once it begins, “it will be virtually impossible to reverse.”

“The loss of Network Neutrality will be a perpetual regret to all consumers and producers of Internet content and services, as well as to this Congress,” he said. “Yet S. 2686 merely instructs the FCC to study the process that will destroy the Internet as we know it.”

Scott pointed out the proposed bill spells out nondiscrimination for all areas of the telecommunications industry, including establishing laws to prevent abuses in the marketplace and to promote competition, yet it “fails to bring the same logic to the Internet.”

“For example, local franchising authorities must treat competitive video providers in a nondiscriminatory manner in the use of the public rights-of-way. Local governments that propose to build broadband networks must not use local ordinances to discriminate. Under the program access rules in S. 2686, cable operators may not use their market power to make exclusive or discriminatory deals with programmers that are denied other operators,” he said, also adding that under the proposed legislation, telecommunications providers “must treat facilities-based VOIP providers in a nondiscriminatory manner,” and “USF support must be distributed according to principles of competitive neutrality.”

“The only sector that does not enjoy this protection against discrimination is Internet content, applications and service providers - the most dynamic marketplace in our economy,” Scott said. “We should apply the principles of nondiscrimination everywhere in an even-handed fashion. We must protect Internet freedom by preventing the telephone companies and cable operators from putting toll booths on the information superhighway.”

Chris Putala, executive vice president, public policy for Earthlink (News - Alert), also took a stand for net neutrality, and pointed out that had the big telcos imposed toll gates on the Internet early in its history, companies like Earthlink, Google, eBay and Yahoo! may have never grown to become the successful companies they are today.

“It is undisputable that the reason the Internet has been a transformative engine for economic growth and innovation is that the Internet is an open communications platform,” Putala said in his testimony. “Small companies and entrepreneurs can use the Internet to prove the worth of their ideas without having to convince a bureaucrat at a cable or telephone company of their economic merit – or having to pay a ‘success’ fee to those network duopolists. The Internet drives growth because – like the market as a whole – it allows a thousand flowers to bloom without central planning or management.”

“Going back to our days battling AOL in the Internet services marketplace, EarthLink has long recognized that consumers are not best served by exclusive-access Internet networks,” Putala said. “We believe that consumers are best served by an Open Access model – where network owners offer fair, reasonable and non-discriminatory wholesale rates to others who seek to bring customers to that network. And we don’t just pay lip service to this model – as a network operator, we live up to the vision. EarthLink’s municipal networks are open networks. Any qualifying ISP will get the same low wholesale rate, and we welcome them to bring consumers to our network. And, we welcome the competition that ensues – it will ultimately deliver the best service and experience to consumers.”

Putala said EarthLink doesn’t buy the big telcos’ argument that they must charge for access in order to off-set the cost of building new networks.

“We embrace net neutrality because it is both consumer-friendly and economically right,” he said. “We will succeed by adding users and by providing our (and our wholesale customers’) users better service, not by throttling web-based innovation and business models. When EarthLink and our local government partners expand the number of facilities-based networks providing Internet access, the marketplace can better police and ensure net neutrality. This model of competition obviating the need for regulation is exactly what happened with wireless resale requirements after this committee ended the wireless duopoly through spectrum auctions.”

Walter B. McCormick, Jr., president and CEO of USTelecom, took the other side of the debate, saying that there is no need for net neutrality legislation at this time. He applauded the Communications, Consumer’s Choice and Broadband Deployment Act of 2006 for taking a “measured approach” to the debate.

“This is a very complex technology debate that, I believe, has been unfortunately and inaccurately oversimplified in recent weeks,” McCormick said. “As I have stated before this committee many times, the companies I represent have been managing networks in this country for over 100 years. Consumers today have —and will continue to have—the freedom to call or e-mail whomever they choose … and to visit any legal website … without being blocked, without their service being impaired or degraded. It’s the right thing to do in a country that values and cherishes the First Amendment. It’s smart business…offering the greatest customer satisfaction and driving demand for broadband.And, the FCC has demonstrated both the will and the capacity to safeguard Internet freedom. We are well aware that Congress and the FCC are watching our companies closely.”

McCormick cautioned that a “rush to regulate the Internet—in anticipation of a problem that may never manifest—is dangerous.”

“This extreme position would not preserve the free and open Internet we enjoy today, it would most certainly stifle its future development and growth,” he said. “And, to hold the consumer benefits of video choice hostage to this extraneous debate over internet regulation makes no sense.”

Should the Senate approve the Communications, Consumer’s Choice and Broadband Deployment Act of 2006, which may happen in July, it will need to be reconciled with a similar telecommunications bill, the Communications, Opportunity, Promotion and Enhancement (COPE) Act, which was passed last week in the House of Representatives. The COPE Act would give the FCC more power to investigate acts of “discrimination” on the part of network operators, though only after the fact. It gives the FCC the power to impose fines for each violation and facilitates an expedited review process for handling complaints. Still, for net neutrality proponents it’s not enough to preserve the free and open model that currently exists.

Currently, there are several stand alone net neutrality bills in the Senate which could become incorporated into the Communications, Consumer’s Choice and Broadband Deployment Act. These include the Internet Non-Discrimination Act of 2006, introduced in March by Sen. Ron Wyden (D-Oregon), and the Internet Freedom Preservation Act, recently introduced by Sen. Olympia Snowe (R-Maine) and Sen. Byron Dorgan (D-ND) Both of these standalone bills outline strict rules for access, including the prohibition of paid tiers, and rules to discourage discriminatory practices. Whether either of these bills becomes incorporated into the Communications, Consumer’s Choice and Broadband Deployment Act is anyone’s guess at this point – however, most political analysts are betting that our Republican controlled Congress, which has long seen generous campaign support from the telecommunications industry, will not be inclined to adopt any meaningful net neutrality legislation this time around.

The Senate Commerce Committee is scheduled to vote on the Communications, Consumer’s Choice and Broadband Deployment Act on June 22. If the legislation is passed, House and Senate negotiators will then need to hash out a compromise on telecom reform. This, in turn, could lead to an even broader, more comprehensive telecommunications reform bill, possibly including net neutrality provisions, which would need to be approved before Congress adjourns in the fall.

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Patrick Barnard is Associate Editor for TMCnet and a columnist covering the telecom industry. To see more of his articles, please visit Patrick Barnard’s columnist page.