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February 16, 2007
The FTC and Net Neutrality
The debate over network neutrality further intensified as the Federal Trade Commission held a two-day workshop this week on whether to regulate the way U.S. phone and cable handle the transmission of Internet data as it crosses their networks.
Network neutrality would prohibit Internet service providers such as Verizon and Comcast from charging companies like Google, eBay and Sony—which seek to use the Web to provide content-rich, bandwidth intensive applications—higher fees to boost the quality and reliability their services are likely to require.
Over the course of the two-day workshop, many net neutrality advocates conceded that some degree of prioritization and QoS will be required as Internet services evolve. This represented major progress in the debate. Only a few months ago net neutrality fans were insisting there would never be any rightful role for management and prioritization in the transport layer—where the service provider fall.
I’ll let slide the fact that this shift coincides with a recent statement by Google, standard bearer for the net neutrality movement, that expressed true concern that the surging amount of video crossing the Internet endangers efficient operation and quality. I’d rather credit the work of AEI scholars Robert Hahn and Robert Litan in documenting the long history of debate within the Internet community about the “end-to-end principle” as well as this rather pointed blog post at the Progress & Freedom Foundation about how applications and content providers have long been using discriminatory server networks available from companies such as Akamai.
Now that all this is out in the open, Alan Davidson, Google’s Washington policy counsel, was willing to say that not all network management is anticompetitive. Prioritization and charging businesses or consumers for more bandwidth is not a problem, he said, neither is providing caching services (a la Akamai) or creating a dedicated IP channels for television service.
But Davidson did say that prioritization in the last mile creates real concern. “We are concerned that prioritization through router-based discrimination in the last mile degrades services and creates incentives to relegate some of those competing services to the slow lane.”
Much of the discussion instead centered on whether the wireline service providers have a level of market power to exercise control over the speed and performance of applications—in effect picking winners and losers among other players in the information supply chain. This at least takes it back into the FTC’s purview.
Still, to buy the Google argument (also expressed by Gigi Sohn of Public Knowledge), you must accept that Verizon and Comcast are big and powerful enough to push Sony, Viacom and Disney around with impunity.
(Meanwhile, over at the FCC, it’s being argued that Sony, Viacom and Disney are big and powerful enough to push everybody else around with impunity.)
Service providers, however, urged the FTC to step back from regulation allow business models to develop in the marketplace. “Given the choice between regulation to solve a problem and allowing the marketplace to solve the problem, we’re fans of the market,” said John Ryan, senior vice president and assistant general counsel for Level 3 Communications.
Walter McCormick, president and CEO of the U.S. Telecommunications Association, said the debate is about whether the government can dictate what kinds of services can and cannot be offered and how broadband networks can and cannot be engineered and operated. But the social benefits of the future Internet require policies that understand how the Internet works and reflect the importance of network management, quality of service and prioritization. “A better Internet doesn’t simply come by adding capacity,” he said.
FTC Commissioner Jon Liebowitz may have summed up the agency’s position when he noted, “many of us are looking for a third way.” He suggested the neutrality deal AT&T struck with the FCC tom win approval of its acquisition of BellSouth as a “jumping off point.”
Here’s where I begin to worry. First of all, for all its ballyhooing about regulation, I don’t think the FTC nor Congress is convinced enough of these so-called dangers of market dominance. And when the Wall Street Journal reports on page one it's boom times again in the telecom manufacturing industry again, in great part to the expected challenges video is going to bring to Internet transport, I don’t think anyone in Washington is going to be in a rush to derail this by imposing regulation based solely on supposition..
If only they’d simply acknowledge this, walk away and let the market do its work. But regulators regulate. So the AT&T FCC deal, bizarre as it is, becomes a model.
The AT&T FCC deal can be summed up like this—it mandates network neutrality except in any area where neutrality will create network transmission problems. So video—the main sticking point over neutrality--is exempt off the bat. Free market policy wins, but in a bass-ackward way—the FCC creates a regulation, followed by a stipulation designed to short-circuit the predictable consequences. This isn’t new, not even in telecom.
Last weekend, an executive at a small but growing company specializing in corporate IP video networking told me that sometime between 2010 and 2015 the amount of video in the global public network will exceed that of data (much like data surpassed voice a few years back). This presents enormous network management challenges that cannot be met by regulatory fiat. One thing I can guarantee: If network neutrality passes, Washington will be spending the next ten years doing costly and convoluted regulatory backflips to undo the damage of foolhardy regulation that never should have been passed in the first place.
Posted by steve.titch at February 16, 2007 03:27 PM
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