"Nothing Bad Happens If Net Neutrality Fails"

There's a missing element in discussions about network neutrality, says Dan Frommer, Deputy Editor of Business Insider. "No one has convincingly and realistically explained what would happen that's so bad if ISPs were not forced to observe net neutrality, and if they were allowed to sell faster access to the highest bidders," Frommer says.

"The reality is that nothing really bad would happen," he maintains. Some think the internet access providers cannot be trusted. To be fair, everybody agrees with that, up to a point. The reason Adam Smith said we can rely on markets is that greedy, avaricious behavior by any actor is met in the market by offers from competitors who will offer a better deal. "Greed" is met by competition, and competition restrains greed.

Any ISP that behaves badly will quickly be met by a rival response from competitors eager to take that ISP's business and customers.

"If anything, things could get even more expensive for consumers if net neutrality is enforced," Frommer maintains. Why?

ISPs operate in competitive markets. They aren't perfectly competitive, only workably so, given the high barriers to entry.  If ISPs lose revenue opportunities because of net neutrality, they certainly will look elsewhere for new revenues, and raising effective prices is an obvious path to take.

There is an argument that if quality-assured tiers of service are allowed (something the Google-Verizon deal precludes), better-capitalized firms will be able to pay, and start-ups will not. That's mostly true.

But bandwidth costs are not the major cost item for new software upstarts. To the extent that "more bandwidth" fixes some latency issues, even real-time services can continue to use the best-effort Internet as bandwidths continue to climb.

The vast majority of Internet businesses won't pay for priority bandwidth, if it's ever available. And the ones who do will figure it into their costs of doing business, the same way they do with rent, staff and health insurance, for example.

Some will not agree. Market power is an issue in business. But competition is the natural restraint. Innovation will occur in the presence of, or despite, network neutrality rules. And the Google-Verizon agreement ensures that all application providers have exactly the same prospects in the Internet access part of the ecosystem.

If other ISPs adopt the same framework, fixed network access will remain a "best effort" service offering no advantages to any single application provider.

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Video Mashup About Google Verizon Net Neutrality Talks

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Google Denies Reports It Has a Deal for Packet Prioritization

Despite reports to the contrary, Google says it doesn't have a deal with Verizon on "network neutrality" that includes packet prioritization, much less paid-for prioritization, Multichannel News reports.


"We have not had any conversations with Verizon about paying for carriage of Google or YouTube traffic," said Google spokesperson Mistique Cano. "The New York Times piece is quite simply wrong."

"The NYT article regarding conversations between Google and Verizon is mistaken," said Verizon spokesman David Fish. "To suggest this is a business arrangement between our companies is entirely incorrect."

The original reporting from the New York Times, Wall Street Journal and Bloomberg had suggested agreement on a framework that would have included both "best effort" and "prioritized" services.

All we can say at this point is that the extensive talks between Google and Verizon Wireless will bear fruit. Each company has too much to gain, and much to lose, if the two parties cannot compromise on packet prioritization in ways that allow both firms to move forward.

Each has investors to persuade, at the very least, and both face a more-uncertain framework as the Federal Communications Commission proceeds with its network neutrality proceeding, as that process seems largely deadlocked on the important issues.

Verizon, Google Net Neutrality Agreement?

A slightly different take on what Google and Verizon might have agreed on, as far as network neutrality rules, is offered by Washington Post writer Cecelia Kang.

As Kang describes the reported agreement, Verizon would refrain from offering paid prioritization to the biggest bidders for capacity on its DSL and fiber networks, essentially preserving a "best effort" access regime.

But Google and Verizon apparently also agreed that both could live with assured access tiers of service designed to optimize the performance of voice, video, conferencing, gaming or other services that are latency sensitive, at least on wireline networks.

Kang says the agreement does not cover wired networks.

Post Tech - Verizon, Google make net neutrality pact

What the Google, Verizon Deal Tells You

Verizon Communications Inc. and Google Inc. reportedly have reached their own deal on how to handle Internet traffic management, Bloomberg reports.

The compromise, according to Bloomberg, would restrict Verizon from selectively slowing Internet content that travels over its wires.


That typically implies"no packet prioritization." Verizon, with its FiOS network nearly completely in place, seems to have been willing to concede that it has enough headroom, in terms of bandwidth, not to have to resort to packet prioritization at all when it needs to manage its broadband access business, at least if I am reading the report correctly, and if the report is correct.

What is not clear from this report is whether "best effort" services can be supplemented by application-optimized features. The compromise, as reported by Bloomberg, seems to suggest such quality measures would not be allowed on the Verizon fixed network.

The apparent compromise, though, is that Google seems to have agreed Verizon Wireless can do so to preserve network quality of experience at times of peak load.

There are some clear technology issues here, namely the fact that no mobile network ever has as much bandwidth as a fiber-to-home network. Network management typically is a more-urgent issue for a wireless network.

But the agreement likely also reflects the "fact" that Verizon's wireless network is viewed as the more strategic of the two networks as well. If something has to be compromised, Verizon seems to have concluded that bargaining away some freedom on its FiOS network is wise if it preserves ability to shape traffic on the wireless network.

It isn't so clear other service providers will be able to so "easily" strike this deal, since Verizon is among the few firms to embrace FTTH so universally. It simply has more bandwidth available to deal with congestion issues.

Still, the key issue here appears to have been Verizon's clear understanding that it could not yield on mobile network managment. Trading away a bargaining chip--no packet prioritizaton on the landline network--seems to have been part of the strategic thinking, at least if the Bloomberg report is correct. 

There could be some downstream impact on packet prioritzation suppliers, though. Verizon will still want to know what is going on. But it will not need tools to shape traffic, since it seems to have agreed it will not do so.

It isn't immediately clear how all the ramifications will work out. But Verizon seems to have set itself firmly on a path that preserves "best effort" as the only service level consumers can buy.

Google, Verizon Said to Strike Deal on Web Traffic Rules - Bloomberg

Do not Neutralize Search Innovation, Google Argues

Google has responded to growing European Community scrutiny of Google's search algorithms in a Financial Times opinion piece. Google is right, as far as the opinion piece goes.

Algorithms embody rules that decide which information is “best”, and how to measure it, and search competitors ought to be free to sort in different ways.

Clearly defining which of any product or service is best is subjective. "Yet in our view, the notion of 'search neutrality' threatens innovation, competition and, fundamentally, your ability as a user to improve how you find information," Google VP Marissa Meyer says.

Ironically, Google does not take the same view where it comes to other partners in the Internet ecosystem, though. Fighting to retain or gain as much advantage as possible within the ecosystem is normal. The irony is that the "freedom for me, regulation for thee" stance can backfire. EC regulators might decide it is Google that requires regulation, not other participants in the value chain.

In all likelihood, the whole ecosystem would be better off with a "lighter touch" that lets clever developers and entrepreneurs, and the consumer response to new products, sort most of these issues out, most of the time.

FT.com / Comment / Opinion - Do not neutralise the web’s endless search

Net Neutrality Issues for Google in Search?

Network neutrality proponents implicitly assume that the key bottleneck, in terms of innovation or competition, is to be found in the broadband access connection, and the way such connections are managed.

It now appears that antitrust regulators in Europe have begun to look at other potential bottlenecks, and search practices already are getting a look, the Financial Times reports. Google's purchase (or planned purchase, as there might be antitrust review) of ITA Software, a travel technology company, is not going to help.

Joaquin Almunia, Europe’s top competition official, already has hinted that European Community regulators are taking Google’s search power seriously. An informal review of search practices already is underway, and seems to be getting more pointed attention now, given the growing issues regulators now seem to be detecting in the mobile content space.

Google has powerful competitors who will not be shy about adding their concerns, and U.S. regulators have been paying more attention to both Google and Apple of late.

The point is that gatekeepers might exist at potentially multiple levels in the Internet business ecosystem, and raising the issue in one area seems to be raising issues in other areas as well.

FT.com / Media - Net neutrality comes back to haunt Google

Is Bit Prioritization Necessary?

Network neutrality proponents, especially those supporting the "strong" forms such as an outright ban on any bit priorities, believe that next generation networks will have ample bandwidth to support all real-time services without the need for prioritizing mechanisms.

Users of enterprise networks might react in shock to such notions, as shared networks often encounter latency and bandwidth constraints that are overcome precisely by policy control. And despite increasing bandwidth on mobile networks, users and network service operators already know that congestion is a major problem.

And the evidence does not seem to support the notion that applications are not affected by congestion, or that use of two or more applications does not create externalities that impair real-time application performance.

"I measured my jitter while using Netflix (Jitter occurs when an application monopolizes a router’s transmit queue and demands that hundreds of its own packets are serviced before any other application gets a single packet transmitted) and found an average jitter of 44 milliseconds and a worse case that exceeds 1000 ms," says Ou.

http://www.digitalsociety.org/2010/06/how-video-streaming-can-ruin-voip-and-gaming/

The Death of Another Bogus Anti-Net Neutrality Argument: Gaming Works on Neutral Networks Too | Public Knowledge

Will Common Carrier Regulation Lead to De Fato Price Regulation?

The Federal Communications Commission says it has no interest in applying price controls to broadband access services. But even if formal rules are not imposed, some executives believe de facto price controls are the logical consequence of any move to regulate broadband access as a common carrier service.

At a minimum, any such rules are likely to immediately slow investment in broadband facilities for years.

The last time the Federal Communications Commission altered fundamental rules in the common carrier area,  AT&T cut annual capital spending by more than half, from $12 billion to $5 billion dollars a year. That cut lasted for four years, until the courts threw out the FCC's mandatory wholesale rules, which created pricing rules service providers found highly damaging, says Dennis Kneale, CNBC media and technology editor.

This time around, the rules might affect a wider range of industry suppliers, including cable and wireless providers, with potentially much-greater damages.

The last time the FCC tried such a major incursion, in the mid-1990s, Stephenson, then the company’s chief financial officer, cut annual capital spending by more than half, from $12 billion to $5 billion dollars a year. That cut lasted for four years, until the courts threw out the FCC mandatory wholesale rules.

Some telecom execs say the FCC’s agenda is downright radical and could thwart high hopes for the wireless Internet, arguably key to the future of the entire U.S. communications industry.

The agency assault could restack the pecking order of winners and losers and reshape their stock prices, affecting the portfolios of millions of retirees and investors as well, says Kneale.

The immediate matter at hand is a prohibition on any type of packet prioritization. But at least some telecom execs also fear this would lead to de facto price controls, primarily because inability to prioritze packets would jeopardize the effort to create enhanced and new services that provide quality of service mechanisms of the sort businesses routinely use.

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8 Liberal Groups Skeptical About Common Carrier Regulation of Broadband

Eight liberal advocacy groups signaled skepticism with a Federal Communications Commission plan for regulating broadband access as a common carrier service.

In a letter to Senate Commerce Chairman John Rockefeller (D-W.V.) and House Energy and Commerce Chairman Henry Waxman (D-Calif.), eight groups called for Congress to restore FCC authority over broadband after an April appeals court ruling appeared to undercut the commission's authority.

The Communications Workers of America, the Minority Media and Telecom Council, the International Brotherhood of Electrical Workers, the League of United Latin American Citizens, the National Urban League, the National Association for the Advancement of Colored People and the Sierra Club signed the letter.

Doubts about reclassification stem from the possibility that it could complicate the regulatory situation and lead to protracted litigation, according to CWA spokeswoman Debbie Goldman.

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Wireless Broadband Would Account for More than 1/2 of Losses Under Net Neutrality Rules

Network neutrality rules would reduce the growth rate of the broadband sector by around 15 percent per year, according to an analysis by the Brattle Group. The loss—$5 billion in 2011, growing to $100 billion by 2020—increases over time and represents a 2.5 percent smaller sector in 2011 and a 17.7 percent smaller sector by 2020.

Wireless broadband would bear much of the brunt of the reduction, as mobile broadband is expected to be the driving force for broadband overall starting about 2013, Brattle Group says. The share of revenue from mobile broadband lines grows over the period, overtaking revenue from wireline broadband lines by 2013. The business versus residential split is fixed at its 2008 proportions of 37 percent business and 63 percent residential.

Residential fixed lines continue to grow at eight percent per year rate until they reach 90 percent of households and thereafter grow at two percent per year. The business fixed lines grow at the same rate.

Mobile broadband is expected to be the source of most of the broadband growth over the next decade and consequently would bear the largest share of the economic burden of network neutrality regulations.

In 2008, mobile broadband lines accounted for only about a quarter of all broadband lines, but would likely account for more than half of the economic losses over the coming decade if the proposed network neutrality regulations are put into place.

Link to full analysis

Will Reclassification Derail FCC's Broadband Plan?

Some at the top level of the Federal Communications Commission may believe a new legal framework for its authority over broadband services will help keep its ambitious National Broadband Plan afloat, but some cable industry policy pundits wonder if the move might produce the opposite effect.

The FCC's reclassification effort could 'totally sidetrack the Commission from getting some pieces of the broadband plan done,' warned Steve Morris, VP and associate general of the National Cable & Telecommunications Association.

Light Reading Cable - Broadband - Will Reclassification Derail FCC's Broadband Plan? - Telecom News Analysis

Title II: Regulated Dumb Pipe is the Polcy: Consumer Welfare is the Issue

Since the greatest service provider fear is that of being reduced to a "dumb pipe" provider of commodity access service, it is drop dead simple to see why most facilities-based providers will oppose the Federal Communications Commission attempt to regulate broadband access as a common carrier access service with no permissible traffic shaping.

Application providers are right to fear unfair business advantage, which would be the case if ISPs decided to block lawful applications or apply differentiated quality measures to their own Internet traffic, while denying such prioritization and quality measures to business partners or competing applications.

Any number of issues present themselves, ranging from the legal (whether the FCC has authority to proceed as it intends) to the likely impact on investment in new and upgraded access facilities (less investment, not more) to impact on innovation.

Some would say the FCC is attempting to regulate "ex ante," before a problem exists, rather than tackling any issues as they arise. The factual record suggests only two examples of blocking, sufficiently chastening the entire industry into agreeing that indeed, all lawful applications must be allowed.

The big problem is how networks can be managed under conditions of congestion so as to preserve quality of experience, and there the difference between traffic shaping and "blocking" is technically quite difficult to separate. All voice networks, for example, use blocking techniques at times of peak congestion to preserve service quality. Data networks have many more options.

Some types of lower-priority traffic might reasonably be slowed down to allow higher-priority traffic types to get preferential treatment, especially video and voice traffic that are highly suscepitble to delay.

Such measures also are crucial for new services of the sort businesses routinely enjoy, where users can buy features allowing them to set their own priorities for some types of applications. In a regime where absolutely no prioritization is allowed, it would not be legal for an ISP to create and sell a service that provides higher continuity for tele-medicine, video or voice services, for example.

"Dumbing down" access networks by prohibiting any packet prioritization automatically prevents creation of quality-assured services, even if end users want them.

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Does Anybody Really Believe a "Small" Number of Title II Rules Will Hold, Long Term?

The Federal Communications Commission's press release on opening its notice of inquiry on Title II common carrier classification of broadband access services will leave many service providers a bit queasy. For starters, the rules almost certainly will apply to cable companies, which never have been regulated, in any way, as "common carriers."

Secondly, even if the FCC promises some lighter-touch "third way," once Title II rules are established as the framework, there is no formal barrier to later changes in rules that would apply more than a "small number" of Title II rules. Nobody familiar with government logic and practice will feel safe that the promised forbearance will hold over the long term.

Taxes and rules get instituted in modest ways, for specific purposes, and then never "sunset." Over time, in the case of taxes, amounts keep creeping up. Over time, in the case of administrative or legal requirements, old rules continue to drift out of date with changed circumstances.

Nor will the actual language provide much comfort. The FCC says it wants to fundamentally alter broadband access regulation, but will "forbear," at its own discretion, from applying all the common carrier rules, "other than the small number that are needed to implement fundamental universal service, competition and market entry, and consumer protection policies."

Not many observers think, over the long term, that the number of rules will remain "small." Where else in federal government action have you seen rules become less numerous over time?

Once Title II is the new framework, any number of steps, including price regulation, entry regulation and other rules are possible. In a nutshell, what was best about the old, highly-regulated monopoly system was service quality and universal access. What was worst was high prices and low rates of innovation.

Under competitive conditions the effect of common carrier regulation is mixed. We are likely to see both low prices and low innovation, plus less investment.

Verizon already earns 70 percent of its cash from operations, not wireline, and the balance continually is shifting to wireless. With lower likely return from wired operations, rational operators will simply starve the wired networks and invest more heavily in wireless.

The problem is that wireline service as a whole is becoming less profitable, and providing less revenue. You don't help matters by making it less profitable, and creating less revenue. You only accelerate its decline.

FCC Votes to Open Title II Reclassification for Broadband Access

The U.S. Federal Communications Commission has taken the first step toward imposing limited regulations on broadband providers by voting Thursday to launch a notice of inquiry exploring the change.

The commission voted three to two to launch the notice of inquiry, which asks for public comment on a proposal by FCC Chairman Julius Genachowski to reclassify broadband as a common-carrier regulated service. It might be an expensive proposition, if the FCC proceeds.

Proposed regulation of high-speed Internet service as a "common carrier" service could cost the U.S. economy at least $62 billion annually over the next five years--a total of $310 billion--and eliminate 502,000 jobs, according to a study released by the Advanced Communications Law & Policy Institute at New York University Law School.

The report estimates that broadband providers and related industries may cut their investments by 10 percent to 30 percent from 2010 to 2015 in response to additional regulation.

At at 30 percent reduction in investment, the economy might sustain an $80 billion hit, according to Charles Davidson, director of the law school's Advanced Communications Law & Policy Institute.

"There will be follow-on effects in the whole ecosystem," said Bret Swanson, president of technology researcher Entropy Economics in Zionsville, Ind., who co-authored the study with Davidson. "A diminution of investment by the big infrastructure companies will reduce network capacity, new services, and investment by all the ecosystem companies."

These investments would spur capital expenditures by others in the ecosystem. A five-percent incremental increase in capital expenditures by the rest of the  ecosystem companies could boost investment by approximately $18 billion per year between 2010 and 2015--about $90 billion over five years--and yield an additional 450,000 jobs created or sustained.

One might ask whether it makes sense to place further burdens on a business whose revenue steadily is declining as a percentage of total end-user communications spending. It wouldn't be the first time the FCC or Congress has moved to essentially disrupt industry structure in hopes of spurring higher consumer welfare.

In the Telecommunications Act of 1996, voice services were liberalized. What nobody apparently anticipated is that wireline voice would suddenly reach its zenith, and begin a long, steady decline. The background assumption was that the business was a "growth" business, rather than a "declining" business. But common sense suggests that different policies are needed when a business is shrinking, than when it is growing, when a business can grow faster because of more competition and when it will simply decline faster because of new constraints. $310 Billion Economic Loss, Over 5 Years if Title II Rules are Imposed

FCC to Vote on Title II Reclassification Move This Week

The Federal Communications Commission says it will vote Thursday, June 17 on issuing a notice of inquiry that would allow the agency to explore whether to reclassify broadband as a Title II common carrier service.

Wall Street will significantly halt investments in broadband networks if the FCC moves to reclassify broadband access as a common carrier, Title II service, said former Rep. Harold Ford (D-Tenn.), Broadband for America honorary co-chair.

The chairman's proposal will make investors "timid or hesitant to make the kinds of investments needed to expand broadband."

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Net Neutrality Would Reduce Investment, Says Frost & Sullivan

Network neutrality has the potential to significantly discourage broadband infrastructure investment, increasing the investment risk, Frost & Sullivan analysts say.

You won't be surprised at that conclusion if you are in the communications service provider business and have to work with investors, or are on the capital allocation side of the business, or ever have modeled expected returns from broadband investment under conditions where robust wholesale access is the rule, where competition is very heavy or where there is little opportunity to provide new revenue-generating services beyond simple access.

In a highly-competitive market, nvestments in access infrastructure are highly sensitive to expected subscriber revenue. Anything that reduces the potential new revenue can drastically affect the investment analysis.

In the presence of net neutrality, operators would likely reduce investment due to the increased risk. Where projects proceeded, consumers would ultimately pay the cost, as they always do.

Net neutrality acts like a tax on the Internet, Frost & Sullivan says. It imposes overhead on network operators, which, in turn, decrease network investments, providing less opportunity, not only for the operators, but also for those that use the operators' networks as well, analysts say.

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The U.S. Mobile Voice Market Is Saturated: So What?

The Cellular Market In The US Is Saturated – 24/7 Wall St

Verizon Wireless, AT&T, Sprint and T-Mobile have almost 260 million wireless subscribers. The U.S. population is 305 million people and some of those are too young to need or use a phone. Others don’t want one.

During the last quarter, Verizon added only 423,000 new contract subscribers and AT&T only 512,000 customers, rates that are lower than has been the case in past quarters.

So what does that mean? What it always means: providers will have to create new products to sell to a base of existing customers, rather than selling more of the existing product to new customers. In the cable and telecom business, that has meant both getting into new lines of business as well as "bundling."

For wireless providers, the new product is wireless broadband, immediately in the form of more smartphone data plans, but over time more use of wireless to support sensor networks of various types.

But there are wider policy implications as well. U.S. regulators sometimes behave as though nothing they do will seriously impede the ability of U.S. service providers to continue to invest and innovate. But both the wireline and wireless segments of the communications business face huge challenges. Existing growth models are exhausted and competition is growing.

Instead of behaving in ways that essentially are punitive, perhaps regulators should ask what they can do to allow the fastest-possible transition to new business models as the old models continue to waste away.

Telecom is not a growth industry; that should be obvious to all observers. The big challenge is to foster a transition to a sustainable model that will support continued investment in state-of-the-art facilities. Telecom, to put it bluntly, is not an industry that needs to be punished; it needs to be fostered.

A Canadian's Take on U.S. Net Neutrality: Big Company Ploy to Squash Competition

The biggest companies in major markets generally tend to favor heavy-handed regulation, says a Canadian IT consultant.  That's why Google, among others, has spent tens of millions pushing for “net neutrality” regulations in the United States, he argues. That's an unusual twist on the debate. 

"Just go ahead and net neutrality on your own network and for your own users. Day one you’re going to find that net neutrality requires you to give incoming porn packets exactly the same forwarding priority on your network as text messages to sales or voice traffic for the CEO’s office - and as soon as you decide to block one set while giving the other a priority boost, you’ll have both demonstrated the fundamentally Orwellian nature of the whole net neutrality sales pitch and turned yourself into one of its opponents."

the full post

User Choice or Imposed Limits: What is Best Way to Manage Bandwidth?

Should the internet treat all data equally, regardless of whether it is part of a multi-gigabyte video file or a short email? Gareth Morgan asks the question in an article at New Scientist.com, after interviewing Johan Pouwelse, a peer-to-peer researcher at the Delft University of Technology in the Netherlands.

Though many will reflexively object, Morgan says one way to deal with demands placed on the network by very-active users is to bill for consumption of bandwidth, not for access at certain speeds. That charging principle would allow people to alter their own behavior, rather than imposing fixed limits to use.

Nearly two years ago, the US Federal Communications Commission (FCC) censured network operator Comcast for trying to impose restrictions on "bandwidth hogs" who use BitTorrent and other file-sharing software. These systems eat up huge amounts of data capacity, and so can degrade the service to other customers, he says.

But the key problem remains unresolved: when large numbers of customers want to access the internet simultaneously, how can traffic be managed in a way that prevents those who are transferring huge multimedia files clogging up the network?

Pouwelse suggests that a different kind of charging tariff could help. Instead of charging customers on the basis of download speeds, network operators should charge users and content providers according to how much data they download or upload. "They could do that without interfering with traffic, in an entirely net neutral way," he says.

This proposal would be opposed by internet giants such as Google and Facebook, who generate large volumes of web traffic and so could face higher charges. But with high-speed broadband stimulating an ever-growing appetite for bandwidth, some way must be found to fairly share out the internet's limited resources.

Bandwidth hogs eat away at principle of net neutrality - tech - 16 April 2010 - New Scientist