Net Neutrality Is Not Dead

NEW YORK (TheStreet) -- Net-neutrality advocates are up in arms over a proposed Federal Communications Commission rule they say will destroy the open Internet.

The FCC says it's doing no such thing. It's likely the FCC is right.

Net neutrality refers to the principle that all traffic on the Internet should receive equal treatment. But under the proposed rule, last-mile Internet service providers such as Comcast (CMCSA) will be able to negotiate agreements for a faster connection with video providers such as Netflix (NFLX).

Still, the agency will set a base-line speed -- a minimum all broadband providers must meet -- regulators will have to approve each fast-lane deal on a case-by-case basis. The baseline will likely be plenty of bandwidth for video.

What advocates of network neutrality fear is that Netflix will pay for fast service but that new start-ups won't be able to and thus competition will be restricted.

The FCC is proposing the new rule because a court ruled in the case of Verizon vs. FCC, in January, that the agency's previous rules, passed in 2010, violated the rights of ISPs such as Verizon (VZ).

FCC Chairman Tom Wheeler said the agency will enforce its transparency rule under which network operators disclose how they manage Internet traffic. There will be no blocking of specific Web sites, and the FCC could still call last-mile ISPs common carriers if they abuse customers.

The problem for net-neutrality advocates is that they remain blind to Internet economics. It costs very little to upgrade a core service such as Google (GOOG). It costs billions to upgrade service levels for ISPs; the money they presently get for service may not compensate for the upgrades' costs.

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