The fight over neutrality

The Internet's biggest brand names are slugging it out with the heavyweight carriers over what is termed 'Net neutrality,' but the battle is really about operators' plans to impose fees for delivering content

It's the war of the tech titans. On one side, the Internet's biggest brand names - Yahoo, Google, eBay, Amazon, Microsoft and Intel. On the other, the heaviest of heavyweight carriers - AT&T, Verizon, Comcast, Sprint. 

They're slugging it out in the US Congress, in the press and online over what is termed 'Net neutrality' but is really about operators' plans to impose fees for delivering content.

Like most things political in the US today, it is a polarizing topic. People are either strongly for neutrality and against price discrimination, or they're all for keeping the government out of the Internet and providing incentives to build infrastructure.

It's an issue right now because a new telecommunications bill is before the Senate, the first major change since the 1996 Telecommunications Act, with a provision for neutrality.

The extra clauses, known as the Snowe-Dorgan Amendment, do not permit carriers to 'block, interfere with, discriminate against, impair or degrade' access to content. Network operators would also be barred from promising better QoS or other deals with individual content providers or owners and would be required to offer all Net material on an 'equivalent' basis.

Historically, non-discrimination has been a core principle of US telecom regulation: all traffic had to be treated equally as it was delivered over a network.

It remained on the statute books until last year when FCC chairman Kevin Martin determined that it no longer applied to residential broadband on the grounds that the market was heavily competitive.

Martin told an interviewer in March that one of his goals was to 'remove' the role of the government in areas that were becoming 'increasingly competitive'. He acknowledged the concerns of consumers, but said he believed the FCC had the power to act if service providers degraded or blocked content.

He said the FCC's policy principles, adopted last year, would ensure consumers of continued access to content available on the Net, 'but also make sure the network operators can control the quality of service and that they have the opportunity to offer consumers different speed with different services.'

Despite that, the FCC hasn't totally let go of neutrality yet. When approving the Verizon-MCI and SBC-AT&T mergers last year, Martin allowed that the neutrality rules remain in place for two more years.

Critics note that it was shortly after that green light that AT&T chairman Ed Whitacre spoke out for the first time. He complained in an interview with Business Week that the Net companies 'use my lines for free - and that's bull. For a Google or a Yahoo! or a Vonage or anybody to expect to use these pipes for free is nuts!'

Since then Whitacre and other AT&T officials have put little flesh on what they would actually charge and how they would structure their prices in a post-neutrality environment.

But they have insisted that end-users receiving best-effort broadband service would continue to receive the same quality service.

 

Rather, those who wanted guaranteed delivery or better QoS would have to pay more.

AT&T spokesperson Claudia Jones said: 'It's requiring companies like AT&T and others to offer a network that can carry these services that the Net is used for. The model of the Net which existed before is no long a fair model. The Internet firms are not paying their fair share.'

Fair share

Jones pointed to the recent Google-MTV tie-up. 'They will carry MTV videos onto the network - that requires more and more use of the network.'

She said the neutrality proponents had not made clear what they were seeking. 'Does anybody really understand what Net neutrality is‾' she said, adding that the Snowe-Dorgan bill definition would have the effect of preventing all Internet traffic prioritization, even for voice.

Paul Misener, VP of global public policy at Amazon.com, says the definition of neutrality sought by the Internet firms revolves around content and content ownership, not different packet streams.

He says the Internet firms want a definition that means networks cannot discriminate on the source or ownership of content. 'They cannot prioritize or degrade the traffic traveling on the networks based on the source or ownership of that,' he said.

Misener says the core issue is the lack of competition. 'The FCC got it wrong last summer,' said Misener. 'They concluded that there was channel competition in broadband. The fact is they were wrong.'

The FCC decision was based on a study that found most Americans had the choice of four or five broadband providers in their neighborhood. Yet Misener says the methodology was severely flawed, using the zip code to define a neighborhood.

'While there may be five, six or ten [providers] in a single postal code, there is not one consumer who can get more than two broadband providers. Different phone companies serve different parts of the same postal code.'

Misener said neutrality proponents were not against upgrading the network or prioritizing traffic by segments.  'It makes sense that video gets priority over a spreadsheet. Let them prioritize, let them provide QoS. We certainly don't oppose them.'

It's not the backbone or the first mile that is the core concern, but the 'middle mile' of the networks - basically from server to server, says Misener. 'It's where one source or owner of a particular content can get its content to the consumer faster.'

The scenario that alarms Amazon.com is that a rival retailer would see its pages loaded faster because of a deal with a major network operator.

'In many parts of the network it's a zero-sum game. You can't prioritize somebody's content without degrading somebody else's.'

Best behavior

'It was illegal until last summer. Since then [the operators] have been on their best behavior. They don't want to give examples while Congress is considering regulation. Yet they are telling Wall Street that they fully intend to do this.'

He acknowledges that anti-trust legislation would take care of the problem,  but anti-trust cases can take anywhere up to ten years.

 

'I'm a free-market Republican,' declared Misener. 'We would not be part of this debate if there were broadband competition, but there isn't competition.'

Andrew Odlyzko, a researcher at the University of Minnesota's Digital Technology Center, who has written extensively about the benefits of tiered pricing in industries as diverse as railways, canals and telecoms, said the carriers 'have not made any serious case for price discrimination.'

'In fact, they have said very little about what exactly they would do if granted their wishes (other than claiming that Google would have to pay them for their networks). The carriers' case is a pretty respectable one from a historical perspective, but they have not made it in public,' he wrote in an email to Telecom Asia.

Vendors are also taking sides. Intel has aligned itself with the Internet firms, with CEO Paul Otellini co-signing a letter to Congress with the CEOs of Microsoft, Yahoo, Google and Amazon.com, calling on legislators to reinstate neutrality.

Alcatel has joined the pro-carrier Hands Off The Net group. Cisco, the biggest IP equipment vendor, hasn't formally aligned itself with either camp, but the firm is opposed to regulatory intervention, a spokesperson said.

He adds: 'If you want to watch YouTube today, you are more than capable of doing that with pretty much standard DSL connection. As bandwidth improves over time we can expect to see more innovative uses of the Internet for delivering content to consumers.

'If a consumer wants to have constant levels of  very high bandwidth provision, then he ought to be able to pay for that: it's  the same concept as business class vs. coach.'

Misener agrees, but plays back the metaphor: 'Who would pay for first-class on an airplane if it were available to everyone at the same price‾'

He describes Cisco as the 'arms dealer' of the scenario. 'Its deep packet inspection technology allows the router to push out different packets at different speeds. It's slick technology, but it allows the kind of discrimination that we fear.'

Meanwhile, the Snowe-Dorgan clauses face a difficult passage through the Senate. The telecom bill without the neutrality clauses passed the Senate committee, but the vote on the amendment was tied 11-all in the committee. On the horizon are the mid-term Congressional elections at year-end. 

The Cisco executive gives it this perspective: 'We think this whole issue will die away in two to three years as service providers continue to deploy higher and higher-bandwidth solutions and evolve their business models away from simple voice provision.'

John Ure, the head of the Telecoms Research Project, makes the same point more bluntly. 'It's really about how do carriers make a buck in the face of declining revenue streams.'


The Internet's Internet battle

Much of the battle over Internet regulation is, not surprisingly, is conducted on the Net itself.
Certainly, there's precious little that's neutral about the dozens of advocacy sites that have sprouted.

 

The content providers' case is found on the It's Our Internet site, a group funded by Amazon, eBay, Google, Microsoft, Yahoo and media company IAC (headed by former Viacom chief Barry Diller).

If weight of numbers counts for anything, this battle is weighted in favor of the neutralists. At last count, it had signed up 150 members - from IP players Skype and Free World Dialup to lobby groups like Christian Coalition and the National Retail Federation. It also includes a number of smaller ISPs, like Pacific-West and Earthlink.

The other prominent neutrality site is savetheinternet.com, which does not have corporate backing but features Internet rights campaigners such as Larry Lessig, the Center for Digital Democracy and consumer groups, along with Craig's List founder Craig Newmark and researcher David Isenberg.

Other established left-liberal sites such as Moveon.org and CommonCause.org have also weighed in on the cause.

In response to the carriers' expensive TV, Web and print ads, the neutrality crowd has posted earnest video appeals on YouTube by the likes of Moby and Web pioneer Tim Berners-Lee.
These sites complain that the telcos and cable companies are spending big on their lobbying and advertising effort, though their estimates vary wildly, ranging from $20 million to $50 million.
However, one line of attack on the carrier groups that does seem to stick is the claim of 'astroturfing' - the formation by corporate interests of front groups that appear to be grassroots but that go no deeper than fake grass.

Common Cause has issued a list of 14 groups, which it claims to be front organizations. Freedom Works, for example, is chaired by former Republican House Majority leader Dick Armey and claims 800,000 grassroots volunteers. Unusual for a grassroots organization, though, is its willingness to receive corporate donations from Verizon and AT&T, while at the same time passionately advocating for the elimination of laws that prevent telcos from competing against cable firms.

The most high-profile pro-carrier site is Hands Off The Internet, a group which is spending up to $20,000 a day on advertising, according to the Campaign Media Analysis Group.

The handsoff.org site describes itself as 'a nationwide coalition of Internet users,' although its dozen members - among them Alcatel, AT&T and the American Conservative Union - do not include any user bodies.

To be fair, it is quite upfront about its biases and supporters. One of its members, netcompetition.org, is also accused of being an astroturf operation and openly acknowledges its cable and telco supporters and its opposition to neutrality.


A European view

Petri Allas, corporate strategy director for BT, points out that the UK market environment is already relatively close to that which the US content and application owners are seeking.

'We already have transparency, non-discrimination and interconnection obligations. In addition, the equivalence of input access over the enduring local loop bottleneck provides an alternative to competitive access. We expect that in the UK any capability to reserve bandwidth would be made available to all customers and not be exclusive to a single operator, avoiding concerns of discrimination and lack of equivalence.

 

At the same time, however, it is important that there are sufficient incentives in place to ensure required investment in infrastructure.  The UK SMP regulation and provisions of non-discrimination address content concerns and state that, subject to SMP/non-discrimination requirements, operators should be able to apply different commercial models for differential standards of service.'

Allas-, continues: 'In other European countries there are different regulations in place.  It is, therefore, possible that the 'Net Neutrality' debate might be more directly felt on those markets, as they are gradually moving to a non-discriminatory model as is in place in the UK. 

iscriminatory or excessive charges for last-mile delivery, interconnection and Internet transit arrangements are still in place in many countries outside the UK, and some incumbents continue to seek forbearance (a form of exclusivity) for their network investments. However, there is no need for any new regulatory remedies or legislation in Europe to address Net Neutrality - just implementation of the existing EU Framework.'

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