Democracy & Technology Blog Thought Free Telecom
Today at Slate.com, Adam Penenberg examined the “net neutrality” debate in an article entitled “Internet Freeloaders:
Should Google have to pay for the bandwidth it consumes?”
Following is Penenberg’s column (indented) with my comments interspersed:
Internet Freeloaders
The Internet has always been about democracy–what the geeks who designed it call “network neutrality.” Data, whether e-mail, a Web page, or video, get sent as packets that are reassembled at the end of their journeys. All packets are created equal, and Internet service providers deliver them without prejudice, based on their network’s speed and capacity.
This isn’t quite right. For years, providers of certain content, applications, and services have used specialized techniques to deliver higher value data in faster and more robust ways. For example, companies that provide streaming video or audio, or companies like Vonage that provide voice-over-IP service, have used caching architectures and quality-of-service technologies to reduce latency and “jitter” and thus deliver smooth audio and video services. From content delivery networks (CDNs) that store and push data to optimal points on the Net to asynchronous transfer mode (ATM) and multiprotocol label switching (MPLS), which route packets across the globe according to levels of priority, networks have exhibited high degrees of “prejudice.” In other words, not all packets have been created equal. Going forward, however, more bandwidth resulting from new fiber-optic capacity could actually reduce the need for QoS and caching technologies in some cases and thus reduce the need for packet discrimination. More about this later….
Telecommunications and cable companies–let’s call them telco-cable–want to change that. Verizon, Comcast, and their ilk have been lobbying Congress to transform the Internet into a two-tiered system. By tagging content, broadband providers would ensure that their own packets (or those from companies paying them protection money) get preferential treatment and reach subscribers faster than second-tier content. This would give companies like Verizon a tremendous advantage as they roll out their own television and VoIP telephone services.
Cable and telecom companies have not been lobbying Congress for a two-tiered system. Some members of Congress and many industry pundits have suggested new regulations–broadly known as “network neutrality” rules–that could radically constrain the flexibility of both infrastructure and content companies to pursue new business plans on the Net. The telecom and cable companies have opposed these proposed new regulations that could massively intrude on and calcify what is a fast-moving and organic telecom environment. They have not lobbied for any two-tier system.
Telco-cable companies have spent billions to lay down broadband pipe and want a return on their investment. They are tired of bandwidth hogs like Google, Amazon, and Microsoft getting a free ride. This was fine when the Internet consisted mostly of e-mail and static Web pages. With the advent of online video, Internet telephony, and IPTV, Verizon, AT&T, and BellSouth want content providers to share the cost. Their reasoning: If Google is going to introduce a video service, shouldn’t it have to pay for some of the bandwidth it scarfs down?
But it isn’t just the Googles of the Web that are soaking up bandwidth. According to the U.K.-based technology firm Cachelogic, peer-to-peer traffic accounts for 80 percent of the traffic of so-called last-mile providers, companies like Verizon and Time Warner Cable that take broadband that final mile into your home. All of this demand for video, music, and file-sharing could create bottlenecks for Verizon and Time Warner–the ones who hook up your home to the data grid.
As a result, telco-cable has been lobbying Congress to rewrite the Telecommunications Act of 1996.
The 1996 Telecom Act is not up for re-write because of these issues, which have come up fairly recently. The 96 Act is up for re-write because it was a terrible failure. It barely even acknowledged the existence, let alone the importance, of the Internet. It empowered the FCC and 51 state utility commissions to micromanage telecom prices and services. It socialized the network by giving “open access” to faux telecom companies who merely played a game of regulatory arbitrage. A rewrite could now do away with these mistakes and actually deregulate this competitive arena. The “net neutrality” effort is a push by many of the same forces who gave us the disastrous Open Access I to revive the monster at a different layer of the network. Call it Open Access II.
A draft of the new bill would codify “network neutrality” (which to this point has been voluntary) and forbid network service providers from blocking or otherwise sabotaging content. Usually fierce competitors, these gatekeepers can agree on one thing: They want to strike the network neutrality clause. Google, Yahoo!, Microsoft, and eBay want to keep it. If telco-cable wins, it will be able to set up separate tiers, forcing Google to pay up or ride in the slow lane.
Google and every other content and infrastructure company on the Net already pay for bandwidth. They pay for long-haul bandwidth. They pay for bandwidth within data centers. If they don’t buy enough bandwidth, they can experience “the slow lane.” “[S]eparate tiers” of service pervade the Net, not to mention every matter of commerce and life. A cross-country “lambda” running at 10 gigabits per second costs more than a cross-country T-1 line at 1.5 megabits. Ten lambdas cost more than one lambda. Equinix, which operates data centers–large secure facilities that host the servers and network equipment for just about every major content and network company–charges its clients per megabit of traffic. Paying to use or acquire someone else’s facilities or product is pretty elementary. Nothing new here.
At this month’s Consumer Electronics Show, Verizon CEO Ivan Seidenberg explained, “We have to make sure that they [application providers] don’t sit on our network and chew up bandwidth. We need to pay for the pipe.” Perhaps, but what Verizon proposes is to charge twice for broadband: first to subscribers, then to content providers. In essence, telcos and cable companies want to privatize the Internet–a model we’ve pretty much left behind since the days of CompuServe, Prodigy, and AOL.
Charge twice? What about magazines. They charge subscribers for the magazine, and they charge advertisers who take up space in the magazine. This model may not work on the Net. We just don’t know yet. The situation is too fluid and moving too fast. But “charging twice” is not some nefarious trick. It’s just another business model that may or may not work.
If the telcos and cable companies get their way, we’ll have a Balkanized Web. Content providers who can afford to pay for premium service will market superior products to consumers with fast connections. Everyone else will make do with second-class companies at second-class speeds.
Time for profundity: You get what you pay for….Seriously, the idea that the Net, which today is a slow molasses trickle of spam, viruses, and herky-jerky video, will regress into Bosnian chaos when cornucopian new fiber optic networks come online is the opposite of the truth. There will be different levels of service, as with every other product on the planet, but new networks will dramatically improve content and services across the Net.
The business model that this most resembles is cable television. There’s one key difference, though. In the cable world, the service providers pay channels for the rights to broadcast their shows. In the system that telco-cable is proposing for the Internet, the content providers–who provide the services that make customers clamor for broadband in the first place–would have to pay for the privilege of being included.
Not all content providers are taking this lying down. Business 2.0’s Om Malik reports that Google has been buying up miles of “dark” fiber–unused fiber-optic cable–at severely depressed prices. Malik believes that Google plans to “blanket major cities with Wi-Fi,” including San Francisco, Washington, D.C., and New York. Given Google’s ethos, its Wi-Fi would probably be free, with revenue derived from targeted advertising. Obviously, the telcos and cable companies would have trouble competing with that. Even if telco-cable is successful in implementing a two-tiered Internet plan, another workaround could be municipal wireless networks, like those being built in Philadelphia. (No wonder Verizon has been fighting them tooth and nail.)
There’s a far better solution than Verizon charging Google to use its bandwidth or Google becoming a service provider itself. What about having subscribers pay for the bandwidth they consume? Just like you buy variable rate cell-phone plans and pay for electricity based on how much you use, your broadband bills should be calculated the same way. That way, heavy Net users could subsidize the Internet for those who don’t use it as often, and access would be available for anybody who wants it. Then content would remain free, and everyone would benefit.
Subscribers paying the whole bill depending on amount of usage–dollars per megabit per month is the common method–is a perfectly reasonable option. Maybe the telcos and cable companies will adopt this end-user-pays-the-whole-bill model and the debate will evaporate. Or maybe the telcos and cable companies will find that consumers won’t pay more than, say, $75 for advanced connectivity. Eventually, of course, consumers will pay one way or another. How to split the cost of bandwidth, however, is a matter of business strategy, not regulation. Whatever happens, not all content will be “free.” Some content will be free in the sense that it is paid for by advertising or subsidized by some other source. But lots of content–movies, educational videos, sports, music, and lots of writing–will be paid for by end-users. The utopian vision of free networks and free content would be costly if taken seriously by policymakers. It is a vision free of thought.
-Bret Swanson