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June 14, 2006

Internet Neutrality – Tough Issue

If the telcos have their way, the Internet in the US COULD become as innovation-free as the phone networks and as content-challenged and inflexible as the cable networks.  On the other hand, legislation to prevent these companies from doing what they MAY not be able to do anyway could be a cure that’s worse than the disease.

Unless your livelihood depends on preventing further creative destruction resulting from Internet innovation, it’s almost impossible to be against the principle of Internet neutrality, the principle that underlying networks should treat all packets in the same way regardless of content.

Make no mistake, the future of US telcos, at least in their present form, DOES depend on putting the Internet genie back in the bottle. And their monopoly on lobbying strength now that AT&T and MCI are gone is even more frightening than their share of the local access duopoly.  Not only is VoIP removing any vestige of an excuse for the greatly inflated rates charged for traditional voice traffic while providing richer and more disaster-resistant service; Internet TV (IP TV) obsoletes the telco’s strategy of providing cable-TV like service as a new revenue source.

We aren’t going to buy “channels” or bundles of channels for much longer. IP TV makes it possible for us to obtain our entertainment a show or an episode or a fragment at a time whenever and where ever we want.  That’s a big whoops for telcos which have bet their future and lots of their stockholders’ money on replicating the obsolete business of the cablecos.  Throttling the free use of the Internet in the US would slow down not only VoIP but also slow the growth of IP TV.  While they’re at it, the telcos, whose current business model is broken, would like to insert themselves as toll collectors between you and Google.

Please jump up and down and say “bullshit” loudly any time anyone suggests that Google or anyone else is getting a free ride on Internet pipes.  Google pays for Internet access just like you and I do, only they buy a lot more so they pay a lot more.  And we pay for the access we use to get to Google.

But the main problem with what the telcos want to do to the Internet is NOT that it might siphon some revenue from Google or even that it is doubledipping.  The much more serious problem is that charging according to content or according to the source or destination of a particular packet will BREAK the Internet for both current application AND future applications and that is exactly what our friendly telcos would like to accomplish.

The Internet functions as well and cheaply as it does because the backbone networks know nothing about what is inside packets.  These networks have the crucial but ultimately simple task of delivering most packets to where they’re going at the best possible average transit time.  As David Isenberg explains so well, this “stupid” network architecture means that the network is a suitable carrier for applications which weren’t even dreams at the time the Internet was first designed.

The Internet the telcos would like us to live with here in the United States is “application aware” as well as “source aware”. If you want to build a new application, you can wait in line for major Internet’s owners (these same telcos) to decide to accommodate your packet type.


Reality check: why doesn’t your landline phone do most of the things your cellphone does?  It doesn’t have to worry about either battery life or size?  The reason is that it’s attached to the traditional phone network on which innovation simply can’t happen.  Telcos would like to make the Internet a similar innovation-free and profit-safe zone.

OK.  This shouldn’t be allowed to happen.  Proponents of net neutrality legislation say there oughtta be a law.  But plenty of smart people – perhaps represented best by Martin Geddes – argue that a net neutrality law would be counterproductive.  Turns out that neutrality itself is very hard to define.  Should a neutral network be prohibited from blocking packets which attack the network itself?  What about spam – does it have to be treated neutrally?  What if someone invents a special purpose network good for connecting vending machines to something or other; does that network have to provide Google access  in a non-discriminatory manner?

Once neutrality is defined by regulation and enforced by bureaucrats, the requirement itself could become an obstacle to innovation.  Even more scary, given the skill of the telcos in manipulating congress (can you say “campaign contribution”?) and the FCC, could the neutrality requirement end up being enforced only against innovators?  What if there were a five year wait for a “neutrality” permit before a new application could be deployed.  Wouldn’t the telcos love that?  Come to think of it, they have been pretty good lately at getting the FCC and the courts to throw obstacles in the way of VoIP.

Countries with true telecommunications competition – now including most of Western Europe and especially Great Britain – don’t have net neutrality legislation.  Nor do they have a net neutrality problem.  And they have higher speed access than we do with wider availability at lower prices.  Hmm…

So what we need is competition and this is exactly what we ain’t got.  Moreover, we’re moving in the wrong direction.  I don’t like the policies advocated by at&t CEO Ed Whitacre (read Don’t Buy DSL from This Man) but I have to give him full credit for reassembling the Humpty Dumpty that Judge Greene thought he had shattered forever.  Even with today’s still neutral Internet, the telco-cableco duopoly is NOT delivering the quality of broadband access Americans need to be competitive in a flattening world.  We need competition.

So, in the absence of competition, do we need net neutrality legislation?  Is that legislation a risk worth taking?  Can it be passed through a lobbyist-ridden Congress?  If so, would the cure be worth than the disease?

I don’t know.  I’m still thinking.  Sorry to be indecisive.

But there is no question that we need competition.  We need to encourage it from every quarter.  We need to oppose any attempt to expand the power of the existing monopolies.  We ought to oppose any mergers (BellSouth and at&t is next on the agenda) which will further strengthen existing monopolies.  This fight needs to be carried out at the local, state, and federal level as well as the marketplace.

We do need a neutral network.  Competition will guarantee neutrality since a neutral Internet will outsell a crippled one (except for special cases which is fine).  But it’s still an open question whether we can reverse the decline in Internet access competition before the US telcos manage to reverse the benefits of the Internet in the US.

BTW, it is no coincidence that VoIP visionary Jeff Pulver is now an IP TV visionary (See yesterday’s WSJ).  Jeff is more convinced than I am that Internet Neutrality legislation would be helpful and has worked hard for it.  We are in complete agreement on the need for a neutral Internet.

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