For most companies, competing is tough. To do it well, you need to have all the tools you can to beat the others in the marketplace.

But Mozilla, proprietor of the open source Firefox Browser, has chosen not to.

As CNET reports, Mozilla is redoing their Firefox mobile handset project “after concluding that [its] ultra-affordable $25 handsets aren’t enough to take on the biggest powers of the smartphone world.” “Changing the world is often glamorized,” CEO Chris Beard bluntly said. “But at its heart, it’s very hard work with an unpredictable path.”

Indeed, the $96 billion mobile handset market, dominated by Apple and Google, is a tough nut to crack, especially since Mozilla shares the rest of the market with well-established brands and innovative offerings that hinder product differentiation, despite all that change the world stuff.

You may gather that Mozilla prides itself as being one of those companies that’s more concerned about its perception and adherence to the collective than its own bottom line. Or, as Mozilla says: “For 10 years, Firefox has stayed non-profit, non-corporate, non-compromised. Choosing Firefox isn’t just choosing a browser. It’s a vote for personal freedom.”

Not surprisingly, this ideology put them at the forefront of the Net Neutrality debate, which just resulted in a 400-page regulatory straightjacket that will initially affect Internet Service Providers (ISPs), but gives authority to the Federal Communications Commission (FCC) to start regulating the rest of the Internet like a utility phone service, including Mozilla. While taking a leadership role driving toward Net Neutrality, Mozilla urged the president and the FCC to force Net Neutrality upon ISPs, demanding they be reclassified as obsolete, 1934-style copper-wire telephone companies to somehow boost broad-based innovation and competition.

Mozilla has also been highly critical of others in the industry, namely, Facebook, that want more flexibility to offer essentially toll-free or Zero-Rated Internet access services, which do not count against data caps, to promote uptake among the world’s poorest inhabitants. Mozilla thinks these services violate Net Neutrality, and pose a “significant risk to the emergence of an open, competitive platform that will ultimately stifle inclusion and economic development.”

The spat between Mozilla and Facebook – both, oddly, ardent supporters of Net Neutrality – illustrates the future plight of the FCC’s “clear” new regulations. It’s true that the new Net Neutrality rules lock down the biggest ISPs. But, they also lock down the rest of the ecosystem, too, including the innovative solutions like Zero-Rating. For small disrupters like Firefox, the impact of forthcoming collateral damage is more profound.

Mozilla got what it wanted, but you can hear the buyer’s remorse in its statement regarding its failed handset venture.

Mozilla has finally discovered it must compete in other ways than just low cost. Their products have to offer more to differentiate them from the competition. As one of the small ideas to get its handset picked up in a crowded market, it seeks to broaden its app ecosystem and allow non-Firefox OS Android apps to run on its phones.

I say small because the company could be more imaginative. Its “pure” Net Neutrality position has hogtied it into a business model that doesn’t allow much market flexibility, however. Instead, it’s been captured by its own ideology, severely limiting truly imaginative responses to its self-created predicament.

Mozilla could become like a Costco, serving premium subscribers and end-users on one end, and then creating priority agreements with suppliers of access, services, content and goods on the other end. This would allow it to provide end-users with attractive discounts, likely increasing subscribers, while also making some good cabbage from suppliers to subsidize overall growth and innovation, too.

But due to an unapologetic quest for ideological purity, that is not in Mozilla’s cards. It’s beneath them. It views itself as “better.” And, besides, the President and the FCC have made two-sided agreements such as the Costco model illegal, even though every other sector of our economy uses that model to grow, remain viable and profit.

Whatever the response is to its competitive and ideological challenges, it remains clear that Net Neutrality has boxed in Mozilla and its market peers. The very tools that could help a smaller player like Mozilla compete, were thwarted when it denied itself those reasonable options.

Still, what a waste the religion of Net Neutrality has imposed on the whole ecosystem. Others beyond Mozilla – millions of those who didn’t choose to follow the company’s holy scripture – will be held back and kept from trying new things, innovating and competition in the marketplace. This did not need to occur. And, in about three years, we’re going to hear the courts proclaim the same thing.

Mike Wendy is President of Media Freedom.