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Network Neutrality is an Answer to the Wrong Problem
[February 10, 2006]

Network Neutrality is an Answer to the Wrong Problem

By Fred Goldstein, Ionary Consulting

Sometimes a small change that goes almost unnoticed makes a big difference. That’s what’s happened as a result of last summer’s decision by the Federal Communications Commission to allow the final deregulation of DSL. Based on a tortured misreading of the Supreme Court's Brand X decision that allowed cable modems to remain closed to third-party ISPs, the FCC allowed the Bells to do the same thing. So the owner of the wire - the incumbent local phone company - will soon have total control over the information content that flows over the wire.

The Bells themselves tried to make the change seem merely technical; after all, their ISPs already have the lions' share of DSL subscribers. But they got what they were looking for: Broadband Internet service will no longer be freely competitive. It will be, for most Americans, a two-vendor choice. Use the Bell’s ISP, or the cable company’s ISP. No other ISPs need apply, unless they manage to string their own wire.

And then a funny thing happened. They started to overplay their hand. The Bells’ motivations became clear too quickly. They really, really don't like the Internet. Its business model is terribly far from the one they have grown to love, the one where a monopoly meters out scarce bandwidth on a “value of service” basis, charging for distance. The Bells’ model focuses on value-added “services;” the Internet is about providing raw connectivity so that services can develop independently at the edges.


So by kicking the ISPs off of their “Broadband” networks, the Bells were setting the stage to replace the Internet we know and love with a substitute more to their liking. For one such model, just turn to your cell phone’s “wireless web.”

You may not actually use that service. I don’t. The Internet it ain’t. There’s nothing on their costly WAP service that I find worth paying for. Now, to be sure, I’d rather use a full-sized computer screen and keyboard than a tiny wireless phone display and keypad. But there’s more to it than that. WAP is a walled garden, more like the Videotex services of the 1980s than the Internet.

But what about the new wireless “broadband” services, like Verizon Wireless’ Broadband Access, which you can attach to your laptop? It does allow Internet web surfing, to be sure. But its service contract has some rather onerous terms, including this humdinger:

”Unlimited NationalAccess/BroadbandAccess services cannot be used (1) for uploading, downloading or streaming of movies, music or games, (2) with server devices or with host computer applications, including, but not limited to, Web camera posts or broadcasts, automatic data feeds, Voice over IP (VoIP), automated machine-to-machine connections, or peer-to-peer (P2P) file sharing, or (3) as a substitute or backup for private lines or dedicated data connections.”

Well, I'm sure they don’t want you to use VoIP across it, especially given the outrageous rates they still charge for international telephone calls. Or upload your photos, when they can charge WAP prices for it, or download from iTunes when they offer a competing service at a higher price. But it goes even beyond that. These guys are control freaks. With only a small number of wireless companies to choose from, consumers don’t have much power.

ISPs can’t get away with that because it’s too competitive - after all, you can always switch ISPs. Oh, oops, not any more! Cable companies are less likely to be as aggressively anti-consumer, but cable modems tend to be a bit costlier than DSL.

Thanks to some intemperate words by faux-AT&T Grand High Poobah Ed Whitacre, suspicion of the Bells plans is now spreading like wildfire. “Why should they be allowed to use my pipes? The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo or Vonage or anybody to expect to use these pipes free is nuts.” Once the firestorm broke, a then-SBC spokesman tried to say that he was only talking about streaming television over the Internet, “IPTV.” But that was just damage control, obviously not what he meant. Besides, he didn’t seem to realize that cable companies don’t get paid by content providers; they pay for content. And Vonage pays for its ISP services too. Clearly the Bells are looking to take control over Internet content, and either take a cut of the content action (pay them to use iTunes or eBay), or charge “Internet Message Units” for access via their wires.

One response is calls for new “network neutrality” rules. These would impose new content regulation on ISPs. It sounds nice at first. After all, we don’t really want Verizon to tell people whose news they can read on line, what Internet radio stations they can listen to, or where they can shop. But it’s the wrong approach. Network neutrality is not about Internet freedom. It’s only a way to feed the prisoners. Once we get this far, the war is already lost.

The problem is not that Internet Service Providers can discriminate. The Internet is considered an “information” service, rather than plain “telecommunications.” A retail ISP’s job, whether it’s run by an independent dial-up or broadband provider, a cable company, or a telephone company, is to connect large numbers of  subscribers to the Internet backbone, and provide them with certain vertical services such as email, web hosting, and DNS. And it’s their job to try to block spam, viruses, and the like.

Internet backbone bandwidth isn’t free; retail ISPs generally have to pay or it. (Top backbone ISPs, on the other hand, just “peer” with each other, but they have to have an expensive network in order to be allowed to play at that table.) So today’s retail broadband subscribers use, on average, less than 100 kilobits/second of backbone capacity, and ISPs are therefore able to “oversubscribe” their backbone links by at least double-digit ratios.

Thus it’s a real concern if Internet users start watching high-definition television by means of Internet streaming. It’s especially a concern to the smaller, surviving ISPs who don’t own the nationwide backbones that the mega-Bells have now acquired. Big streams can displace potentially data applications that have nowhere else to turn to. It’s even reasonable to suggest that companies that own wires should be allowed to charge for dedicated bandwidth, if that’s what’s needed for some applications. Rules or laws that require all ISPs to carry everything they're asked to, on a nondiscriminatory basis, are thus dangerous and indeed risk making the Internet itself nearly unusable. Indeed, their major beneficiaries are likely to be spammers, adware operators, and others who inhabit the gray area, undesirable but not clearly illegal.

The press is already raising the flag about the “two-tier Internet.” They accept Whitacre’s restatements at face value, and suggest that the battle is over whether network operators will charge content providers extra for “priority” service for their video streams. But that's not the problem. We already have broadcast, cable and satellite TV. The problem is that telcos want to discriminate against different data providers, or use “deep packet inspection” to charge for something other than raw packet delivery. Vendors are already hawking gear that can, for instance, monitor for email being downloaded from a third-party server, to enable the network operator to bill by the message.

What’s missing from the picture is a boundary between what is and what isn’t Internet. The telcos want to call everything “Internet” so they can control it. Net-neutrality advocates then want to regulate that “Internet” so they won’t be excluded. This group includes VoIP providers who recognize that they are in the cross-hairs of the telco-ISPs, who rightly see them as competition for their surviving, though declining, voice business.

But the answer isn’t to regulate the “Internet” per se: Not everything is the “Internet.” It’s to restore choice. It’s vital to guarantee that local connectivity, raw bandwidth, remains available on the wholesale market, so that consumers have a choice of ISP. If there’s a real choice of ISPs, then the free market will sort out the details. It’s the telco-cable duopoly that makes the faux-Internet such a possibility. Here and there, a wireless ISP or cable overbuilder might offer a third choice, but shy of wholesale connectivity, there’ll be no free market for information. What good is freedom of the press when a few wealthy publishers control all avenues of delivery?

Maybe video streaming won’t be too expensive after all, so some ISPs will allow it. But maybe some ISPs can offer a more constrained, cheaper service that caps certain usage patterns. Maybe some users will be willing to pay extra for a higher quality link to a VoIP gateway of their choice. Maybe some want their Internet raw, while others want tight spam filters, and others still want their ISP to provide “family-friendly” censorship. These are not the kinds of questions that belong in a Congressional committee, or in an FCC Docket, or in court. They’re the kind of questions that the ISP industry has been dealing with for over a decade. Lets not let the Bells kill it off, or try to replace freedom of speech with content regulation.

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Fred Goldstein is Principal of Ionary Consulting in Newton, Massachusetts.

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