Monday, September 9, 2013

Net Neutrality in Court Again

The U.S. Court of Appeals for the District of Columbia Circuit is hearing oral arguments Sept. 9, 2013 in a lawsuit brought by Verizon Communications challenging the Federal Communications Commission "net neutrality" rules.

Some paint the dispute as involving “Internet access.” That isn’t actually the case. The FCC already mandates that users have access to all lawful applications. The FCC also agrees that Internet service providers have the right to manage traffic on their networks to maintain quality of experience by alleviating congestion problems.

The issue is whether ISPs have the right to shape traffic by providing class of service features, for example giving priority to voice or video traffic under conditions of network congestion.

Some supporters of net neutrality worry about the business ramifications for end users and application providers, while ISPs maintain they have the right to create and enforce policies that provide better end user experience, while also creating potential new revenue streams.

The concern is that a “two-tier” Internet could develop, where some end users and some application providers would be able to use or provide a “faster” or “better” experience, in the same way that content delivery networks now are used by app providers.

That could happen if end users are able to pay for such expedited handling of their traffic, or if ISPs could charge app providers for providing such expedited handling.

Critics of network neutrality rules argue that potential business abuses (ISPs giving priority to their own streaming video services compared to rival services) are prevented by existing antitrust laws.

Supporters of network neutrality argue that prohibiting class of service offers levels the playing field for small and big app providers alike. That is a reasonable argument, but also ignores sources of business advantage that bigger and wealthier firms always have, when competing with smaller firms, especially the ability to pay for content delivery and other quality-enhancing features.

Beyond that, the network neutrality argument resembles other challenges ISPs and regulators also face. In Europe, for example, communications regulators face crucial challenges about the ways they promote competition and at the same time encourage investment.

By setting low mandatory wholesale rates, European regulators have succeeded in spurring competition. But those same rules have depressed investment in next generation networks.

Network neutrality rules similarly discourage some types of network investment, while arguably encouraging investment in raw access capacity, since quality of service measures cannot be used.

At a high level, customers or business partners always pay for every investment in network infrastructure. Part of the issue is whether network neutrality rules encourage or discourage some forms of innovation, and encourage or discourage network investment.

It’s a difficult balance to strike.

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