Manufacturers Cool to Net Neutrality Measures

Published July 1, 2007

Telephone and cable companies have been the most vocal opponents of network neutrality, and the telecom manufacturing sector has begun to add its voice to the debate. They fear investment, innovation, and growth in the sector will suffer if Congress forces carriers to operate so-called neutral networks.

The regulatory impetus behind network neutrality, which would prohibit telephone and cable companies from performing any quality, reliability, error correction, or performance enhancement of applications as they cross their networks, is the fear that a small handful of corporations would leverage this strength to dominate the entire Internet business from end to end.

‘A Very Healthy Market’

Danielle Jafari, senior director and general council for the Telecommunications Industry Association (TIA), the trade group that represents U.S. manufacturers of networking equipment used to support the nation’s Internet infrastructure, said carriers are not the monopoly threat critics claim they are.

“It’s a very healthy market,” Jafari said. “Anyone who says it isn’t just has to turn on the TV and see ads from DirecTV, the cable companies, and phone companies, who are all competing on prices and services. That’s how it should be.”

TIA’s opposition to network neutrality appears to support this notion, as carriers form the principal customer base for TIA’s membership. A consolidated, monopolistic market would not attract the investor and entrepreneurial interest that has marked the telecom manufacturing sector for the past several years.

Manufacturers that sell to carriers foresee enormous short-, medium-, and long-term demand for hardware and software tools that will enhance the quality of service, content, and applications as they move through carrier networks.

Video, in particular, has sparked a surge in aggregate bandwidth use, which is now approaching 1 exabyte–1 quintillion bytes–per month nationally, according to the University of Minnesota’s Digital Technology Center.

Supply Chain Is Diverse

A second countervailing factor is that the telecommunications supply chain is more diverse than ever. While net neutrality hawks invoke the ghost of the old AT&T monopoly, they forget that when U.S. District Judge Harold Greene approved the AT&T break-up in 1984, the company had a vertical lock on the U.S. telecom market. It manufactured all the equipment that went into the U.S. network. Its operating company subsidiaries purchased all that equipment from Western Electric, its manufacturing subsidiary.

Today, AT&T, while large, is simply one choice consumers can turn to for phone, video, and Internet service.

Hundreds of companies now manufacture equipment for telephone, cable, and wireless companies worldwide, ranging from large players such as Cisco Systems and Nokia-Siemens to start-ups such as Accedian Networks and Nakina Systems.

Neutrality Yanks Supply Chain

To use some technical language, the information supply chain can be separated into layers. Standards groups have identified seven, but for our purposes here we can collapse them into three–physical, applications, and transport. (See table.)

Internet Equipment

The physical layer can be defined as the boxes and integrated software that connect to the Internet and exchange information. Physical layer components include PCs and network servers, along with their operating systems (Windows, Unix, Linux), routers, cable and DSL modems, iPods, wireless phones, PDAs, WiFi cards, etc.

The applications layer consists largely of the software that generates and supports the content and applications that make the Internet the information, commercial, and entertainment vehicle for consumers and enterprises.

The transport layer can be defined as the hardware and software that move information across the network and ensure it gets there. The explosion of Internet traffic has triggered a new round of investment and job growth in this area–which Jafari fears could be disrupted if Congress bans Internet quality control inside the network.

‘Won’t Buy Dumb Pipes’

“We don’t want to have dumb pipes. People won’t buy dumb pipes,” Jafari said.

The problem, she notes, is that network neutrality would regulate only the transport layer of the Internet. It would place prohibitions on research and product development between manufacturers and carriers that would otherwise be open to other players in the infrastructure supply chain.

For example, under network neutrality, Akamai would still be permitted to offer Web caching and server networking to Sony or Disney to enhance the performance of an interactive game or video download. But for Nakina Systems, which makes software that allows carriers to better manage the traffic in their networks, neutrality would kill any demand because carriers would likely be prohibited from using Nakina’s solution.

The challenges of Internet traffic congestion will be met by increasing raw bandwidth capacity and by applying tools that add to the network “smarts” so voice, video, and other error-sensitive applications work properly in a crowded network, Jafari said.

“Some say a bit is a bit, but that’s not the world we live in,” Jafari added. “The network has a role. Nothing will be solved by creating regulation that says everything must be done at the edge.”

Steven Titch ([email protected]) is senior fellow for IT and telecom policy at The Heartland Institute and managing editor of IT&T News.