June 8, 2006 6:45 PM PDT

New Net neutrality plan may ruffle feathers

By Declan McCullagh
Staff Writer, CNET News

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A new proposal in the U.S. House of Representatives takes the concept of mandatory Net neutrality that companies like Amazon.com, eBay, Google, Microsoft and Yahoo have publicly embraced--and extends it to, well, those same companies.

Rep. Charles Gonzalez, a Texas Democrat, has proposed an amendment (click for PDF) to a telecommunications bill being debated Thursday that says neither broadband providers nor commercial Web sites and search engines may engage in so-called discriminatory practices.

(Also on Thursday, the House rejected the original Net neutrality amendment aimed at broadband providers proposed by Rep. Ed Markey, a Massachusetts Democrat.)

In an unusual twist, Gonzalez doesn't even support the idea of mandated Net neutrality. Rather, his amendment appears to have been intended as a kind of poison pill that would force Internet companies to back away from their own requests.

During the House floor debate that continued through Thursday evening, Gonzalez said enacting new laws would create "massive federal regulation by mandating conditions on how the Internet will evolve."

If enacted, Gonzalez's amendment would mean that the Federal Communications Commission would regulate Internet advertising, paid placement and content deals to ensure they take place in a neutral and nondiscriminatory way. That might prevent Amazon from entering into an exclusive relationship with Toys "R" Us, for instance, and could let Yahoo and Microsoft force Google to accept ads for rivals on its search engines. It also could prevent Google from declining certain types of controversial or negative ads, which is the company's long-standing practice.

In the line of fire
Critics of Net neutrality chortled on Thursday, saying that if Gonzalez's ideas gain traction, the Internet companies might have started a political steamroller that they lack the power to stop. (Network neutrality is the idea that all Internet sites must be treated equally by broadband providers.)

"Google has got to be worried about the direction this debate has gone in," said James Gattuso, a fellow at the conservative Heritage Foundation in Washington, D.C., who has written a paper criticizing mandatory Net neutrality rules.

Gattuso said of the liberal groups leading the Net neutrality charge: "I think they actually would regulate Google if that became feasible. They don't like big companies."

U.S. Rep.
Charles Gonzalez

For its part, Google says there's no parallel between enforcing Net neutrality for broadband providers--and Net neutrality for content providers.

"We'd say, respectfully, that it doesn't make sense: Net neutrality rules are needed because of the last-mile bottleneck. However, there is no parallel monopoly for online services," Google spokesman John Murchinson said in e-mail to CNET News.com.

Murchinson added: "The telcos and cable companies have a dominant market position due to their legacy ratepayer-subsidized grants of last-mile rights-of-way and a resulting monopoly or duopoly dominance...Most Americans can't get multiple competing broadband choices no matter how much they want them."

Microsoft declined to comment on the amendment, saying it had not taken a position on it.

Free Press, a Washington-based group that has often been critical of large telecommunications companies, has been one of the most vocal groups in favor of mandatory Net neutrality regulations.

But Free Press' policy director, Ben Scott, said his organization nevertheless opposes Net neutrality for Internet companies. Gonzalez's amendment "extends the principle of Net neutrality to content rather than the physical wires of the Internet. Those are two different things entirely," Scott said.

"The marketplace is so limited and we have two players and very high barriers to entry," Scott said. "By contrast, in the Internet content market, you have very low barriers to entry and multiple players."

Ray Gifford, president of the free-market Progress and Freedom Foundation and critic of Net neutrality, said Gonzalez's amendment "underscores how the logic of Net neutrality does not logically stop at the physical layer of the Internet, but rather demands regulatory oversight of the content and applications layers as well."

"The process ends at full-blown 'public interest' regulation of the Internet, which Mr. Gonzalez's amendment would accomplish," Gifford said.

The House Rules Committee did not permit Gonzalez to offer his amendment during the floor debate, which is expected to end with a vote on another Net neutrality proposal late in the evening.

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