The FCC is making a landmark ruling Thursday about the future of the Internet

Key Points
  • The GOP-dominated FCC is likely to approve a plan to remove "net neutrality" regulations.
  • The vote for "restoring internet freedom" will give more power to internet service providers to set pricing and prioritze different types of traffic.
  • It will rescind the "Open Internet Order," which was enacted in 2015 and regulated ISPs in the same way as telecoms.
  • Here are the arguments on both sides.
Net neutrality vote looms
Net neutrality vote looms

The FCC, led by Trump-appointed Chairman Ajit Pai, is set to vote on Thursday on whether or not to uphold the Obama-era "Open Internet Order," better known as "net neutrality" regulations.

The decision will determine how we use the internet, affecting how small start-ups launch and how big businesses charge customers.

Here's what you need to know:

What is the principle of net neutrality?

Net neutrality is probably a buzzword you've heard thrown around a lot. It's easy to understand. Basically, the idea is that the internet should be neutral and that the folks whose infrastructure supports it, such as big telecom and cable companies including CNBC owner Comcast, should just be "dumb pipes" that carry all internet traffic equally, not gatekeepers who can favor certain sites or activities online by changing pricing and bandwidth based on the type of traffic, its origin or destination.

Almost everybody claims to support net neutrality. The argument is about how much and what type of regulation is necessary to sustain it.

Republicans argue that forcing internet service providers to treat all traffic equally will curtail ISPs' incentive to invest in infrastructure upgrades and stifle innovation that would bring consumers better service. As you'd expect, the ISPs agree with them. Comcast, the country's largest ISP, has actively lobbied in favor of changing the current regulations.

The other side, including most internet content companies and many Democrats, believe that if ISPs are not explicitly banned from treating different internet traffic in different ways, they will use this power to charge higher rates for certain types of traffic, stifling the free flow of information in order to bolster their profits.

What is the Open Internet Order?

The measure, according to the FCC, is a set of "strong, sustainable rules grounded in multiple sources of legal authority to protect the Open Internet and ensure that Americans reap the economic, social, and civic benefits of an Open Internet today and into the future." The FCC under President Barack Obama began working on the rule in 2010, and it was implemented in 2015.

It declares that ISPs are regulated under something called Title II of the Communications Act of 1934. This regulation has been applied in the past to companies like phone networks — it requires that all phone carriers deliver your call, no matter where you're calling from or which service provider you use.

Previously, ISPs were regulated under Title I, which classified them as information services.

By applying Title II to ISPs, the FCC essentially ruled that internet providers can't block traffic or charge competitors different prices to access their services. All data under the Open Internet Order should be treated equally.

What are some arguments in favor of keeping the order?

The arguments in favor of keeping ISPs regulated under Title II are plentiful.

One of Pai's core arguments for reversing the act is that it has stifled competition among smaller ISPs. But some lawmakers, including Democratic House Minority Leader Nancy Pelosi, disagree and are in favor of keeping ISPs under Act II. "Consumers should be able to use the internet on the device they want, using the apps and services they want without their internet provider standing in the way," Pelosi said in June.

There are also fears that ISPs will throttle data and could potentially block access to services that they fear are in direct competition with their own offerings. Imagine, for example, if one provider blocked Netflix because it wants its customers to instead view its own suite of on-demand movies and TV shows.

The Verge's Nilay Patel thinks that reversing the act will make the internet landscape will look a lot more like mobile broadband. There, carriers are already doing all sorts of things that are not allowed if they're regulated under Title II.

For example, wireless carriers can throttle data to slower speeds if you use too much, charge you for different internet usage features (like using your phone as a hotspot), and tack on fees if you want to stream video in HD.

With the current act in place, ISPs can't do what we're seeing in mobile.

Title II also gives the FCC the ability to tell ISPs to stop doing something, like throttling data, while Title I does not. Ben Thompson from Stratechery references an instance in 2007 where Comcast throttled data on peer-to-peer content-sharing network BitTorrent. The FCC was not in a position to tell it to stop, since at the time Comcast was regulated under Title I. Comcast ultimately lifted the throttling anyway.

What are some arguments in favor of killing it, as the FCC will probably do?

The primary arguments to kill the act come down to two things: competition and innovation. The FCC believes that moving ISPs back to Title I could help spur new competition and will allow ISPs to innovate on their products and services.

Plenty of internet firms did flourish before the the Open Internet Order. Google, Facebook and Netflix all grew into companies worth tens or hundreds of billions of dollars without these regulations in place.

Furthermore, the ISPs have said they're not planning to throttling data speeds or give priority access to one service or another. They point out that they had the right to do so before 2015 and did not.

Pai has argued that, by revoking the Title II status, it will be easier for smaller ISPs to compete in the same markets as larger ones, thereby creating more choices for consumers. By cutting the regulation, Pai believes, competition will force cable companies to offer the best possible products at the best prices for consumers.

Thompson wrote about how T-Mobile, the smallest of the big four wireless carriers, was able to upend the wireless industry by creating new products and services (called "uncarrier" moves) to attract new consumers. Some of those ideas involved practices that wouldn't be allowed under Title II, like giving preferential treatment to Netflix so data used for Netflix wouldn't be counted against a customer's monthly data cap.

"Increasing competition would not only have the same positive outcomes for customers that T-Mobile demonstrated, but would solve the (mostly theoretical) net neutrality issue at the same time: the greatest check on an ISP is the likelihood of an unsatisfied customer leaving," Thompson wrote.

What's the FCC voting about on Thursday?

The FCC will gather for an open commission meeting in Washington, where it will vote likely in favor of "Restoring Internet Freedom," which will return "broadband Internet access service to its prior classification as an information service, and reinstate the private mobile service classification on mobile broadband Internet access."

In other words, it's voting to keep internet services either under Title II or move them back to Title I. It is expected to choose the latter.

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and