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No One’s Neutral About Net Neutrality

A Look at the Issues & Arguments on Both Sides of the Debate

Two guys and a great idea. Isn’t that how Google got its start? Well actually – two guys, a great idea, and the Internet.

Just this past summer, two other guys had a great idea. They loved the new iPhone 4's still and video camera. But there was no way to mount it to a tripod, and no add-on solution that satisfied them. So they invented the Glif (their Google-friendly variant of "glyph," the architectural term for an ornamental channel or groove) – essentially, an L-shaped piece of plastic with a groove and a threaded ferrule so it could fit on a tripod or just stand by itself for watching videos or as an alarm clock. They had a prototype made, but needed $10,000 or so to go into production.

So they made a video, put it out on the Web, and signed up for Kickstarter, a site that accepts contributions from individuals to fund ideas. They asked for $20, and in return you’d get a Glif as soon as it was produced. Within 48 hours, they had almost $50,000 in pledges. A little over ten days into the campaign, they had over $100,000. By the time their 30-day Kickstarter campaign ended on November 3, more than 5 thousand backers had pledged $137,417 – 1,374 percent of the initial goal. (As of this writing, the molds were made and the products, all made in America, would soon be shipping.)

In a sense, the Internet has come to embody the romantic American spirit, the idea that anything is possible, that everyone has the opportunity to make it big. It is the great enabler, forum and marketplace. It’s the first place we turn to connect with people, to speak out on issues, to market our wares, to research a doctoral thesis – indeed, even to be elected president of the United States.

It’s all those things because, so far, the Internet has been a level playing field. All content is treated equally, whether it comes from two guys in their garage or the world’s largest corporation. It all gets to users through the wires and fiber at the same speed, subject to the same bandwidth limitations or availability. It all has an equal chance to arrive on a user’s screen. So the upstarts in the garage have the same opportunity to reach an audience as the big corporation. So far.

Net neutrality defined

This idea of the Internet as level playing field – that all data is treated the same regardless of source, destination or content – is called net neutrality. Content can’t be blocked, slowed down, sped up, or interfered with in any way. It’s all equal. For many netizens and content providers large and small, net neutrality is a sacred principle, often called the First Amendment of the Internet. For the owners of the pipes, though – the cable companies and telco Internet Service Providers – and some of the largest content and tech companies, there’s money to be made, advantage to be had, and new value and choices to be delivered to consumers if the Net were not quite so neutral.

Net neutrality is here, for now

In the Internet’s brief lifespan, net neutrality has been an honored principle that has earned near-universal compliance, with few violations that have come to light. But it’s not the law of the land. And that’s what scares everyone on every side of the issue. The FCC’s authority to regulate and enforce net neutrality is currently up in the air, following a slap from the U.S. Court of Appeals in April. And Congress was too busy before the election to deal with the issue, though some members of the new incoming Congress have expressed their serious opposition to any real regulation of the Internet by the FCC.

As it stands today, nothing is in the way of any ISP blocking, slowing down, or prioritizing content in any way they see fit. "...given political realities, this particular issue has been intractable in Washington for several years now," writes Richard Whitt, Google’s Washington telecom and media counsel, in an official blog post. "At this time there are no enforceable protections – at the Federal Communications Commission or anywhere else – against even the worst forms of carrier discrimination against Internet traffic." 1Google Public Policy Blog, "Facts about our network neutrality policy proposal," by Richard Whitt, 8/12/10 It’s not for lack of trying on the FCC’s part, though.

Who wants it, and who doesn’t

The Open Internet Coalition is a pro-neutrality group that claims to speak for tens of millions of Americans. Its list of supporters includes a number of top-tier Internet companies – Amazon, the ACLU, Ask.com, eBay, Facebook, Free Press, Google, HSN, LendingTree, Match.com, Netflix, PayPal, RealEstate.com, Sling Media, Sony, TicketMaster, Tivo, Twitter, and YouTube, among dozens of other major Internet properties.

Another visible and organized group promoting net neutrality is the SavetheInternet.com coalition, which claims to include two million "everyday people" and thousands of nonprofits. It is coordinated by the media reform organization, Free Press. Free Press, Consumers Union, and the Consumer Federation of America joined together in 2006 to publish "Why Consumers Demand Internet Freedom," a comprehensive presentation of the pro-net neutrality position.

In the political sphere, President Obama took a strong stand in favor of net neutrality in his campaign, promising to "take a back seat to no one." 2SavetheInternet.com Coalition, Frequently Asked Questions But with bigger, more visible issues to deal with, and with FCC Chairman Genachoski unable to make a decision and promote it, and the transfer of power in Congress, the administration may well have lost its opportunity to pass the legislation or regulation it wants. The president’s American Recovery & Reinvestment Act included $7.2 billion to expand broadband, with open Internet conditions attached to use of the funds.

The telcos and cable companies are leading the charge against net neutrality, with strong support from the Republican Party and an array of corporations including Apple, Cisco, Microsoft, Nokia, and Research in Motion (all members of the Information Technology Information Council), as well as industry trade groups including the National Cable & Telecommunications Association and CTIA/The Wireless Association. Advocacy groups are playing a big role, too, such as Americans for Prosperity, which launched a $1.4 million ad campaign this year calling net neutrality a government takeover.

In a very visible way this past summer Google became involved in the debate. Originally one of the staunchest proponents of neutrality, it earned a "surrender monkey" 4Wired Magazine, "Why Google Became A Carrier-Humping, Net Neutrality Surrender Monkey," 8/10/10 title for its collusion with Verizon to put forth a compromise legislative framework this summer. Google responded to its critics by saying, "We have taken a backseat to no one in our support for an open internet. We offered this proposal in the spirit of compromise. Others might have done it differently, but we think locking in key enforceable protections for consumers is progress and preferable to no protection."

And a lot of money is being spent. In 2009, cable companies, telcos, and their associations spent nearly $72 million to lobby Washington. 5Free Press, freepress.net, "Telecom Lobbying 2009," Senate Office of Public Records In the first quarter of 2010, neutrality opponents outspent proponents on lobbying more than 4 to 1 – $19.7 million to oppose versus $4.7 million in support. 6ReadWriteWeb, "Net Neutrality Opponents Outspending Proponents More Than 4 to 1," by Marshall Kirkpatric, 6/29/10

How we got here: A net neutrality timeline

The Internet was conceived to be net neutral, but no one could conceive the impact the Net would quickly have. The debate over formal net neutrality gained volume as broadband achieved wider adoption. At the heart of the discussion is how broadband is to be categorized, and therefore regulated. Is it a telecommunications service, like the telephone system, thus to be regulated under the purview of the FCC’s Title II authority? Or is it an information service, and if so, in what way is it or is it not within the FCC’s jurisdiction? The court skirmishes that have transpired to date are perhaps just a taste of what is to come.

Here is a rundown of the key events leading to the current regulatory and legislative status, and key points in the debate.

March 14, 2002: The FCC rules that cable modem service "is properly classified as an interstate information service and is therefore subject to FCC jurisdiction...cable modem service does not contain a separate ’telecommunications service’ offering and therefore is not subject to common carrier regulation." 7Federal Communications Commission news release, "FCC Classifies Cable Modem Service As ’Information Service’," 3/14/2002

June 27, 2005: The U.S. Supreme Court upholds the FCC’s classification of cable modem service as an "information service" and not a "telecommunication service," thereby exempting it from mandatory FCC regulation. 8National Telecommunications Cooperative Association press release, "Supreme Court Upholds FCC Classification of Cable Modem Broadband Service As An ’Information Service’," by Dan Mitchell; also, Supreme Court of the United States, "National Cable & Telecommunications Association et al. v. Brand X Internet Services, et al., No. 04-277, decided 6/27/2005

August 1, 2008: The FCC votes 3-to-2 to uphold a complaint against Comcast for blocking its users access to BitTorrent, the popular (and bandwidth-intensive) protocol for sharing large files including music and videos, 9Wikipedia, "Network neutrality/Legal situation/Law in the United States" upholding the still uncodified principle of net neutrality.

April 6, 2010: The U.S. Court of Appeals for the District of Columbia Circuit vacates the FCC’s order against Comcast, citing the FCC’s classification of broadband as an information service, rather than a telecommunications service, which obviated its authority in the matter. 10The New York Times, "F.C.C. Proposes Rules on Internet Access," by Edward Wyatt, 5/6/10

May 6, 2010: FCC Chairman Julius Genachowski announces a plan for a "third way" that would reclassify broadband as a telecommunications service, but exempt it from many of the rules that govern telephone service; the commission would not be able to regulate rates or Internet content, services, applications or electronic commerce sites. 11The New York Times, "F.C.C. Proposes Rules on Internet Access," by Edward Wyatt, 5/6/10 Genachowski says, "The Third Way approach was developed out of a desire to restore the status quo light-touch framework that existed prior to the court case." 12Wired Magazine’s "Epicenter" blog, "Feds Start Move to Reimpose Rules on ISPs, by Ryan Singel, 6/17/10U.S. House of Representative minority leader John Boehner calls it a "government takeover of a large portion of the private sector." 13The New York Times, "Broadband and the F.C.C.," editorial, 5/16/10

May 28, 2010: U.S. Representative Joe Barton (R- TX), ranking member of the Committee on Energy and Commerce, and Rep. Cliff Stearns (R-FL), ranking member of the Subcommittee on Communications, Technology, and the Internet, send a letter to FCC Chairman Genachowski urging him "not to proceed down your announced path to reclassify broadband service as a phone service under Title II of the Communications Act. Such a significant interpretive change to the Communications Act should be made by Congress." The letter cites "severe" consequences including "reduced broadband investment, less economic stimulation, and fewer jobs." It is signed by 170 other representatives. A proverbial line is drawn in the sand.

August 9, 2010: On the heels of a New York Times story and a rash of leaks, rumors, and denials, Google and Verizon sidestep discussions with the FCC and jointly put forth a proposed legislative framework for Internet regulation. The framework introduces the idea of specialized or differentiated online services which, along with the entire wireless Internet, would be exempt from any neutrality requirements. A moderate uproar ensues, and the debate shifts into high gear.

August 9, 2010: The FCC fires off an immediate response to the Google-Verizon announcement. "Some will claim this announcement moves the discussion forward," Commissioner Michael J. Copps says in a written statement. "That’s one of its many problems. It is time to move a decision forward – a decision to reassert FCC authority over broadband telecommunications, to guarantee an open Internet now and forever, and to put the interests of consumers in front of the interests of giant corporations." 14Federal Communications Commission press release, "Statement of Commissioner Michael J. Copps on Verizon-Google Announcement, 8/9/10

September 29, 2010: Despite support from large broadband providers, 15Congress Daily/National Journal Tech Daily Dose, "Debate Rages Over Broadband Regulation," by Juliana Gruenwald, 10/12/10 House Energy and Commerce Committee Chairman Henry Waxman (D- CA) fails to win support for a proposal to give the FCC case-by-case authority to rule on net neutrality and provide some neutrality protections for the wireless Internet, while prohibiting the FCC from re-regulating the Internet under telephone rules. The matter is effectively tabled for Congress. Waxman responds by reversing his position, encouraging the FCC to go ahead and re-regulate, saying, "if Congress can’t act, the FCC must." 16The Wall Street Journal, "’Net Neutrality’ Is Left To FCC As Congress Fails To Take Action," by Amy Schatz, 9/30/10

And then came the November elections.

In a last-ditch effort to come up with a winning campaign issue (and likely, to distract attention from health care and the deficit), nearly 100 Democrats signed onto a "Net Neutrality Protection" campaign. None of them won their election. 17ReadWriteWeb, "What Do Last Week’s U.S. Elections Mean for Net Neutrality?", by Audrey Watters, 11/7/10 But a majority of Republicans did win in the House, and already, they have the FCC in their sights.

"It is imperative that we maintain the freedom of the Internet," said Texas Rep. Joe Barton, who is jockeying for chairmanship of the Energy and Commerce Committee. "I do not agree with the FCC’s attempt to regulate the Internet through Title II. We can certainly move legislation making that crystal clear that they do not have that authority. So we will be doing aggressive oversight of the FCC." 18Congress Daily/National Journal Tech Daily Dose, "Barton Outlines Aggressive Agenda As Possible Commerce Chairman," by Juliana Greenwald, 11/5/10

And this is where we stand at this writing. Congress is unlikely to act on the issue in its lame duck session. When the new Congress is sworn in in January, it is likely to consider action to limit the FCC’s authority to regulate broadband; but three out of the five FCC seats are held by Democrats. Both sides are vocalizing entrenched positions. So it is fairly certain that net neutrality is not an issue ready for a bipartisanship breakthrough.

What does it mean for business?

Like everything about net neutrality, it’s not a simple question to answer. If you’re a company with some depth to your pockets, an unregulated Internet with paid premium pipes could be a huge competitive edge. Your fast-loading content will make for the best user experience, putting your competition at a disadvantage they may not be able to overcome, if they can’t also ante up for the faster pipe.

If you’re an entertainment company, you have reason to be concerned, as you likely already are. Without net neutrality, nothing’s to stop the companies that control the pipes from creating their own premium entertainment channels. Even if some measure of neutrality is legislated, the idea of a "specialized services" exemption – put on the table by Google-Verizon and being given serious consideration all around – opens the door for the creation of proprietary fast lanes, and entertainment channels are likely the first that would be built. Companies that provide free Internet calls are in a similar boat. The precedent has already been set in Europe, where ISPs charge from $14 to $21 a month to users of the "free" Internet calling application. 19The New York Times, "Europe Takes Up Debate on Universal Internet Access," by Kevin J. O’Brien, 11/7/10

And obviously, if you’re an ISP, you have the opportunity to make a lot more money with very little effort if net neutrality goes away. Without laying one more inch of fiber, you can start collecting fees from anyone who wants their content delivered quickly.

So what about the rest of the business world? Software-as-a-Service companies in particular have a lot to worry about, but they have not been very vocal in the debate. Businesses that depend on cloud applications everyday have performance expectations that have to be met. If SaaS providers have to pay more to make sure their applications stay up to speed, it’s going to impact their business models – reducing profits, increasing costs to end users, or both.

The bottom line is, we already know that users start abandoning sites after waiting just four seconds for them to load. If the big competitor’s site loads faster, that’s where users are going to go. Better make sure you’re doing everything you can right now to make sure your site is a lean, mean speed machine.

What can businesses do to prepare?

Businesses can’t afford to put their heads in the sand and hope net neutrality works out in their favor. Even if net neutrality becomes a formal regulation, you’ll still be a more competitive business if you optimize your site for speed and performance.

"Not all companies are doing what they need to at a basic level to monitor and understand what the end-user experience is," says Anshu Agarwal, vice president of marketing for Keynote Systems. "A lot of it has to do with how you write the application and how it’s going through the browsers. There are a number of ways to address the issues for companies who really care about performance. Performance problems can be fundamentally solved today, no matter what happens with net neutrality."

A sound strategy for optimizing performance today and in the future includes following best practices in page construction – minding script and object placement, reducing external calls, keeping assets small – and following a robust and consistent performance monitoring program in the field at the end-user level, so performance issues and hiccups can be quickly identified and corrected. This strategy is doubly important on the mobile side, where networks are less consistent and speeds inherently slower.

What does it mean for end users?

The last mile ends at a user sitting in front of a computer, or with a smartphone in her hand, or perched in front of his Internet-connected TV. How will their lives change if the unratified First Amendment of the Internet is overturned?

For one thing, if they are a blogger, they will find their posts may not enjoy the speedy delivery they do now. They could end up as the second- or third-class citizens of the Internet – unless they’re willing to pay, perhaps to a savvy start-up that offers premium delivery.

On the consumption side, many fear the "cable-ization" of the Internet, that confusing and often cursed smörgåsboard of price plans and packages – basic, premium, HD, sports, etc. Whereas now for Internet access, consumers have only to make a provider/speed choice between cable, DSL, fiber and satellite, adding content into the mix could make for a truly daunting array of choices. And then there’s the question of what you do with your cable TV.

"At some point there’s saturation for consumers and they’re unwilling to continue to pay additional dollars because of limits and competing demands on disposable income," Agarwal says. "The trend for younger generations will be to move off of content provided on broadcast and cable, and onto the Web. That means choices will be made about what kind of access to entertainment and information will be bought."

The surge in Netflix streaming is evidence of that fact. In its last quarterly earnings report, Netflix CEO Reed Hastings made it clear that Netflix is now a streaming company. 20Fast Company online, "Netflix CEO: We’re a Streaming Company," updated 10/21/10 And in fact, a recent study by bandwidth equipment vendor Sandvine finds that more than 20 percent of downstream wire-line Internet traffic during peak hours is Netflix streaming. 21Sandvine, "Fall 2010 Global Internet Phenomena Report," 2010, page 2 This fact surely will not be lost on cable companies, whose response could very well be to raise broadband rates.

And then there is the citizen democracy perspective. Less-than-equal access to online content and communication channels could adversely impact public dialog and speech, according to Allen Hammond, a professor at Santa Clara Law and director of the Broadband Institute of California.

"We didn’t always have ways that work very well of finding out what everyone else thinks," Hammond says. "We do now, with Twitter and with Facebook and with a lot of other ways of communicating. But to the extent that those become managed by price points that may price certain people out of the market, or performance criteria that if they’re charged for, begin to price people out of the market, then we have a much less rich dialog among people and between people. And I think that’s something we have to watch out for."

Who is going to decide?

The stage is set for a showdown between the FCC and the Congress. More than likely, since the House is going to be busy first with orientation for its huge freshman class, and then with setting its new conservative agenda, the FCC will be the first to act.

"Unless there’s some cooperation between the House and Senate and within the House, I don’t think there’s going to be any legislation that makes it out," Hammond says. "There’s not going to be any legislation, and the solution to the issue of where the FCC’s authority comes from is going to fall back to the FCC and then be litigated through the court."

Whichever way it goes, it is likely that the Net as we know it is going to change significantly, and neither side is going to be completely happy.

The FCC’s 4+2 Broadband Principles

In August 2005, the FCC issued a policy statement formally adopting these principles:

To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet,

1. Consumers are entitled to access the lawful Internet content of their choice.

2. Consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.

3. Consumers are entitled to connect their choice of legal devices that do not harm the network.

4. Consumers are entitled to competition among network providers, application and service providers, and content providers. 22Federal Communications Commission, Policy Statement, FCC 05-151, adopted 8/5/05

In September 2009, Chairman Genachowski proposed to add two more principles:

5. Broadband providers cannot discriminate against services or applications by slowing them down.

6. Broadband providers must tell consumers how its engineers manage the network when it gets congested.23Wired Magazine’s "Epicenter" blog, "FCC Backs Net Neutrality – And Then Some," by Ryan Singel, 9/21/09

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