The push to get Net neutrality legislation through a Democratic Congress is not going anywhere this year, industry experts agree. According to a recent Federal Trade Commission report and an IDC study, such legislation poses more dangers than benefits. But whether those arguments indicate mounting opinion against government rules to prohibit tiered services remains a matter of debate.

The IDC study predicts a “more muted” version of Net neutrality legislation, which would protect consumer choice and freedom but leave service providers the option of offering premium services with higher quality of service (QOS).

Even proponents of Net neutrality legislation such as Derek Turner, research director of Free Press and an organizer of the Save The Internet coalition, admit it stands virtually no chance this year.

“The only real likelihood of telecom reform is some kind of broadband data bill to help more accurately collect data,” Turner said, referring to a measure introduced by U.S. Sen. Daniel Inouye (D-Hawaii) and a draft proposal by U.S. Rep. Edward Markey (D-Mass.) “That seems to have more bipartisan support. Of course, it's hard for people to say more data is a bad thing.”

It's also been hard to get much of a consensus on Net neutrality, given the multiple definitions and many diversions the issue has taken. That's a big reason why Washington experts such as Carol Mattey, director of the technology, media and telecommunications regulatory consulting practice for Deloitte & Touche, think Congress won't act at all.

“I'm very skeptical that Congress will move forward on Net neutrality because it is a very politically charged issue,” she said. “To date, there is a lack of consensus on what Net neutrality is. You can't enact something if you can't agree what the terms are or what the issues are.”

The FTC report, issued in late June, was prepared by an Internet access task force, which found no evidence of “market failure or demonstrated consumer harm,” said Deborah Platt Majoras, chairman of the FTC, in a press release. In fact, she said, the market is moving toward more competition, not less, warning that any regulation at this point would have “potentially adverse and unintended effects of regulation in the area of broadband Internet access.”

Turner dismisses the FTC findings, however, saying the agency did no original research and based its conclusions primarily on what was said at a fall meeting mostly attended by industry representatives, not consumer groups.

“There is not a lot of ‘there’ there,” Turner said. “Considering this agency is supposed to be the best expert on the issue of fair trade and competition, it is really surprising there is not one single iota of original research done. The FTC even admits at the beginning of the report that they did not conduct empirical research. They say there is competition in broadband access. We would strongly disagree; it is, at best, a duopoly.”

Turner also dismisses any impact of the FTC recommendations on what Congress does.

“It certainly got a lot of press in the first week,” he said. “But the issue is whether or not it will influence anyone in Congress and I think the answer is no.”

The IDC study, “U.S. Consumer Internet Traffic 2007-2011 Forecast: The Impact of Net Neutrality on Service Provider Infrastructure Investment,” concludes that many of the largest Net neutrality proponents — including Google, Yahoo! and others — would be smart to try to partner with network operators rather than advocate legislative action that would restrict what they can do.

More than likely, the IDC study concludes, federal rules that would limit the ability of telecom, cable and other Internet backbone and access providers to provide tiered services — which allow them to charge more for higher QOS — would discourage investment and thus limit what would be available.

Matt Davis, program director of IDC's Consumer Multiplay Services program and an author of the study, believes Net neutrality is a dead issue “unless someone messes up” — something he admits is still possible.

“I don't think anybody is going to mess with [voice over IP} again or do what Telus did and block access [to a union Web site during labor negotiations],” Davis said. “Those are well-understood no-nos. But there are so many applications that could be potentially tinkered with.”

The temptation for service providers is to use their knowledge of the network, through capabilities such as deep packet inspection (DPI), to determine traffic patterns and then use that information to the detriment of competitors, he said.

“One example would be using DPI to detect VoIP traffic coming out of this specific area, finding out that it's a college campus and running a promotion for our own VoIP in that particular place,” Davis said. “That doesn't touch another person's traffic, but it does use the knowledge of the network to gain a competitive advantage.”

Network operators already have an incentive to invest because consumers are clamoring for faster Internet access, he said. The IDC study found Internet access is the single most important piece of the service bundle (see chart at right).

As applications such as online gaming become part of a provider's portfolio — both AT&T and Verizon are doing this now — the temptation to give the internal service a priority grows, he added.

Using Net neutrality legislation to fight that possibility runs the greater risk of depressing network investment, much as unbundled network element rules in the 1996 Telecom Act slowed local network investment while telecom service providers waited to see if they would have to open up remote access facilities such as digital loop carriers to competitors, the IDC report said.

That's why, Davis believes, companies such as Google will quietly begin talking with service providers about the options for using QOS to deliver higher quality video.

“Online video is not all fun and games with short-form, user-created, grainy-poor quality forever,” he said. “Google will want to be full-fledged video distribution hub, all the way up to full-fledged movies and [high-definition] content, “If you get into that business, there is no other avenue but to have some form of QOS.”

Net Neutrality proponent Turner dismisses both of IDC's premises.

“They are asserting that the big industry proponents of Net neutrality are going to decide to roll over and support what they have been opposing all along,” he said. “I think that is a little weird. Google is in the position to benefit the most from discrimination on the Internet, and they always have been. But they believe in keeping the Internet open so innovative companies can develop, and they plan on acquiring innovative companies and start-ups that would benefit from an open Internet, like YouTube, which wouldn't exist if the Internet services become discriminatory.”

As for legislation that impacts investment, Turner said, it is only regulatory uncertainty that causes the problem.

“We believe that competition is what drives network investment in infrastructure, not deregulation,” he said. “Regulatory uncertainty may have a negative impact — where you have capital essentially on strike. But once the rule is made, I think you'll see tons of network investment because consumers are demanding these services. AT&T and Verizon want to get into HD video, so they will invest to compete.”

It's likely to come down to what's easiest for the businesses involved, said Jerry Ellig, director of the Regulatory Studies Program at the Mercatus Center at George Mason University and former deputy director and acting director of the Office of Policy Planning for the FTC.

“If it's easier to negotiate with each other, they will do that,” he said. “If they think it's easier to get Congress to pass a bill, they will do that.”