Heartland Ideas

Net Neutrality

Under the guise of encouraging competition, protecting consumers and preserving First Amendment freedoms on the Internet, a coalition of corporations and organizations, representing all parts of the political spectrum, have been urging the Federal Communications Commission, Congress and even state legislatures to adopt laws that codify “network neutrality” on the Internet. The latest legislative strategy may be an attempt to impose network neutrality conditions on any service provider that accepts funds from the $7.2 billion broadband stimulus.

Network neutrality would regulate the transmission of Internet data. It would impose obligations and prohibitions on major service providers that own the networks that connect homes and businesses to the Internet. It would dictate the technology and software that phone companies, cable companies and other Internet service providers (ISPs) could develop, purchase and use in their network. It would limit the quality choices they could offer their consumer and business customers. It would lead to a host of unintended consequences, the most immediate and likely being a slow, congested Internet with little or none of the utility for the multimedia applications for which it has become associated. The principles of network neutrality that would be instituted as law are:

  • Carriers should be prohibited from blocking access to any legal Web site or application;
  • Carriers should be prohibited from preventing any application using the Internet Protocol (IP), the basic programming language used on the Internet, to run on its network;
  • Carriers must allow any IP-addressable device to attach to the network;
  • Carriers must provide users with information about their network service plan; 
  • Carriers should treat all data the same and be prohibited from altering, prioritizing or partitioning data with the intent of improving quality for their own services or for select groups of customers or partners.

The first four principles are all but pointless. First, an ISP exists to connect individuals and businesses to the Internet at large. A service provider who “violates” them would be running counter to its own business model. That’s why, in the near 15-year history of U.S. ISP service, there has only been once violation of these guidelines—tiny Madison River Communications, which attempted blocked Vonage’s Voice over Internet Protocol (VoIP service). The FCC forced Madison River to halt the blocking and make a $15,000 payment to the U.S. Treasury as part of an agreement to drop the investigation.1 Beyond that, it was short-sighted. VoIP services are popular and ISPs, to keep their business, find they must support them.

The second and third principles are beyond ISP control. By definition, any IP-compatible device can communicate over an IP network. This is simply the way the equipment works. An ISP can’t do anything about it. Now an ISP may require a password if a customer wants to use the portion of the network it owns to connect to other devices, but a password requirement does not interfere with the IP connection itself. Just getting a password prompt is proof an IP device is operating on the network. And ISPs are not the only businesses who use passwords protect their networked assets. Most businesses and consumers, if they are wise, password-protect any laptops, PCs and larger computers that connect to the Internet. That’s precisely because any IP device can talk to another.

The fourth principle is redundant. Information about service is covered in the basic buyer-seller agreement. And if an ISP were to violate it to the point where a consumer or business owner thinks he’s been defrauded, there are existing legal mechanisms to address those cases.

So while any Internet regulation is undesirable, the initial four neutrality provisions don’t really “safeguard” anything. They have the same effect as would a decree that required every motor vehicle built in the U.S. to drive forward and reverse. Law or no law, cars are going to be built that way.

The fifth principle, however, would hold serious consequences if given the force of law. The fifth principle of network neutrality would impose limits on how service providers can use their networks to improve the quality, reliability, prioritization and management of data and applications as they move across their facilities. Specifically, phone and cable companies, along with ISPs such as EarthLink and Covad Communications that predominately serve businesses, would be prohibited from offering Web site owners (sometimes called Web hosts), ranging from companies the size of Google to small entrepreneurial Web storefronts, any improvement in applications speed or performance for an added price.

Network neutrality proponents say regulations are needed because the phone and cable companies control most consumer connections to the Internet. As an example, they point to Comcast, the nation’s largest cable company, which in October 2008 confirmed reports that it was intentionally slowing down the rate that voluminous video files were being transferred to BitTorrent.com, one of many so-called peer-to-peer (P2P) sites that allow users to search for and exchange movies and TV shows between and among their own PCs. Although an Associated Press (AP) headline reported that Comcast was blocking P2P applications, the text of the very article reported otherwise.2 BitTorrent software is designed to set up as many simultaneous connections as possible between the user’s PC and BitTorrent’s file sharing site (the more connections, the faster the transmission). To keep BitTorrent users from flooding the network, especially at peak times, Comcast introduced software that limited the number of simultaneous connections the BitTorrent software could set up. BitTorrent users could still reach the site, but the rate of transfer was slowed. Comcast argues this network management decision was made to ensure service quality for the vast majority of Comcast Internet customers whose high-speed connections would be slowed by the amount of bandwidth P2P applications were gobbling up. Even cable industry critics such as George Ou, writing on ZDNet, conceded Comcast was within its rights to do so:

We can think of it as a freeway onramp that has lights on it to rate limit the number of cars that may enter a freeway… If you didn’t have the lights and everyone tries to pile on to the freeway at the same time, everyone ends up with worse traffic.

The Comcast action, triggered with the reality that P2P protocols such as the BitTorrent protocol are designed to consume as much bandwidth as is available, has sharpened the debate about what the unintended consequences of network neutrality might be. If network neutrality were enacted as bills are currently written, service providers would not be able to take technical countermeasures that would balance bandwidth consumption. Conversely, they would not be allowed to offer rabid P2P users priority connections a higher price. And whether they charged for it or not, service providers would not be able prioritize transmission of certain types of data, for example, streaming video or online gaming, even if it would make the application perform better. They would not be allowed to enter agreements with third party providers to give their services special handling. They would not be permitted to improve the quality of their own services, such as Voice over Internet Protocol (VoIP) phone calling, without providing the same level of quality to competitors who use their network.

As such, network neutrality enforcement would add an unprecedented level of government interference in the way Internet applications work, and to what extent the sophisticated transmission mechanisms within the Internet could be used to facilitate future Web applications such as telemedicine and distance learning, as well as entertainment and e-commerce. And even then, it is doubtful whether network neutrality can ensure the “equal access” proponents say they want. It is also questionable whether a policy of network neutrality is either workable or desirable on today’s Internet.

Network neutrality proponents state that without neutrality, service providers will be able to create high-speed “toll” lanes on the Internet, and relegate those without deep pockets to some sort of “slow” lane. These suppositions are presented with no evidence. Today, the Internet reaches the customer at speeds as high as 15 megabits per second (Mb/s), hardly pokey by any measure, and there’s every reason to believe speeds will get faster. The norm was 4 Mb/s in 2005, and 8 Mb/s in 2008, while prices have remained stable. All this has come about without mandated network neutrality.

As justification for a ban on service providers creating differentiated pricing for faster data speeds or guarantees of higher quality, supporters cite the historical classification of network owners as “common carriers,” a status which they say obligates them to treat all data the same.

The “common carrier” rationale no longer holds. True, only a few years ago, telecom networks were neutral common carriers by default. Two things changed. First, the Internet and broadband together enabled an unlimited number of parties to use the network to deliver diverse content, applications and services. Second, network technology evolved to the point where service providers could manage, manipulate and prioritize data in their networks in ways that can add greater value.

Although neutrality proponents routinely compare telecom networks to utilities like electricity and water, the concept of the “value-add” is a critical distinction in telecom. The common carrier argument sees only a raw data stream crossing the network. It’s a clever twist, because it’s easy to comprehend data—all those one and zeros—flowing to homes much like electricity and water. But the analogy ends there. Consumers don’t use their Internet connections to receive a stream of digits; they use them to find, purchase and exchange data in the form of processed information, be it a simple e-mail or a high-definition movie.

Network neutrality mistakenly assumes that service providers deliver commoditized data when, in fact, they deliver packaged information products that have been created and crafted by numerous parties.

Processed information, as opposed to raw data, can take many forms, and can be valued using any number of measures. To the user, therefore, the Internet, as a delivery mechanism, is inherently commercial and non-neutral. As a party to an information-based transaction, the consumer implicitly accepts that the enterprises that have invested in the creation, processing, transmission, presentation and sale of that information are entitled to compensation.

Network neutrality would lock service providers out of the process. It would prohibit the companies that build, own and operate the nation’s broadband networks from taking any strategic role in the management and optimization of information products that use their facilities, to the detriment of everyone who depends on a high-performance Internet. Network neutrality would preempt the development of an entire class of optional, but valuable, products, features and services that would make for a better network. For example, any application that has life or death implications and calls for real-time communication—say a remote home-based health monitoring system linked to emergency alarms at a hospital, would benefit from, and perhaps require, transmission prioritization.

In fact, the capability to do so already exists. Hospital networks, which use the very same IP protocol as the Internet, can and do prioritize traffic. So do many other businesses and organizations that do business over the Internet.

The Internet is not, and never has been, neutral. Nor will a network neutrality policy make it so. All it will do is place legal limits on the quality and performance of Web-based services. Neither federal and state legislators, nor FCC commissioners, will serve the users or Internet economy if they go out of their way to remove an entire group of companies from the information value chain.