This week the Federal Communications Commission (FCC) announced new rules governing Internet service, effectively putting an end to net neutrality, or the idea that all web traffic should be treated equally. Or so that’s what critics are saying. The FCC insists, however, that the new rules would not harm Internet users. In a blog post, FCC Chairman Tom Wheeler said there had been “a great deal of misinformation” about the proposal, which he said would not permit “behavior harmful to consumers or competition by limiting the openness of the Internet.”

What is net neutrality?

If you don’t know what net neutrality is, don’t feel bad. You aren’t alone.

Net neutrality is the idea that your Internet service provider (ISP) must treat all Web traffic equally. A court decision in January struck down FCC rules meant to ensure that Internet providers do not discriminate by blocking or slowing certain content. That decision makes it possible for Internet providers such as Comcast and Verizon to cut deals with content providers, which would pay to stream their content in an Internet “fast lane.” After the ruling, the FCC said it would revise its rules, which is has done.

What are the new rules?

The newly proposed FCC rules would allow companies such as Netflix to pay ISPs to stream their videos and other content more quickly. Consumer advocates claim this could create two lanes on the Internet: a fast lane limited to companies willing to pay for that access and a slower lane for less fortunate websites.

Verizon, which sued the FCC for the right to cut such deals, said that it had no intention of preventing customers from viewing certain sites. Verizon and other Internet providers “have always made clear that we support an open Internet and we have publicly committed to ensuring that customers can access the Internet content they want, when they want and how they want,” the company said in a statement.

The FCC said these deals would still be fair because Internet providers would be required to reveal how they handle traffic, how much they charge companies for access to fast lanes, and whether they have given preferential treatment to their own content. Internet providers would be required to act in a “commercially reasonable manner,” according to the FCC, which will vote on the proposed rules later this year.

What does this mean for consumers?

These new rules may lead to a more expensive Web, but the average Internet user probably won’t notice anything right away. However, over time, websites would probably pass on to consumers the costs of paying for high-speed access. In addition, it could become difficult to view certain websites owned by companies that can’t afford to pay for access to an Internet fast lane.

The proposed rules could affect not just entertainment, but also education. For example, if schools use an online curriculum made by a company that cut a deal with Verizon, students who subscribe to Verizon’s Internet service at home would have an advantage over other students who subscribe to another provider.

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Wayne Thorp
ABOUT THE AUTHOR:

Wayne A. Thorp, CFA, is editor of Computerized Investing and a vice president and the senior financial analyst at The American Association of Individual Investors (AAII). He is also the program manager for AAII's Stock Investor Pro fundamental stock screening and research database program and is on the advisory boards of AAII's Stock Superstars Report and Dividend Investing newsletters. He holds the Chartered Financial Analyst (CFA) designation and is a 1997 honors graduate of DePaul University in Chicago. Wayne's interests include stock screening, technical analysis and charting, social media and tech gadgets. However, in the summer he'd prefer to be hip-deep in northern Michigan's Manistee River fly-fishing for rainbow trout.

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