Yesterday, a bi-partisan group of US Senators sponsored legislative measures to ensure that America remains technologically competitive in the rapidly changing global marketplace. Senators Alexander, Bingaman, Domenici and Mikulski introduced the Protecting America’s Competitive Edge Acts, or PACE, to promote wide ranging changes in mathematics and science education, research and development through appropriations and tax reform, and visa programs for qualified doctorate students in math, engineering, technology or the physical sciences.

The legislation seeks to strengthen the nation’s infrastructure at the component level, namely, to train and retain those earning advanced degrees in math and the hard sciences and to promote innovation and basic research. The legislation contains other measures to promote infrastructure developments, such as providing that the Senate and the FCC work together to implement regulatory measures that facilitate and accelerate access to broadband Internet.

Since everyone else has written about “network neutrality,” venturing to guess exactly what it means, I may as well add my two cents to the debate.

Continuing with that monetary theme, and to illustrate the stakes involved, Disney’s $7.4 billion dollar purchase yesterday of Pixar demonstrates the value that companies are placing on the digitization of exceptional entertainment content. The reason for the ambiguity and fuss about concepts like Net Neutrality is simple: the entertainment production and distribution landscape is rapidly and fundamentally transforming into something entirely new and different, and companies are scrambling for prime space.

In brief, Net Neutrality is a fight about control over how digital services are to be delivered to consumers. It’s a good idea; and virtually everyone agrees that service providers have no business interfering with their customers’ right to access any lawful content on the Internet, to use any applications of their choosing or to attach any devices they desire to the network (think gaming consoles, for example). Viewed from this angle, it pretty much looks like a wide open world of ones and zeros, and in fact, the FCC said as much several months ago in a Policy Statement. Insert the word “public” prior to the word “Internet;” however, and the gloves come off.  

The gloves come off because the network builders – the Nets – have stated that they intend to charge companies seeking to have priority on their broadband networks for premier delivery of digital content to subscribers. There is developing opposition to the Nets’ high speed toll lane plans, and part of this is due to the fact that the debate is about as easy a PR fight to mischaracterize if there ever was one. The Nets’ “gee whiz” high speed networks are not quite the same as the public Internet, however, even though they may be delivered by similar technologies. What’s more, these networks are not fully built, not by a long shot, nor will they ever be if the Nets believe they will not be rewarded for their investment dollars, at some considerable risk.

In the meantime, the Nets' business models are under assault from all sides, and only those companies that are highly adaptable will survive the serial transformation of technologies used to create, package, deliver and enjoy entertainment or other such similarly delivered content, like education. The Nets cannot cling to what they have now, much as they would like. The erosion of the telcos' core voice business to Voice over Internet Protocol (VoIP) carriers most likely presages (but cannot match in scale) the market share that cable companies stand to lose from the distribution of IP video over the web by alternative video providers. Who needs the cable or satellite company if you can get your content and high speed link some other way?

The "Net Nots" are companies seeking to benefit from the ubiquitous deployment of high speed networks. These might be the aforementioned alternative video providers; big screen TV makers, or companies that make the glass or chipsets for the same; web-based application service providers like Google or Yahoo! or eBay; makers of modems or other “first stop” devices; companies that combine hardware and software like Apple, and now Microsoft, with its X-Box; gaming companies; handset device vendors that want to change your notions of  what constitutes a computer, or TV, into a combination device that fits into a pocket or a bag, and so on. Basically, it's a grab bag of companies that are being armed by some of the same equipment providers that are involved in building the Nets' nets.

The Nets and Net Nots will combine and converge, forming business models that will produce eddies around entertainment or computing uses to augment (and to influence) consumer lifestyles. What’s not clear from this point, however, is which combinations of network delivery, devices and applications will prove more right (or timely) than others, and how they will be run, or by whom. In other words, whereas the eventual system of alliances may well resemble something more akin to the Abbott and Costello “Who’s on First?” radio skit, there are others who view the probable outcome more darkly, say, more on the order of Lord of the Rings, envisioning a world of good versus evil, and guess which camp the service providers fall into?

My two cents says that these projections of the digital future based upon current business stereotypes are ill-suited to usher in sweeping legislation that pre-ordains what the Nets can and cannot do with the networks they are in the process of building. In fact, one sure way to take the wind of out the sails of the ongoing network convergence would be to handicap one or more of the key players to presumptively benefit other players under the auspices of helping consumers.

In short, we want more players placing these bets. Time Warner’s Richard Parsons sees his company, with its various distribution and content production and Internet arms, as a giant hedge against any one industry segment or company gaining too much power over the others (although he may well be thinking of the service providers in this context, but the argument applies: no one segment should have veto power or control that would curtail the ability of other sectors or companies to do market deals, to provide services to consumers, as they see fit).

You may also want to view the Disney-Pixar deal in the same way: it’s not your father’s media company. It’s something very different – how would you have policymakers factor theme parks into the cross marketing of cartoons with computing devices so beautifully designed they instantly achieve icon status, all under the roof of a venerable outfit that virtually means "animation" to generations of people all over the world?

Given that none of us have a crystal ball – a fantastic metaphor here if there ever was one – we need to tread very carefully when we propose adopting new rules that purportedly would benefit consumers. I think the FCC’s intention to examine each violation of Net Neutrality principles on the facts is a much better way to proceed than cementing new rules into place to deal with situations we simply are not equipped to understand.

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In the early (commercial) days of the Internet, to boldly go where no one dared go before, brave explorers ventured to… sign up for AOL. Not that this was difficult; every single commercial establishment larger than a four seater pizza joint had the AOL software package sitting there right in front of you, screaming out from the counter, but, the point is, there was a sign-up requirement, a registration process, the line up for the lifetime tattoo, what have you: every step mandatory and controlled. This is how AOL came to own you, the blessed Internet consumer: you needed an ISP.

But then along came Google, which tried a different approach, which may have gone something like this. You’re playing around on the computer, looking for information that you desperately needed an hour ago, only you find the organization of your search returns somewhat… well, haphazard, if not downright disorganized… until you tried Google. Finally, here was a way you could rapidly sift through information slapped up on your screen according to relevance. If you were fortunate, you might have been able to finish your assignment on time, but, under any circumstances, you made mental note of how well organized and how fast Google worked, vowing to return next time.

In short, you signed yourself up.

Having clung for too long to the glory days of dial-up, AOL missed the broadband revolution, and now calls itself a “portal,” in a position not too dissimilar from the telcos it once might have aggressively pursued as partners in the new world: dreading the loss of every single customer that ditches dial-up (or circuit voice) for broadband. AOL once might have helped the telcos (or even the cable companies) design better broadband portal pages – I still have a snapshot in my head of an early Verizon DSL homepage filed under the “notable for its extraordinarily lousy design” category – but this was long before Yahoo! Now that we’re on the subject, how many movies or magazines does Yahoo! own anyway?

The telcos' defense against losing a dial-up customer has been long in the making. Many years ago, they invested heavily in wireless. Recently, and after a protracted fight over some pretty arcane (but utterly controlling) regulatory stuff, they decided they’d better invest heavily in wireline broadband facilities. Since early estimates are often too low, they learned pretty quickly that they’d better convert more of their network footprints to broadband (DSL) than they originally anticipated, locked as they are in a turf war with cable. Thus, they are feverishly upgrading copper facilities while simultaneously planning for the high fiber future (FTTP, FTTC, or FTTN), while simultaneously upgrading their wireless networks for greater capacity and capabilities.

Not an easy job, but they are well on their way, and not a minute too soon, and they’re more than happy to sign you up as a customer for any and all services they offer (at a discount!), bundled together in just one easy bill, just step right up and…

So the telcos are in the game, but how, exactly, will the “sign up and be served” game be played in the future? Will this be conducted under the “or else” model, or by some other, more consumer friendly terms? The problem is that everyone is approaching the customer interaction (ok, brainwashing) from a different angle. The telcos, spending gazillions of dollars to build networks for tomorrow, are worried about 1) learning how to talk the content talk and walk the content walk while 2) recouping their far out network investments in world where application service providers might swoop in and eat their lunch.