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April 18, 2006
Guest Blogger: Daniel Berninger - "Net neutrality means don't tread on the Internet!"
Companies selling Internet access argue for property rights as the basis for unwinding long standing net neutrality. However, the companies deriving revenues from Internet access do not own the Internet any more than a company making money from a port owns the ocean. No one entity public or private can own the Internet as in the case of an ocean. An Internet access provider does not assume ownership of the content of communication transiting its network any more than a port assumes ownership of packages loaded onto ships. The Internet access provider like a shipper can assess risks in the sense of whether a package contains liquids, perishables, or hazardous material, but customers reserve the right make decisions about the nature of transport. The telephone network implementation of network neutrality known as common carrier rules prevent AT&T from discriminating against particular users. They prevent Verizon from asking about the purpose of a call before connecting it.
Net neutrality prevents discrimination by limiting billing for transport to generic measures of performance and capacity rather than the nature of the user or usage. Neutrality allows for Internet enabled alternatives to monopolist voice and video providers that also happen to dominate Internet access, so the desire to end neutrality, even if it leads to the death of the Internet, comes as no surprise. Limits on business models pursued by Verizon or AT&T will get criticized as socialism, but government has never escaped the need to assert non-discrimination principles to facilitate commerce. The issues surrounding the present net neutrality debate have arisen with different labels since the Roman Empire. The desire to discriminate against particular users or usage as the means to defeat competition or other nefarious purpose arises in communication (telegraph, telephone, and Internet); transportation (railroads, highways, taxi cabs, and buses); and supporting facilities (hotels, restaurants, gas stations.)
The magnitude of alarm arises from the lack of market forces to discipline anti-customer activities of dominant providers of broadband in the US. A market has to exist for market forces to work. The idea of a telco taking kickbacks to distort Internet access experience would not present much of a problem if alternative suppliers existed. Changing Internet access providers in the US involves moving to a different state. Craig McCaw's wireless startup Clearwire implements a non-neutral policy in a financial arrangement that gives Bell Canada's VoIP offer special status while requiring that non-affiliated VoIP companies submit to certification. Ed Whitacre's AT&T announced a special Internet access offer for VoIP companies. The deal conveniently preserves the usage based access fees in exchange for some undefined quality of service benefit. AT&T's plans represent more of a problem than Clearwire's, because AT&T can enforce its certification demands.
Opposition to net neutrality arises to preserve market power in the $300bn voice market not the pursuit of "investment incentives" necessary to improve US broadband penetration rates. AT&T and Verizon claim to need new sources of revenue to fund the "billions and billions" it costs to expand their access networks, but the poor performance of the US broadband ranking traces to the expense of broadband offers not availability. Broadband penetration rankings reflect the cost of broadband around the world. AT&T et al already extract more revenue per bit than carriers in other countries. The proposal of a new revenue stream from advertisers or Google et al will decrease not increase penetration rates. Pew Internet & American Life polls show annual growth in percentage of people with access to the Internet (broadband and dial-up) in the US has already nearly stopped. Ending net neutrality will only reduce the number of people interested in access to the Internet.
Proposals do not even clearly yield a net increase in revenues as implementing a non-neutral policy makes networks less valuable to end users at the same time it makes them more expensive to build and operate. The loss of net neutrality means the Bells would likely end up paying for some content as the price of getting paid for distribution of other content. Neutrality works in both directions. It prevents content and application companies from using their market power. The absence of common carrier status means the cable companies pay for content as Verizon already discovered in a video deal with CBS. Costs go up with the complexity of tying revenue to usage and users to the point where implementation of billing could easily cost more than the underlying service. Loss of net neutrality means the loss of the inherent liability protection. Carriers can not be held liable for illegal uses of their networks to the extent they don't control use or user. The loss of net neutrality in access will trigger expensive re-negotiation with uncertain outcome of all the network interconnect agreements associated with the "inter" in Internet.
The requirement of accepting all users and all uses on non-discriminatory terms does not foreclose offering different quality of service tiers or non-neutral policies in the name of network management. Quality of service tiers already exist in terms of reliability, performance, and bandwidth, although quality of service guarantees through bandwidth reservation remain a function of private networks. The complexity of business and technical implementations and inherent inefficiencies in bandwidth utilization not net neutrality prevent the extension of quality of service guarantees between networks. Network access providers limit distribution or charge extra for IP addresses, block port 25 use for outbound SMTP, assert narrow Acceptable Use Policies, and consider heavy usage cause for termination. The policies do not violate net neutrality where there exists a plausible linkage to network risks. Net neutrality means users get to choose level of service. In other words, Verizon can't force one group or another sit at the back of the bus if Google or Amazon refuse to pay a protection fee.
The track record of communication policy apparatus in serving corporate interests over the public interest underlies a sadly compelling argument against making net neutrality rules enforceable. Ironically, government facilitated the accumulation of Bell company market power by granting risk free funding of infrastructure through exclusive monopoly, priceless unconstrained access to public rights-of-way, as well as, no cost spectrum to launch wireless divisions in the 80's. Consider the speed of Congressional action when Verizon and AT&T say they need national video franchise rights. Consider the fact that Verizon quickly turns to FCC when it finds cable companies pursue non-neutral advertising policies. The Bells point to the failure of communication policy as rationale for yet more concessions rather than admiting a connection to twenty years of incremental regulatory relief. The alignment of government with the monopoly Bells drives up the cost of broadband in the US and slows economic growth no less than the much discussed high cost of energy.
The survival of net neutrality depends on the undemonstrated ability of citizens to get engaged in communication policy developments. The long legal history of common carriage provisions in communications provides a framework to push back in the courts. Entrepreneurs will do their part by creating businesses that probe every weakness in the Bellco defenses. The relative expense of broadband continues to throttle growth of the info tech industry, but info tech appears divided between defending the Internet and reluctance to challenge powerful anti-Internet forces. A letter pushing for strong enforcement of net neutrality sent to Commerce Committee Chairman Barton by the CEO's of Amazon, Yahoo, Google, Microsoft, and eBay keeps hope alive. Its seems at least possible average citizens will mobilize like they have in the past when essential freedoms come under threat and rally around a flag that reads "Don't tread on the Internet!"
Daniel Berninger, VP and Senior Analyst, Tier1 Research
Daniel Berninger joined Tier1 Research in August 2004 as Senior Analyst covering telecom. Daniel has over a decade of experience that includes helping to launch three prominent VoIP startups - ITXC, Vonage, and Free World Dialup. His expertise on the intersection of telecom and the Internet has been sought by Congress, FCC, Federal Reserve, and state PSCs. Daniel led early VoIP deployments at Verizon, HP, and NASA for VocalTec Communications. He won the 1999 VON Pioneer Award for co-founding the VON Coalition and worked on the original assessment of VoIP at Bell Laboratories. He completed doctoral studies in preparation for a Ph.D. in System Engineering at the University of Pennsylvania.
Tags: Net Neutrality, Daniel Berninger
(c) 2006 Jeff Pulver. All Rights Reserved.
(This blog posting is copyright protected by Jeff Pulver. Portions of this blog posting may be quoted or abstracted if attributed.)
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Posted by jeff on April 18, 2006 07:15 AM | Permalink
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Comments
Readers of this comment thread should know that "John Rice" and pkp646 look to be part of a tag-team of industry shills who invade blog comments on net neutrality to argue against any government regulation of the Internet. (Google "pkp646 and 'John Rice'" and you'll see what I mean)
What they fail to point out is that Net Neutrality has been the rule that has governed access to the Internet since its inception. It's the reason that the Internet has become such a dynamic force for new ideas, economic innovation and free speech. What they really want is for Congress to radically re-write our telecommunications laws so that companies like AT&T, Verizon and BellSouth can swoop in and become gatekeepers to Internet content -- in a way that benefits no one except the largest ISPs.
I'd like pkp646 and "John Rice" to tell us how it is that they appear together (usually one after the other) spouting identical industry talking points across the blogosphere.
What gives fellas? Are you being paid?
Posted by: sagecast at May 21, 2006 07:25 AM
One more thing: competition. The real solution is competition. Cable, satellite and Wi-Fi are all waiting for the telecos to slip up and can violations of net neutrality would be just the opportunity that they are looking for to steal some market share.
Posted by: pkp646 at April 25, 2006 12:58 PM
I like Dan’s ocean and shipping reference. However, I think that he missed an obvious point. Governments do not dictate shipping speeds for a given container. Why should the government be dictating the speed that Internet providers can offer service? Why should we accept government setting a mediocre level of service for everyone? Policymakers should be opening the door for entrepreneurs to offer new technologies and better Internet service. Through natural market forces that level of service for everyone will be increased. Preventing companies from offering differentiated service options is not in the best interest of the public.
Posted by: John Rice at April 20, 2006 03:58 PM
I agree with Decider...I just don't see a coming crisis that the market won't solve or that warrants government intervention.
Posted by: Kip at April 20, 2006 06:41 AM
I'm not gonna buy the doomsday scenario just yet. This is all purely hypothetical and I think we haven't been paying attention to the news lately if we think that inviting government to solve a problem that doesn't exist is going to be beneficial. Odds are this works itself out without Congress. With Congress, we're on a slippery slope - regulation begets regulation, and THAT's what would suffocate the Internet as we know it.
Posted by: The Decider at April 19, 2006 08:51 PM
Google and company are not so much concerned with keeping the internet free or other such noble sentiments. What they care about is their bottom line. I would not personally prefer the government to step in to help one multi-billion dollar company compete against another. I think they are fine doing so themselves. As such, I say let the people decide by using their money to support what they feel is right. If a provider blocks content and they don't like it, let them go to another that won't. It's about competition and the consumer spirit. Not government regulation.
Posted by: pkp646 at April 19, 2006 02:36 PM