SEPTEMBER 2006 :: HOT TOPIC: NET NEUTRALITY

A Battle for Control of the Web

Congress recently waded into a heated debate that pits the titans of the new economy-companies like Google and Yahoo-against those of the old-AT&T, Verizon Communications, Time Warner and Comcast. The issue is "Net neutrality," and it has to do with how much control the companies that build and maintain the Internet pipelines-mostly telephone and cable companies-should have over the content that runs through those pipelines, and whether they can force Internet content providers to pay for the privilege.

The Internet is set up so that users can use any legal Web site or application, and all Internet traffic is treated equally. But downloading a two-hour video eats up far more bandwidth, or space on the Internet pipeline, than an email.

Telephone and cable companies have suggested that they may start charging fees to Internet-content companies, like Google and Yahoo, whose content is clogging up large portions of their bandwidth. Companies that refuse to pay might find their content moving at slower speeds over the pipeline than the content of those companies that do pay.

Who favors Net neutrality, and why? Most software and Internet companies have joined the cause. They have found valuable allies at both ends of the political spectrum, from the AFL-CIO to the Christian Coalition, which want to make sure that no one has the power to stop them from distributing their content over the Internet.

Proponents worry that unless net neutrality is enshrined into law, broadband providers will try to block or degrade Internet access for some content and services, particularly those, like online television streams or Internet phone service, that compete with the phone and cable companies.

Who opposes Net neutrality, and why? The big phone and cable companies, like AT&T, Verizon, Time Warner and Comcast, argue that there's no need for the government to get involved in regulating their business. They say they have no intention-nor would it be in their business interests-to block anyone's access to the Internet. But given the huge costs involved in building and expanding the broadband Internet pipeline, they don't see why content providers should be protected by the government from paying their share of the cost.

Opponents point out there are few examples of network providers blocking content from competing Web companies. Moreover, they say, the Federal Communications Commission has the authority to penalize any company that does so.

--Amir Efrati

The Facts

A U.S. Internet user with a typical cable-Internet service pays about $12 for one-megabit-per-second of download speed each month, compared with $4.20 in France and $1.73 in Japan, according to the Organization for Economic Cooperation and Development

Internet-service providers say a small set of subscribers use most of their total bandwidth. In 2003, 6% of Comcast subscribers used 78% of the company's bandwidth.

In 2005, the FCC fined Mebane, N.C., Internet-service provider and phone company Madison River $15,000 for blocking its DSL customers from using rival Web-based phone service Vonage.

Net-neutrality proponents enlisted the support of musicians Moby and REM's Michael Stipe, and a trio known as The Broadband, which released a song called "God Save the Internet" about the recent debate.

Between 1996 and 2005, the cable industry spent $105.3 billion in capital expenditures, which included new fiber-optic cables that deliver television, phone and broadband Internet, according to Kagan Research.

Points of View

'The Internet as we know it is facing a serious threat. Today the Internet is an information highway where anybody--no matter how large or small, how traditional or unconventional--has equal access. But the phone and cable monopolies ... want the power to choose who gets access to high-speed lanes and whose content gets seen first and fastest.'

--Eric Schmidt, CEO of Google

'What if a cable company with a pro-choice board of directors decides that it doesn't like a pro-life organization using its high-speed network to encourage pro-life activities? ... They could slow down the pro-life Web site ... and it would be legal.'

--Roberta Combs,
President, Christian Coalition of America

'We and the cable companies have made an investment, and for a Google or Yahoo or Vonage or anybody to expect to use these pipes free is nuts.'

--Edward Whitacre, CEO of AT&T

'This is a vigorously competitive marketplace that is working to benefit consumers. There is no need for new laws and regulations.'

--David L. Cohen, Executive vice president at Comcast

Our View

Last spring, users of Cox Communications' broadband Internet service found that they could no longer access Craigslist.org, the free classifieds site. Some bloggers immediately smelled a rat-Cox's parent company also owns newspapers, which compete with Craigslist for classified ads.

In a letter to this newspaper at the time, Sen. Ron Wyden cited the Cox incident as an example of why we need Net neutrality rules. Without them, supposedly, Verizon, Comcast, Cox and other Internet access companies would control users' Internet experience to the detriment of consumers.

Well, not quite. It turns out Cox had installed another company's security software to protect its users, and a bug in that software inadvertently cut users off from Craigslist. Nevertheless, this is a teaching moment. Net neutrality advocates say we need new regulations for the Internet to make it illegal to do what Cox was supposedly doing. Of course, Cox is innocent in this case-but this is precisely the point. Under a Net neutrality regime, Cox could well have been subject to investigation, sanction and lawsuits for what amounted to a bug in someone else's software. This is so because most versions of Net neutrality would create a legal obligation for companies like Cox to manage their networks in a "nondiscriminatory" manner. This may sound simple, but it's not.

As it is, the big phone and cable companies, which also offer Internet service, try to ensure that a user's experience is "optimized." They have every business incentive to do so if they want to keep those customers. That this sometimes seems hard to believe (say, when there are delays in downloading a streaming music video) shows how difficult a task that is. Exposing these companies to litigation or prosecution for not doing this to some Web site's satisfaction is not going to make the task easier.

Net neutrality only became a cause of big Web sites like Google and Yahoo when some phone companies suggested they might want to charge Google or other content providers for priority access to their networks.

No way, shouted Google and its allies, many of which have fabulously rich stock prices. Far better to charge individual consumers. Well, the American Consumer Institute, a Washington think tank, actually asked an economist to look into whether this is true. In his 40-page paper, Larry Darby's answer is that pricing flexibility is good for consumers.

He cites the newspaper industry-in which the costs of providing news are split between readers and advertisers-as an example of the kind of "multisided market" that can develop when businesses are free to charge whoever is most willing to pay.

Net neutrality's proponents seem to have failed to generate any legislative momentum for Internet regulation this year, but its advocates are already looking forward to a new Congress and the possibility that the Democrats could take control of the House, Senate or both after this November's elections. So Net neutrality will live on as a political threat, combining as it does the economic self-interest of Google, et al., and the egalitarian pretense supplied by such pro-regulation voices as Moveon.org. What everyone should understand is that consumer benefit has nothing to do with it.