At approximately 3:30 p.m. on Thursday, Aug. 5, Federal Communications Commission Chief of Staff Edward Lazarus walked into a conference room where his boss, FCC Chairman Julius Genachowski, was meeting with public interest groups discussing federal broadband policy.

The chairman turned to his chief of staff and asked him to update the room on the ongoing broadband regulation talks between Verizon (VZ), AT&T (T), Google (GOOG), Skype and the Open Internet Coalition, a Web industry group.

"Eddie looked like he had just lost his best friend," according to a person who was present and recalled the expression on Lazarus's face. Addressing the gathering, Lazarus announced that the talks had been terminated -- he would later say "suspended" -- explaining that the negotiators had found a number of points of agreement but had failed to reach a consensus.

What was at stake in the Lazarus talks? No less than the future of the Internet, with wide-ranging ramifications for the delivery of broadband content and services to the home -- not to mention hospitals, banks and mobile devices.

Outside of Public View

As Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google forge ahead with highly publicized new plans to stream high-speed content like movies and TV shows to your living room, smartphone, telecom and cable giants like AT&T, Verizon and Comcast (CMSCA) have been intensely lobbying to maintain control over the broadband pipes they spent billions to build. Comcast is going so far as to buy a rich content factory, NBC Universal, a deal that would create a $35 billion media and delivery juggernaut. That merger is currently pending before the FCC, and though public interest groups have been roundly critical, it's expected to be approved.

An epic and escalating war is now taking place over the next era of broadband content delivery. Some skirmishes are playing out in the public eye, but others -- perhaps the most critical -- are far removed from it. In fact, very few people know that the highly controversial efforts by Google and Verizon to hammer out their own proposal for a broadband policy framework -- news of which broke only last month -- started nearly two years ago. The outcome of this ever-hotter war will have a profound impact on the way consumers access information well into the future.

Just hours earlier on that August Thursday, Lazarus had assured the participants that his talks were moving ahead and making progress, according to sources familiar with the meetings. But when news emerged (in the form of a New York Times article that appeared online late Wednesday and in the Thursday newspaper) that two of the key participants, Verizon and Google, were on the verge of announcing their own proposal, the talks collapsed. It was a plan that Lazarus -- not to mention Skype or the Open Internet Coalition -- was not prepared to accept.

Google and Verizon disputed the Times article, insisting that they were pitching a policy proposal not a business deal, as the article described it. But it was clear that Lazarus's approach had hit a wall.

"We hadn't gotten consensus on any of the issues, and everything was contingent on everything else."
"We had exhausted the Lazarus process," a participant in the talks told DailyFinance. "We had reached an impasse, and the decision to suspend the meetings was the right decision. We hadn't gotten consensus on any of the issues, and everything was contingent on everything else. The toughest issues were managed services and wireless broadband, and how you treat them."

Prior to working at the FCC, Lazarus, a former law clerk for Supreme Court Justice Harry Blackmun, had spent most of the decade as a partner at legal powerhouse Akin Gump in Los Angeles. He has written extensively on various legal issues, and when Lazarus promoted his book Closed Chambers on The Daily Show in 2006, host Jon Stewart asked him about the need for complex legal jargon. Lazarus replied: "Do you know how much I charge on an hourly basis, Jon? If I didn't make up my own language, why would people pay me?"

At Stake: Equal Access to the Internet

For Lazarus (pictured at right), the closed-door meetings were a bold, high-stakes gamble to bring together the polarized sides of the frequently acrimonious debate over net neutrality -- the basic idea that Internet broadband providers shouldn't pick winners on the Web or discriminate against rival content. During a speech in Aspen just three weeks ago, Verizon policy chief Tom Tauke said: "The elephant that is still in the room is the issue that has dominated debate in this industry for at least five years, and that is net neutrality."

The Internet today largely operates under the principle of net neutrality, which most people don't even notice, so it's easy to take for granted. But all Web users and companies have equal access to the Internet, in the same way that all Americans have the right to take a road trip anywhere in the 50 states without a passport. Companies and institutions have closed networks, but the main public internet is accessible by all.

Without this open access, net neutrality advocates argue, startups like Google, Twitter and untold thousands of others could never have taken hold. Indeed, innovation online would be grievously stifled. For the last five years, Internet-dependent companies like Google and Skype have been fighting a series of running battles with the giant broadband providers over how net neutrality should be enshrined -- if at all -- in regulation and law moving forward.

Lazarus is a relative newcomer to the net neutrality debate. It appears he wanted to broker a deal he could hand to Congress on a silver platter heading into a contentious midterm election. Instead, he got a busted process, two rogue participants, furious interest groups and an agency in near-disarray, at least on broadband policy. "The chairman remains fully committed to preserving the free and open Internet as a platform for investment, innovation, free speech and consumer choice," a senior FCC official tells DailyFinance. The FCC declined to make Lazarus available for an interview.

Behind-the-Scenes Maneuvering by Two Giants

Lazarus was scrambling to find a solution to the grave jurisdictional crisis the FCC faced after a federal judge ruled in April that the agency lacked the authority to enforce net neutrality -- a verdict that rocked tech policy circles from D.C. to Hollywood. The court said the FCC had no power to enforce four principles laid down in 2004 by then-FCC Chairman Michael Powell that are the basis for net neutrality. Powell's successor, Kevin Martin, tried to use those principles in 2008 to sanction cable giant Comcast for slowing down peer-to-peer traffic -- an ultimately botched pseudo-regulatory action with far-reaching and unintended consequences.

But behind the scenes, two of the biggest and most important companies in technology and telecommunications, Google and Verizon, grew tired of waiting for the feds to act amid the regulatory and legal morass surrounding net neutrality and broadband policy. So, they got together and put a tangible broadband policy compromise on the table. In the process, the companies inadvertently pulled back the curtain on what could be the most ineffectual regulatory agency in Washington -- the FCC.

Although news of the Google-Verizon proposal emerged last month, the two companies have actually been working together on policy efforts to a greater degree and for longer than they've admitted publicly. In the fall of 2008, nearly two years before the Lazarus talks blew up, two top Verizon policy officials, Tauke and Link Hoewing, Verizon's VP of Internet and tech policy, happened to be in the Bay Area attending a tech conference, when they decided to pay a call at Google.

Traditional adversaries -- at least when it came to net neutrality -- Verizon and Google seemed like unlikely future allies.

Initially, the two companies' courtship was nurtured by the friendship between Alan Davidson (pictured at right), Google's with-it public-policy chief, and Hoewing, who has worked with Tauke to craft Verizon's policy strategy. This friendship predated Davidson's arrival at Google, going back to his stint at the Center for Democracy and Technology, where he was known as something of a savvy libertarian. Had Davidson and Hoewing, two of the brightest tech policy minds in D.C., not already been friends, the controversial deal that rocked Internet circles and made headlines everywhere might never have happened.

By 2008, Verizon had been slowly coming around to the ideas of openness that Google espoused -- at least relative to some of its fellow telecom giants, like AT&T. "Verizon has had a history of being forward-looking on a lot of Internet policy issues," says a top Internet industry source. "They've taken a strong stance on free-speech issues and were among the first to really start thinking about themselves as a broadband company."

Google's Spectrum Bid Was Built to Lose

Earlier in 2008, Verizon had agreed to pay $4.7 billion for the highly coveted 700 Mhz C Block in a closely watched FCC wireless spectrum auction and in doing so also agreed to abide by open-access provisions set by the FCC for that chunk of spectrum. (Those provisions mean subscribers can use any compatible phone and software and aren't locked into a single device, like Apple's iPhone.)

Google had craftily triggered the open-access provisions by meeting the FCC's $4.6 billion reserve bid. In a savvy strategic move, Google was bidding to lose -- or rather, bidding to trigger the provisions -- although Google execs later said the company would have ponied up the $4.6 billion for the spectrum had it actually won. But Verizon Wireless, the nation's largest mobile carrier, would never have allowed Google to buy nearly $5 billion worth of wireless spectrum outright. So, it outbid Google and accepted the FCC's open-access provisions.

It's taken nearly three years, but that chunk of 700 Mhz C Block spectrum is now Verizon 4G -- the company's next generation of superfast wireless broadband -- and it's about to be rolled out, with the open-access provisions intact, company officials say.

On their 2008 visit to the Bay Area, Verizon's Tauke and Hoewing ended up having a day-long series of meetings at Google's Mountain View, Calif., campus. It was the initial foray in what would become a nearly-two-year odyssey to see if the two companies could find common ground on net neutrality. About a year later, Google and Verizon quietly filed paperwork with the FCC, outlining some areas of agreement after the talks had gained momentum in the summer of 2009. Another filing followed in early 2010.

In March, Google CEO Eric Schmidt (pictured at left, above) and Verizon CEO Ivan Seidenberg (at left, below) wrote an op-ed in The Wall Street Journal in which they pledged to work together and said that although "our two companies don't agree on every issue, we do agree generally as a matter of policy that the framework of minimal government involvement should continue." And of course, their talks gained greater urgency after the FCC lost the Comcast decision in April 2010.

"Google and Amazon and others have moved closer to the middle on the net neutrality debate," says a source familiar with the Google-Verizon partnership. "Verizon needs to have some predictability to continue investing. Google knows that it needs the telecom sector to make massive investment. And both companies need to keep consumers happy."

The conventional wisdom was that Google and Verizon would do little more than talk.

But three weeks ago, Google and Verizon finally dropped the bombshell they had been crafting, on and off, since October 2008. Essentially, the framework would ensure net neutrality on wired networks, meaning no traffic-blocking or discrimination against any content or rival. However, the proposal would not require net neutrality on wireless networks, which is apostasy to the principle's backers. Their deal would also create an ambiguous category of "managed services," a nonpublic, superfast network that companies could use to deliver prioritized content -- for a price -- something also fundamentally antithetical to hardcore net neutrality advocates.

"Was the Google-Verizon proposal the only reason the talks failed? No. Was it the straw that broke the camel's back? Yes." When Lazarus finally called off the talks in August, he was about to leave for vacation anyway, according to multiple sources. But he and the other meeting participants had known for months about the separate discussion between Google and Verizon. Although those two had struck their own deal, the other parties, including AT&T and Skype, still remained far apart on the key issues. There was really no reason for them to continue negotiating when two of their peers had struck their own pact. Besides that, the telecom and cable companies weren't budging from their stance of no net neutrality on wireless networks nor from their insistence on "managed services," and those were positions the Open Internet Coalition and the FCC itself simply couldn't accept.

"Until the network operators start feeling that policymakers and elected officials won't support their position that there will be no rules on wireless services or specialized services, I don't see their position changing unilaterally," says Markham Erickson, the respected tech policy lawyer who led the Open Internet Coalition at the Lazarus talks.

"Was the Google-Verizon proposal the only reason the talks failed? No," says Gigi Sohn, president and co-founder of Public Knowledge, a D.C.-based pro-net neutrality advocacy group. "Was it the straw that broke the camel's back? Yes."

The Roots of Net Neutrality

Former FCC Chairman Michael Powell (pictured at right) knows very well how important the concept of net neutrality is. He was a George W. Bush-appointee who served as FCC chairman from 2001 to 2005, and it was his initial four principles that form the policy basis for the current net neutrality debate. Looking at the situation that the FCC is dealing with, Powell now says: "Genachowski has an enormous challenge, and he has to assert himself forcefully. The chairman has a problem in that his jurisdictional basis is unclear and confused. But that's why we have a Congress, and they should absolutely fix this problem and stop the confusion."

Powell disapproves of the FCC moving ahead to reclassify without Congress: "I don't think it's an appropriate position to say we [the FCC] may not have the authority, but we think Congress may take too long, so we're going to create it for ourselves."

As chairman, Powell pushed for what became known as the "four freedoms" throughout 2004 and 2005:

• Freedom to access content. Consumers should have access to their choice of legal content.
• Freedom to use applications. Consumers should be able to run applications of their choice.
• Freedom to attach personal devices. Consumers should be permitted to attach any devices they choose to the connection in their homes.
• Freedom to obtain service plan information. Consumers should receive meaningful information regarding their service plans.

The lost Comcast decision meant the FCC lacked jurisdiction over broadband and thus could not enforce the four freedoms or any other type of openness or net neutrality regulation. The decision threw the agency's ambitious National Broadband Plan into chaos because Genachowski has proposed adding two additional two principles -- one formalizing nondiscrimination, the essence of strong net neutrality, the other extending the principle to wireless networks -- to Powell's original four. The ruling put the chairman in a serious bind.

Genchowski did have one immediate option, what some referred to as "the nuclear option." That was to simply reclassify broadband Internet from a Title I "information" service to a Title II "communications" service, which would give the commission the needed regulatory authority to enforce net neutrality. Of the five FCC commissioners, Michael Copps and Mignon Clyburn, were ready to vote for immediate Title II reclassification, according to sources with knowledge of the matter. Genachowski would have been the third and deciding vote, but the chairman chose to hold off.

Such wholesale reclassification is unacceptable to the telecom and cable companies because they claim it would introduce the possibility of increased litigation and price controls, among other things. Instead, Genachowski tried to thread the needle, proposing something he called "the third way" -- or "Title II lite" -- as an alternative to standing around toothless after being knocked out in the Comcast case or taking the major step of full Title II reclassification. The chairman has garnered support for this position, if not wholehearted plaudits for the pace of his action.

"We're in favor of the third way," says Sohn of Public Knowledge (pictured at left). "And we're willing to accept the chairman's political calculation that [the FCC waits] until after the election. As long as he moves after the election, then we're fine."

"We are also hopeful for legislation, and we will exercise some patience there as well," Sohn adds. "But if there's no legislation after the election, the chairman has to move forward with reclassification because consumers can't wait any longer for protection and be left without a cop on the beat."

"All options remain on the table," a senior FCC official tells DailyFinance. "The FCC staff is busy reviewing and analyzing an extensive record of more than 50,000 comments in the broadband framework proceeding, which only closed a few weeks ago. Securing a solid legal foundation for broadband policy is too important an issue to rush."

"I Will Take a Backseat to No One"

As a presidential candidate, then-Senator Barack Obama sensed the importance of an open Internet, and he pledged to make broadband deployment, innovation and investment a centerpiece of his economic agenda. In November 2007, during a speech at Google's Mountain View headquarters, Obama declared his strong support for net neutrality in unambiguous terms before a packed house, with many Googlers standing.

"I will take a backseat to no one in my commitment to network neutrality," Obama declared, "because once providers start to privilege some applications or websites over others, then the smaller voices get squeezed out, and we all lose. The Internet is perhaps the most open network in history, and we have to keep it that way.

"We could see the Internet get divided up by the highest bidders," Obama warned. "We have to ensure free and full exchange of information, and that starts with an open Internet." After the speech, Google CEO Eric Schmidt thanked Obama for "such a strong message about innovation."

During the presidential campaign, Sascha Meinrath, now 36, was part of Obama's idealistic technology, media and telecom working group -- led by Genachowski -- that included young tech policy stars such as Alec Ross and Ben Scott, both now at the State Dept., as well as former FCC-staffer Blair Levin, among others. Meinrath is currently director of the New America Foundation's Open Technology Initiative and a top telecom policy expert and pro-net neutrality advocate -- another wunderkind of progressive tech policy activism. The New America Foundation is a relatively new, nonprofit center-progressive D.C. think tank run by Steve Coll, a Pulitzer Prize-winning former star at the Washington Post. Google CEO Schmidt is the foundation's chairman.

Nearly three years after the heady idealism of then-candidate Obama's tech, media and telecom working group, Meinrath (pictured at right) has become one of Genechowski's toughest critics. He says the FCC has failed to carry out Obama's vision by dragging its feet, cowering to both industry and Congress and generally delaying real action, despite some lofty rhetoric.

Meinrath isn't the only such critic. An emerging consensus among both public interest groups and progressive think thanks asserts that Genachowski has so far been a bust. "The FCC continues to kick the can down the road and prolong this process, but the longer the FCC ponders the politics of net neutrality, the longer consumers are left unprotected," Free Press Research Director S. Derek Turner said in a recent statement. "It is time for the FCC to stop writing notices and start making clear rules of the road. The phone and cable companies have shown us what the Internet will look like if they are allowed to write their own rules and build a two-tiered Internet with fast and slow lanes and zero protections on mobile broadband. We don't need more questions from the FCC, we need more answers."

Not surprisingly, some young GOP-allied telecom lobbyists have been overheard celebrating the public interest groups' distress in D.C. bars in recent weeks.

"When Genachowski became chairman of the FCC, many of us thought that this was a fantastic opportunity to implement the telecom agenda he had already signed off on," Meinrath says. "Which begs the question: What happened? Was there some sort of political math done where people realized that fixing telecom requires angering powerful constituencies? Why, now that he's chairman of the FCC, has Genachowski failed to implement so much of the agenda that he supported? Why has the Obama administration refused to hold Genachowski publicly accountable for his failure to act?"

Genachowski (pictured at left) is clearly ambitious. A former Internet executive for media mogul Barry Diller's IAC conglomerate, Genachowski is an old Harvard Law School chum of President Obama's -- and someone who genuinely cares about broadband issues and development. But he's also learned a few things about politics.

After leading Obama's tech media and telecom policy working group, Genachowski initially aimed high, hoping to be named the nation's first chief technology officer, when that was a Cabinet-level position, according to multiple sources. When the CTO job was downgraded, he became the front-runner to head the FCC.

"Over the years, I've worked with multiple chairmen, including Michael Powell and Kevin Martin, and Genachowski is by far the worst to work with," says Meinrath of his former boss on the working group. "Powell's and Martin's doors were open to us on a regular basis, even when we disagreed. That has all but ceased under the Genachowski administration."

The FCC today is "in endless process," Meinrath says, adding that "the opportunity costs of this failure to act are staggering -- in the tens to hundreds of billions of dollars a year. So, drawing out the telecom reform decision-making process is causing substantial harm to our economy: lost jobs, lost revenue and lost productivity."

Privately, some FCC officials have grumbled about an election-year, hyperpolitical Congress and lack of support from the Obama team. Others have even suggested that White House has pressured the FCC -- an independent agency -- to ratchet back on net neutrality for political reasons. Meinrath is among those making such claims. "Multiple senior FCC officials pressure have said in meetings where I was present that they've received pressure from the White House and from Capitol Hill to slow down on the National Broadband Plan and net neutrality," he says plainly. The FCC declined to comment on this allegation.

"If you're going to start a fire, you better be ready to deal with it." But others say the current and recent White Houses rarely meddle too heavily in FCC matters, especially this administration, which is dealing with a crippled economy, war and now the Middle East peace process. "The White House has real limitations on what they can do to influence the agency," says a former FCC official. "They don't pick up the phone and tell an independent agency what to do. To a White House, the FCC is a place they don't want to be bothered with. They expect a chairman to take care of business over there."

"But they've badly mismanaged this issue," this former official adds. "If you're going to start a fire, you better be ready to deal with it."

Or as another former FCC official puts it more bluntly: "When you're a regulator in D.C., you can do two things: Go along to get along, or try to do something, which could lead to a shit-storm. Genachowski has managed to do basically nothing -- and create a shit-storm."

Close Ties Even Before Verizon's Android Smartphone

The inaction that has left Genachowski with such a mess is partly what drove Google and Verizon to seek out their separate peace on net neutrality.

While Google and Verizon insist that their initiative isn't a business project, they do have close ties, especially through their partnership on the Android mobile operating system, which Verizon has embraced successfully with hit products like the Droid smartphone, which it has used to combat Apple's wildly popular iPhone. And the Google-Verizon proposal certainly isn't a cut-and-dry Android business partnership. As Tauke's and Hoewing's fall 2008 meetings at Google demonstrate, the two sides were looking for common ground well before Verizon's Droid rollout.

The first two components of the Google-Verizon plan -- net neutrality for wired networks and no net neutrality for wireless networks -- are fairly straightforward. The first point represents an apparent victory for net neutrality advocates -- openness, choice and nondiscrimination on the Internet, period. "It would be hard to imagine a major telecom company agreeing to this even six months ago," says a person familiar with the deal, adding that this point has gotten overwashed by the more controversial elements.

Net neutrality advocates have been hoping to extend the nondiscrimination principle to wireless services, and in fact, Genachowski proposed it last fall. But the wireless carriers have been fiercely opposed. It's a matter of physics, they say.

"Spectrum is very limited because so many people can be using it in a given cell site." "When you get into wireless, you're talking about changing the power levels as people move through a cell site and scheduling packets when the connections are most capable," Verizon's Hoewing told DailyFinance in a recent interview. "So we're constantly managing network traffic in order to reasonably assure good services over the network. Spectrum is very limited because so many people can be using it in a given cell site."

Hoewing says Verizon's proposal calls for more transparency from the carriers with respect to speeds and how networks are managed. "We're going to be ensuring that the consumer knows the real speeds they can expect to get. We've got do a better job with that."

Given the urgent need to free more wireless spectrum, this is a legitimate issue for wireless providers. AT&T can't even keep up with the voracious data demands of its iPhone and iPad users. Most everyone agrees that the U.S. needs to deploy more wireless spectrum, but that takes time, money and infrastructure.

Just What Are These "Managed Services"?

However, it's the third component of the Google-Verizon proposal, the mysterious "managed services" provision, that has proved most confusing and has the most controversial and potentially long-lasting implications.

In essence, Google and Verizon are proposing a separate "managed services" network apart from the "public Internet," where nondiscrimination wouldn't apply and where wealthy companies would be able to buy huge chunks of bandwidth and superfast connections. Some of the benign-sounding uses Google and Verizon have mentioned as managed services are things like high-speed, secure networks for medical or banking data. Managed services would be a faster, paid alternative to the public Internet, kind of like ultra-premium cable for the rich.

"We studiously avoided defining managed services to encourage innovation and because we don't know what these services are right now," Hoewing told me. "We define what they are not. They are not broadband Internet access that complies with the consumer protection principles where you can go anywhere, use any application, connect any device, and that would include the nondiscrimination principle. They are different but can use Internet content and [Internet protocol] technologies. They are an additional service, and we can't try to pass them off as being the public internet. The FCC would have the authority to look at managed services and send an emergency report to Congress if necessary."

Google's participation in such a proposal shocked many net neutrality supporters, who had long seen the search giant as one of their most powerful allies. Meinrath has an explanation for that turnabout: "Google wants to bolster its standing with Verizon because Google wants Verizon to be the platform for it's iPad-killer tablet and Google video."

"I think Google is schizophrenic. Its success is due to the open nature of the Internet." Does that mean Google is evil? "I think Google is schizophrenic," Meinrath says. "Google's success is due to the open nature of the Internet. It's unlikely that it ever would have gotten off the ground had the dominant players locked in prioritization for their own services in the late 1990s."

Meinrath adds: "Eric Schmidt is a very smart man. Now that Google is the dominant market player, he's looking at the dollars that could come from a fourth, Google-centric, addition of a triple play [phone, TV, Internet] home package. This fourth 'Google service package' would generate huge amounts of money, but it would also undermine the best-effort Internet and would create a discriminatory regime prejudiced toward supporting the largest corporate players and undermining new competitors and innovators."

For the record, Google officials from Schmidt on down have publicly and privately insisted that the company remains committed to what Schmidt has lately taken to calling the "public Internet." At least for now, Google officials are are dismissing the suggestion that Google could, say, roll out a high-speed movie-rental service based on YouTube for Verizon FiOS customers as a "managed service." The public internet is just fine for us, thank you very much.

But the concerns don't stop there, Meinrath says. "All of this is before you even get into applications that have mixed-media uses -- the next generations of World of Warcraft and collaborative office suites that combine instant messaging with video, voice or gaming all integrated in the same application," he says. "So the so-called 'policy framework' that Google and Verizon propose requires that we either eliminate privacy and have a deep packet inspection regime across the board, or that we build a new broadband infrastructure for rich corporations who will then extract the cost of this redundant buildout from their customers."

Another Nice Trick by Google

Google knew that a backlash would come -- and boy, did it -- but the company's compromise on wireless and managed services was made at least a bit more palatable by the fact that Google's $4.6 billion bid for that 700 Mhz C Block that Verizon wound up buying triggered the open-access provisions for using that spectrum. So, we now have the curious situation that while the Google-Verizon proposal doesn't require net neutrality for wireless networks, Verizon Wireless is preparing to roll out 4G wireless service under open-access provisions -- a service that will likely power millions of Google Android-equipped devices.

Nice trick. Clearly, it was a significant coup for Google to be able to achieve a deal with Verizon while still being able to enjoy the benefits of the telecom's open 4G network. In short, Google gets to have it both ways, so it shouldn't be surprised that Meinrath accuses it and Verizon of adopting a "for thee, but not for me" position.

"But while a Google-Verizon partnership may start out as a joint agreement, it won't end up that way." "Google wants to be able to use Verizon's new C Block band, which contains an open-device mandate, to sell its services," Meinrath charges. "But while a Google-Verizon partnership may start out as a joint agreement, it won't end up that way. Either Google will get a leg up on Verizon and take them over and crush them, or Verizon will do the same thing. Without regulations preventing these sorts of mergers and acquisitions, there's no equilibrium point in telecom. Either Verizon or Google will take control, with the possibility being that Google would become either a telecom subsidiary or a telecom network owner."

That's a bold claim, but pro net-neutrality advocates feel betrayed by Google, and by the FCC and President Obama -- all perceived as friendly forces only one short year ago. And they're angry. "Our erstwhile allies are causing serious damage," says Meinrath. "It appears that the White House is perfectly happy with the status quo since they have not put any public pressure on the FCC to actually fulfill Obama's campaign promises to reform telecommunications and foster both an open Internet and a competitive media environment. As a growing consensus now believes, since the White House has refused to weigh in, they must be happy with Genachowski's inaction."

Time for an Ultimatum?

Since the "suspension" of the Lazarus talks, many parties have moved the Washington discussions across town to the K Street offices of the Information Technology Industry Council, an industry organization that lobbies the government on behalf of a wide variety of tech giants, including Microsoft (MSFT), Oracle (ORCL), Cisco (CSCO), Apple, Hewlett-Packard (HPQ) and Dell (DELL). ITIC Chairman Dean Garfield has been in touch with Lazarus, according to several sources, and the FCC issued a muted statement of quasi-support for the talks, which do not include Google -- still smarting over the wicked PR hit it took over the Verizon proposal -- or the Open Internet Coalition.

"These are no longer net neutrality talks," says Meinrath. "These are mega-corporations talking to other mega-corporations about how they should carve up the Internet."

Giving critics who see the FCC taking a go-slow approach to this firestorm even more ammunition, just last week, the FCC issued a notice seeking further public comment clarifying several issues before it makes any decision, ensuring that nothing will happen until after the November elections. "If the goal is to keep talking about change with ever acting, then Genachowski has been a major success for the Obama administration," says Meinrath. "But if President Obama is serious about upholding his campaign pledge, he should tell Chairman Genachowski to either act or resign."

That may not be such an extreme position, considering what's at stake in this war: the future of the Internet.