So far, 2007 has been a jubilant year for proponents of network neutrality–the principle that Internet operators should handle all the data they transport the same way, without special “fast lanes” open only to those who can afford them. After a legislative stalemate in 2006, activists from groups such as SavetheInternet.com are celebrating new efforts in Congress to make network neutrality into law. They’re also celebrating an unexpected pledge from leading backbone operator AT&T to honor the principle, at least temporarily.

But the fight isn’t over. It’s still possible that certain types of tiered Internet access will emerge in the near future. That’s partly due to political and business realities: no bill is assured of passage in the still fractious 110th Congress, and AT&T’s concessions contain loopholes that allow the company to move forward with premium services such as U-Verse, which is all about extending fiber-optic fast lanes to customers’ homes. But the situation is also a consequence of the march of technology. New bandwidth-intensive applications such as YouTube-style video downloads and peer-to-peer file sharing are clogging the network so quickly, researchers say, that service providers may be forced to start charging more to carry certain types of data.

Public discussion of net neutrality dates back to 2002, when Columbia law professor Tim Wu, Stanford law professor Lawrence Lessig, and others warned of the growing business pressures on Internet service providers (ISPs) to restrict less lucrative types of Internet usage and charge more for others. But the threat was largely theoretical until late 2005, when Ed Whitacre, CEO of SBC (soon to be renamed AT&T), implied in a Business Week interview that SBC wanted to charge Internet companies such as Yahoo, Google, and Vonage extra for carrying their data over SBC’s network to SBC broadband customers, even if the companies had already paid access fees to their own ISPs. “Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it,” Whitacre said.

The remarks galvanized online content companies and free-speech advocates to push for legislation enshrining network neutrality, including provisions to prevent ISPs from treating data differently depending on its source, as Whitacre seemed to be proposing. SavetheInternet.com, a coalition of strange bedfellows including MoveOn.org, Common Cause, the United Church of Christ, and Gun Owners of America, spent much of 2006 lobbying to get network-neutrality protections into major bills overhauling the Telecommunications Act of 1934. The phone and cable companies fought back, spending millions on lobbying efforts, and House and Senate Republicans repeatedly blocked the network-neutrality amendments. But in the end, Congress adjourned without acting on a final telecommunications bill.

Network-neutrality advocates got a holiday surprise just before the new year, when AT&T finished negotiations with the Federal Communications Commission (FCC) over its proposed merger with BellSouth. Before they would vote to approve the merger, the FCC’s two Democratic members forced AT&T to accept a number of conditions, including an explicit network-neutrality pledge. In the agreement, released December 29, AT&T reluctantly promised “not to provide or to sell to Internet content, application, or service providers … any service that privileges, degrades or prioritizes any packet transmitted over AT&T/BellSouth’s wireline broadband Internet access service based on its source, ownership or destination.”

SavetheInternet.com and other groups greeted AT&T’s concessions as a major victory. Columbia’s Tim Wu called it “a milestone in the history of the Internet.” And it was indeed a remarkable turnaround for AT&T, considering Whitacre’s past vehemence on the matter.

But the agreement was far from a cry of surrender from ISPs. AT&T agreed to adhere to an equal-access provision for only two years, or until Washington enacts network-neutrality legislation. And while the combined AT&T/BellSouth will own the largest single chunk of the Internet’s infrastructure in North America, the agreement has no impact on the other big backbone owners: Verizon, Qwest, and cable companies such as Comcast.

Critics have also pointed out a large loophole in AT&T’s agreement. The “wireline broadband Internet access service” mentioned in the agreement referred only to the company’s existing copper-wire DSL service. AT&T’s “U-Verse” TV and Internet service, being rolled out in San Antonio, Houston, Milwaukee, and up to 30 more cities by the end of 2007, is based on fiber-optic technology and therefore isn’t affected by the concessions, notes Susan Crawford, a cyberlaw expert at Cardozo Law School.

U-Verse includes both television programming and a high-speed Internet access package cobranded with Yahoo. Since it’s not covered by the merger agreement, AT&T is theoretically free to make deals with Yahoo and other Internet companies to speed their content to U-Verse subscribers. “AT&T is effectively saying, ‘We’ll keep existing “broadband” access neutral. But when it comes to our new super-duper “AT&T Yahoo! High Speed Internet U-verse Enabled,” well, that’s not up for negotiation,’” Crawford writes.

New laws that would supersede AT&T’s agreement and other net-neutrality compromises may have brighter prospects in the new Democratic-led Congress. Already, Senators Byron Dorgan (D-North Dakota) and Olympia Snowe (R-Maine) have reintroduced a bill, the Internet Freedom Preservation Act, that would amend the 1934 telecommunications act to impose strict network-neutrality requirements on broadband service providers.

“We have increasingly big interests in this country today, cable and phone companies and others, who want to be gatekeepers and have toll charges on the Internet,” Dorgan said in a videotaped statement about the bill. “They’d like to say to content providers, ‘If you want to go on the information superhighway you’re going to have to pay us extra money.’ That is, in my judgment, dangerous, because somewhere out in this country, there are a couple of people, a couple of college students in a dorm room, perhaps, who have a great idea, the next new thing, and the only way they are going to take that innovation out onto the Internet is if there is someone out there [who] is not discriminating against the new businesses, the little businesses.”

The Dorgan-Snowe bill–cosponsored by Senators Hilary Rodham Clinton (D-New York), Barack Obama (D-Illinois), and John Kerry (D-Massachusetts)–now awaits consideration by the Senate Committee on Commerce, Science, and Transportation. No comparable bill has yet surfaced in the House of Representatives, but House Energy and Commerce Committee chairman John Dingell (D-MI) told reporters this week that net-neutrality legislation would be a “high priority” of the House in 2007. Any such legislation, however, seems likely to stir renewed opposition from the telecommunications lobby.

The single biggest future barrier for advocates of strict network neutrality could be simple technological change. The Internet’s newest killer apps–digital video, Voice over IP, and online gaming–chew up much more of the ISPs’ available bandwidth than previous generations of applications did. Video is the biggest bandwidth hog, and it isn’t just coming from commercial sites like iTunes and YouTube. It’s also generated by consumers, who are exchanging unprecedented amounts of video and other data over peer-to-peer file-sharing networks such as BitTorrent but are still paying flat monthly access fees.

Networking researchers say it’s unrealistic to expect ISPs to transport all this extra data for free. “The guys who move these huge amounts of data around have to be compensated somehow,” says Hui Zhang, a Columbia University computer scientist who heads a startup, Rinera Networks, that’s focused on giving ISPs more control over the data flowing through their networks. “This whole discussion about net neutrality is going to have to lead to another discussion about usage-based charging.”