There are of course a lot of moving pieces surrounding this debate, and however the chips fall, it’s going to have a long-term effect over how the Internet operates over the next several years.

Earlier this year, FCC Chairman Julius Genachowski was dealt an important setback when the U.S. Court of Appeals ruled that the FCC doesn’t have the legal authority to impose net neutrality rules on broadband providers. In hopes of still finding a way to rein in the providers, he’s since circulated new proposed rules that would require providers to disclose what kind of traffic they intend to throttle and why, giving consumers a little more information so they can make a more informed choice when picking a provider. And in a speech on Dec. 1, Genachowski also expressed support for “usage-based pricing,” which would essentially allow providers to charge variable pricing plans where consumers would pay higher fees for using higher amounts of bandwidth.

Certain Internet companies that aren’t providers, but who rely on having unfettered pipes through which they can deliver their services, aren’t happy with the proposed rules either. Companies like Amazon, Skype and Netflix, want stronger rules that would prevent the providers from slowing down traffic from their sites or blocking them altogether. They’ve even pushed the FCC to reconsider regulating the Internet outright as a telecommunications service, as it does the telephone system today, an idea that Genachowski briefly considered, then abandoned.

No surprise, they’ve been lobbying the FCC heavily, as have the telecom providers. According to Capital Business, a Washington Post publication, 150 organizations have hired 118 lobbying firms to try to influence the outcome of tomorrow’s vote.

The pressure isn’t stopping there. Republican commissioner Robert McDowell has pledged to vote against the rules, saying, as he did in a Wall Street Journal op-ed today, that imposing regulations would threaten everything that makes the Internet a source of innovation. Commissioner Meredith Baker Attwell, also a Republican, has attacked the proposal and similarly pledged to vote against it, arguing that only Congress, not the FCC, has the authority to regulate the Internet.

Congressional Republicans, with their heads full of steam after their November electoral wins, are rushing into the fray. Michigan’s Republican Representative Fred Upton, who will chair the House Energy and Commerce Committee when the new Congress comes into session early next year, wrote Genachowski and called his proposal “the most controversial item the FCC has had before it in a decade.”

Meanwhile, Congressional Democrats are pressing fellow Democrat Michael Copps to vote for Genachowski’s rules, fearing that a vote against them would hurt President Obama politically, as Sara Jerome wrote in Hillicon Valley. In the end, he is expected to fall in line and vote in favor.

Perhaps a harbinger of things to come is the spat between Level 3 Communications and Comcast. Level 3, which operates much of North America’s fiber-optic network, last month accused Comcast of “trying to set up a toll booth” by charging Level 3 recurring fees whenever a Comcast subscriber streamed content that got delivered by Level 3. This happened right after Level 3 cut a deal to become the primary delivery network for Netflix.

The dispute has reached sufficient intensity for Level 3 to ask federal regulators to impose conditions on Comcast in its efforts to acquire NBC Universal, arguing that Comcast’s demand for the fees “adversely changes the nature of the Internet.” The FCC may yet get serious about reviewing the merger, as Politico reported last week.

Comcast for its part has argued that Level 3 is gaming network peering rules, and has “demanded unlimited capacity at our cost.”

Whatever the outcome of tomorrow’s vote, expect lots of unhappy people.

Microsoft said it has been preparing modified versions of the affected programs that should be ready when the injunction goes into effect on Jan. 11, allowing sales to continue without interruption. The company also indicated the ruling shouldn’t affect its highly anticipated Office 2010 software, due out next year. It also doesn’t affect copies of Word that have already been sold.

The U.S. Court of Appeals for the Federal Circuit on Tuesday affirmed a ruling in a case brought by i4i Inc., a Toronto-based technology company that convinced a Texas jury last May that recent versions of Microsoft Word infringed a company software patent that deals with manipulating the architecture of a document.

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The Court of Appeals overturned a lower court ruling which concluded that network DVRs were a violation of content copyrights.

Bernstein Research analyst Craig Moffett notes this morning that the Court concurred with Cablevision’s view that by ceding control of what’s recorded to the customer, Cablevision’s network DVR model avoids direct liability for copyright infringement. “In Cablevision’s view, a network DVR is, in essence, simply a DVR with a very long cord,” he writes.

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