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Net Neutrality Could Mean Reduced Access, Increased Costs

Editor's note: On Oct. 16, 2006, AT&T said it would follow the FCC's net neutrality guidelines for 30 months after the merger, if approved. A decision by the FCC was pending at press time.

The so-called "net neutrality" debate, primarily between internet service providers (ISPs) and companies that run search engines, has begun generating steam again. With the mid-term elections on the horizon, net neutrality had been pushed to Congress' back burner. But after the U.S. Department of Justice approved AT&T's purchase of BellSouth on Oct. 11, consumer advocates and technology companies have stepped up their rhetoric favoring a "free and open Internet." What happens next is in the hands of the Federal Communications Commission, which will decide whether or not to block the merger.* At issue is a concern that AT&T would essentially have a monopoly on the nation's telecommunications networks, potentially getting in the way of open access to Web sites and other online services of competitors.

We can expect to see a new spate of commercials, along with news and blog coverage on both sides of the net-neutrality issue. As they did over the summers, ISPs are again accusing search engines of trying to shirk their fair share of the costs. And proponents of net neutrality are fighting back with their own sponsored-content ads right...well...on their Internet sites.

So who's on the side of what's right? Depends on your perspective. Ever since the Internet came into broad commercial use in 1994, the federal government has held to a practice of staying out of the way of online communications, with few rules mandated. But that may soon change. Search engines, such as Google and Yahoo, say the lack of federal regulation has allowed use of the Internet to flourish and meet the needs of the public-so they are advocating that all Internet sites to be treated the same, with no special fees for services that take high amounts of bandwidth; e.g., net neutrality. But ISPs, such as AT&T, Time Warner Cable and Comcast, say they are concerned because certain Internet uses, such as downloading music or other large files, potentially get in the way of usage by others. Further, because they have invested heavily in building (and maintaining) channels for online activity, they say it's only fair to share the costs with heavy users. The ISPs make several compelling arguments:

* They spend large amounts of money to develop networks and keep them running, which search engines use extensively without cost.

* In other industries, it's standard protocol to pay more for higher use. Why should the Internet be any different?

But on the other side, Internet users make strong arguments, as well:

* They say net neutrality ought to ensure that broadband providers cannot use their market power to favor one application or set of content over another-instead, equal access ought to be assured.

* Bulk e-mailers and other large users don't believe they should have to pay the ISPs extra fees for services already offered. And, they argue, small companies may not be able to afford the fee, which could alter the level of service they provide.

* As well, they point out that consumers already pay for access, providing ISPs with the revenue expected to pay for the "pipes." They ask, why should ISPs be allowed to segregate content through additional pricing?

In Congress, committees and subcommittees have begun to hold hearings on the issue of net neutrality. A bill before the Senate Commerce Committee to preserve equal access, the Snowe-Dorgan Net Neutrality proposal, died in an 11-11 tie on June 28. Proponents say it was a victory for the cable and phone companies; opponents say it simply isn't necessary...yet.

As online banking, electronic statements, electronic surveys, and e-mail alerts are becoming staples in the set of financial tools used by consumers, many believe credit unions could be adversely affected if ISPs are allowed to charge for tiered services. It is expected that ISPs will pass the cost on to their customers, affecting the pocketbooks of small businesses and individuals.

For now, much confusion continues to surround net neutrality, and it's important for credit unions to stay informed. With open access a "given" in the early years of the Internet, we've all become accustomed to focusing on content and services, not right of entry. And financial institutions have benefited from an environment that has allowed even the smallest financial institutions to look "large" in the eyes of Internet users. But it may not last. Credit unions may wind up with reduced access to members or increased costs for serving members online. As all of us stay alert to what's to come, one thing is certain: it's going to get very, very warm!

Greg Crandell is executive vice president of Digital Mailer, Herndon, Va. He can be reached at 866-994-4900.

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