Washington Update: Will Fed Intervention Curb or Protect Your Digital Freedom?

Tech regulation
Considering the high-tech industry's expanding reach into everyday consumer life, it should be no surprise that Washington, D.C. has taken a closer look at the Internet economy of late.

Though the industry has historically viewed Beltway politicians as a group best kept at arm's length, several hot-button tech issues on the D.C. agenda this summer might be worth keeping a closer eye on.

New influential players may clash with established political powers over decisions that could affect how we use--and how much we pay for--the technology that is becoming more and more a part of our daily lives.

Here is a look at the top political/tech topics for the summer of 2010.

Facebook and Google Privacy Issues

Privacy issues
Are you confused or concerned about how companies such as Google and Facebook use the data they collect on you as you conduct Internet searches or tend to your imaginary online farm?

If so, you're on the same side as privacy advocacy groups, whose complaints have in part motivated Congress to start drafting an Internet privacy bill that seeks to find common ground between online-advertiser interests and the concerns of privacy and consumer advocacy groups.

Facebook in particular has come under considerable fire recently for the way it handles user privacy, with several senators sending a joint letter to the company asking it to change its procedures.

Google Buzz
Google, which seems to be perpetually under fire for its data practices, was chastised by privacy regulators from several different countries this spring, in part over the way new services such as Google Buzz inadvertently exposed user data. And you can expect massive blowback over Google's recent admissions of Wi-Fi network spying.

Representative Rick Boucher (D-Virginia)
Though the Federal Trade Commission (which is no friend of Google's) is taking a wait-and-see stance right now, the draft privacy bill being backed by congressmen Rick Boucher (D-Virginia) and Cliff Stearns (R-Florida) shows that lawmakers are ready to put rules in place if online advertisers fail to act quickly.

What does all the tussling mean for average Facebook or Google users?

Online advertisers will lobby heavily to protect their ability to generate billions in interactive-media business based on user activity. Lawmakers seeking brownie points with online constituents, however, have easy targets in such act-first-think-later business models. It's a no-lose battle for legislators, who win either by protecting voters or by attracting more campaign contributions from concerned lobbyists or corporations.

At the very least, regulatory pressure--or the threat thereof--has already pushed Facebook into an effort to make its privacy settings more understandable.

Don't expect user-information harvesting to go away completely, though: Advertisers claim that many people find great utility in having online services help them discover new information or products. And as long as people keep clicking on spam, the advertisers may have a case.

Google-AdMob Purchase

AdMob, a Google subsidiary for mobile advertising
For a company with many direct connections to the Obama administration, Google sure has a lot of enemies in Washington, D.C. these days. But in its latest clash with the FTC, Google dodged a bullet when the federal regulators recently dropped their opposition to Google's planned acquisition of mobile advertising provider AdMob.

The $750 million purchase of AdMob, announced last year, was Google's big move to gain a lead in the fast-growing field of advertisements tailored for smartphones and other mobile platforms.

Though Google dominates the wired-Internet search arena, the mobile playing field is still up for grabs. Concerns that Google plus AdMob would amount to a huge lead in the nascent marketplace spurred the FTC to do some extensive groundwork developing material to support a challenge on antitrust concerns.

What ultimately pushed the agency to drop its opposition was the emergence of a strong competitor--namely Apple's move to purchase mobile ad company Quattro Wireless in January. In a statement, the FTC all but said that increased activity in the market meant that it would be hard to see a Google-AdMob combination as being dominatingly harmful. (And perhaps the aggressive warning by Google CEO Eric Schmidt about the company's willingness to fight back against the FTC helped, too.)

Don't expect this to be the last you hear of the FTC's getting involved in Internet-market issues, though. Even Apple might end up in the FTC's crosshairs, with rumors already suggesting possible investigations into whether Apple's blocking the use of Adobe Flash from iPhone applications is an abuse of market power, or whether Apple's own iAd system is anticompetitive.

FTC chairman Jon Leibowitz
Under new chairman Jon Leibowitz, the agency is actively seeking congressional help to gain new power in an Internet-centric world where its current powers are limited. (Of course, such power might not be so bad--heck, the FTC might even help you keep that scanned image of a naked body part from being brought back out of your bad-behavior past.)

The bottom line for consumers? While regulators and politicians debate layers of jurisdiction, the only safe prediction is that more ads are coming to your mobile phone or Web browser, no matter which company serves them up. Be it a competitive market or a monopoly, we're quite sure that advertising, like politicians, won't disappear soon.

Next: Will Broadband Prices Increase?

Broadband Reclassification, or Net Neutrality Part Deux

Welcome to one of the longest-running shows in telecom regulation: the ongoing fight over the issue known as "net neutrality," now in its second or third iteration since its debut on the regulatory scene in 2005.

Federal Communications Commission
What once began as a fairly simple technical conflict--centered mainly on the phone companies' desire to keep applications like Internet-based phone calls off their broadband networks--is now a full-scale battle royal that has the Federal Communications Commission attempting to change regulatory rules to bring the broadband operations of cable companies and big telecommunications firms back under agency purview.

How did that happen? The idea of net neutrality, at its most basic level, espouses the belief that network service providers--those companies that offer DSL, fiber, or cable-modem broadband services--shouldn't be allowed to block or degrade their users' ability to connect to any legal content or applications on the Internet.

Though cable and phone companies will tell you they have no desire to block any user access to the Internet, their political and economic DNA basically requires that they use their massive resources to fight any additional regulatory requirements about doing so--and hence you have the political battle without end.

In 2008, the FCC slapped the wrist of cable giant Comcast for the company's secretive attempts to stop its users from downloading peer-to-peer video files.

This spring, an appeals court in D.C. struck down that ruling and basically said that the FCC didn't have the necessary jurisdiction to enforce the net-neutrality principles the agency had adopted in 2005.

In response, the FCC, under new chairman Julius Genachowski, has proposed new rules to restore some of the FCC's old regulatory power over phone-company and cable broadband services, rules that need congressional approval to be put in place.

Who are the major players? On one side are the large service providers, namely telcommunications companies led by AT&T and Verizon, and cable behemoths like Comcast and Time Warner Cable.

Though fierce competitors in the marketplace, the big service providers are consummate professionals at presenting a unified lobbying message backed up by big campaign contributions, television advertisements, and millions more spent in support of "advocacy" groups that parrot the service providers' no-regulation talking points.

(Point of reference: AT&T, in 2008, had 700 or so lawyers working in its regulatory departments; Google, at the same time, had fewer than a dozen staffers in its D.C. offices. While Google's regulatory troops have probably grown in size since, they still are likely dwarfed by the telecommunications companies' legal armies.)

President Barack Obama
On the pro-regulation side is a somewhat looser coalition of net-neutrality backers. It's a group with firepower, however, since it includes President Obama, his FCC chairman, powerful members of the Democratic majority in Congress, leading consumer-protection concerns--and Google.

What this group ultimately wants is some regulatory or law-focused backstop to prevent service providers from using their market- and infrastructure-based power to determine winners and losers in the Internet marketplace.

Though they may not have the legal or marketing muscle of the service providers, the pro-regulation forces have presidential air cover, with his congressional majority (at least until the next elections), which can mean the most when the votes are counted.

What does this battle mean for the average high-tech consumer? If the service providers win the day and keep the regulators away, it is possible that broadband prices for some types of services--like streaming video--could increase, with preferential treatment given to companies that enter paying partnerships with service providers.

Service providers, however, repeatedly say that competition will keep such moves from happening--and that approval of net-neutrality regulations or a reclassification scheme could lead to decreased investment in network buildouts and a loss of broadband-industry jobs.

Verizon Wireless
The reality? Expect neither doomsday scenario to emerge. Instead, expect a lot more political posturing (with Republicans typically backing the carriers, and Democrats behind net neutrality) as the FCC moves to implement its rules sometime this summer or early fall--an exercise that will be followed quickly by lawsuits challenging the reclassification process.

Even as potential foes such as Verizon and Google find ways to work together, the issue known as net neutrality will be a political football kicked around for another year, at least.

Paul Kapustka is editor and founder of Sidecut Reports, an independent research firm that specializes in wireless technologies.

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