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TheStreet Open House

Does the Net Neutrality Debate Present Investing Opportunities?

James Dennin, Kapitall: This whole net neutrality debate is confusing. Which naturally raises the question, how can I make money off it?

It's been two days now since a ruling from a US appeals court completely changed the way the FCC is allowed to regulate the internet. And everyone still seems very, very confused about what's going to happen now, and who exactly stands to benefit. 

[Read more from Kapitall: Will Short Selling Rise in 2014? Consider 6 Stocks with Spikes in Short Interest]

The ruling on the case, which was brought by the giant Internet Service Provider (ISP) Verizon (VZ), holds that the FCC can no longer enforce  net neutrality, a principle that requires carriers like Verizon to charge everyone the same for broadband.

And this had been in place for a pretty good reason. When you're talking about the distribution of information, allowing someone to vary the price or how quickly the information moves gives them more control over who hears what. If Verizon or AT&T (T) controlled too many of the mechanisms that bring you the evening news, it wouldn't be the evening news anymore. 

That was the case that the FCC tried to present in favor of net neutrality, although they can still submit an appeal to the Supreme Court. Based on the ruling, ISPs can now choose how much they charge for different qualities of internet service.

For now major player Netflix (NFLX) sees an upside . After all, its high quality video is exactly the kind of thing ISPs could charge extra for. But  this also creates a potential problem for them. Netflix could be pressured into shelling out extra, lest an ISP impede their streams. And smaller companies who can't afford faster streams might fall by the way-side.

And if we want to get really Orwellian about this, ISPs could theoretically charge more to stream data to people they don't like, or refuse to stream it at all. This concern is probably what's got companies like Google (GOOG) and Yelp! (YELP) buying up lobbyists like hotcakes. 

As Netflix points out, though, it has a large and loyal customer base, and it's not afraid to use them. It might be hard to imagine viewers turning out in droves to protect net neutrality – it's just not a very photogenic political issue.  But cut off 40 million people in the middle of a Breaking Bad episode? 

That ISP would make enemies for life. 

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