Congress has made it a priority to reform telecommunications rules during this Congressional year; the last big overhaul was in 1996. The House of Representatives will soon be voting on one of the first telecom reform bills to make it out of committee. The bill is a real boon for telecom firms that want to offer television services, and has a nice tidbit or two for consumers and cable companies, too.

So far so good. But the bill is less helpful on another front. As telephone and cable companies morph into multiservice giants that compete directly with each other, they also want to make more money from their data networks. To do this, they propose to charge their Web site customers for preferential treatment of their traffic, or perhaps give partner sites such treatment to make them more competitive. Doing so, however, would violate the principle of network neutrality, which essentially states that the pipes and servers that make up the Internet should treat all data packets equally (see my February column on this topic). And this bill does little to ensure that the Net stays neutral.

Path to IPTV Made Easier

One of the primary reasons for telecom reform is to enable new services, like IPTV. This bill tackles head-on one of the longstanding issues that complicates IPTV deployment, namely local franchising of TV services.

As things stand, cable companies have to negotiate with individual counties and towns in order to get a foothold into their TV markets. Each of these local franchises has its own set of rules and restrictions, creating an overly complex and slow process for any newcomer into the market.

The bill that just came out of committee, known as the Communications Opportunity, Promotion, and Enhancement Act of 2006, primarily does away with that local franchise process and creates a national franchise license for IPTV services. Cable companies would also be able to take advantage of the national franchises.

The bill protects cities and counties from losing revenue and control over service deployment by allowing them to reserve certain rights regarding service rollout in their areas and to retain some of their licensing fees. Consumers in less desirable, less profitable locations get something too, because the bill includes a provision that requires telcos to eventually serve the entire franchise area. There's no set schedule for that rollout, however, so some people in rural areas could still wait a long time to get these services. One other plus: The bill would bar states from preventing cities and towns from offering their own broadband or wireless services to their residents. Certain states have been persuaded to do just that, after large communications firms raised a stink about competition from local government. By removing the barrier to more widespread municipal Wi-Fi and broadband services, this bill might increase competition and perhaps bring these services to areas that private firms don't want to serve, so it's a win for consumers.

Net Neutrality in Peril

Many of the bill's provisions serve to balance out the needs of the various groups involved, from the cable and telephone companies to cities, towns, and consumers.

But the bill lacks clear, direct language that would protect network neutrality. Representative Joe Barton (R-Texas), one of the sponsors of the bill, has said that codifying Net neutrality into law is unnecessary; he wants to let the market regulate itself. Accordingly, the bill addresses punishment of abuse, but does nothing for prevention. It gives the Federal Communications Commission the ability to investigate complaints of discriminatory behavior and to fine offending companies, but it expressly forbids the FCC from creating any rules regarding Net neutrality.

That's exactly what telecom and cable companies want. There have been multiple public statements from different firms regarding their plans to offer a new tier of broadband service to companies that use their networks. To get this level of service, companies would not only pay for bandwidth and access, but they would also pay for speedier access.

Why should any company pay extra? Why should established players with fat wallets get even more of an advantage over new businesses that might offer innovative services? And why should a network operator be permitted to decide who gets priority access to my home and computer?

Pipe and Provider

In my opinion, one of the problems here stems from the fact that as these companies broaden their service offerings, they are mingling their roles as network access providers with their roles as content and Web service providers. Specifically, as content providers, network operators will be competing with firms that do not own the pipes that deliver content. That situation creates an enormous conflict of interest for firms like AT&T, Comcast, or Verizon, and it gives them a tremendous advantage. Why give them the opportunity to kill off a competitor?

I'm not one for draconian regulations, nor do I want to stifle the tradition of innovation that has made the Net so successful, the accusation that opponents of Net neutrality rules aim at those who want to protect the principle. But it seems to me that even if network operators don't actually kill off their content-provider rivals, failure to regulate this issue would end up stifling innovation because older, established firms will have the money to pay extra for top-tier preferential service, while smaller, innovative ones will be less able to do so.

For more on Net neutrality pros and cons, read the testimony given to the House Committee on Energy and Commerce.

The president of the U.S. Telecommunications Association has made a public statement saying that nothing will be blocked, impaired, or degraded when network operators offer priority packet service. But the moment that one Web site gets faster service than another, it gains both a competitive advantage--which is what the network operators are in fact selling--and it sets a new standard for customer expectations. Access to other content and sites may not be actually blocked or degraded, but to the user it will seem degraded in comparison to the new, faster tier.

If telcos and cable companies want to recoup their heavy investments in broadband networks, fine: Let them raise rates on bandwidth usage. If there are Web-wide concerns over quality of service for new video offerings, let all video receive the same "preferential" treatment. A Web site should succeed or fail based on consumer choice, not on the relationship the site operator has with network access providers.