The Disaster That Is Net Neutrality

Published January 1, 2007

Under the guise of encouraging competition and protecting consumers, search engine giant Google is urging Michigan legislators to add a “network neutrality” provision to a telecommunications deregulation bill pending in the state senate. The initiative mirrors calls for similar legislation at the federal level.

The net neutrality provision has drawn an apparent groundswell of support from advocates of an “open Internet,” although the loudest support comes from the big Web applications and e-commerce companies such as Google, eBay, and

Network neutrality would require service providers who own the nation’s networks–companies such as AT&T, Verizon, Comcast, and EarthLink–to treat all data the same way as it moves across their networks. The term “neutrality” makes the proposal sound as if it’s preserving some kind of equality of access on the Internet. Yet its enforcement would actually add an unprecedented level of government regulation of the Internet, the Web, and e-commerce.

Google and other 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. The suppositions are presented with no evidence and the “slow” lane could easily be 100 Mb/s or more, hardly pokey by any measure.

As justification for a ban on rate-based speed and quality tiers, supporters cite the historical classification of network owners as “common carriers,” a status that obligates them to treat all data the same.

Leaving aside for a moment whether Michigan is even constitutionally permitted to regulate Internet service–which the Federal Communications Commission has defined as interstate commerce–network neutrality is nonetheless a horrible idea. In seeking to address a problem that does not exist, it stands to do much more damage in the form of unintended consequences.

No Longer Utilities

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 a way 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 ones 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 email or a high-definition movie.

Network neutrality mistakenly assumes that AT&T, Verizon, and the other 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 pre-empt the development of an entire class of optional, but valuable, products, features, and services that would make for a better network.

This strategic role has not been denied any other group of companies that have a significant stake in the future development of Internet services. Google, in the pursuit of revenues and profits, can use as much capital as it wants to add any amount of software or processing power to its servers to make its search engine work better. Nothing prevents eBay from favoring its PayPal subsidiary, an Internet-based bank and transaction-processing company, in handling fee-based account settlements with buyers and sellers.

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. Legislators, in Lansing or Washington, will do users and the Internet economy a grave disservice if they go out of their way to remove an entire group of companies from the information value chain.

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