Decoding the Network Neutrality Debate in the United States Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law Penn State University.

Decoding the Network Neutrality Debate in the United States

Rob Frieden, Pioneers Chair and Professor of Telecommunications and LawPenn State University

email: [email protected]; web site: http://www.personal.psu.edu/faculty/r/m/rmf5blog site: http://telefrieden.blogspot.com/

A Presentation at Diverging Electronic Communications Regulatory Trends in EU and US

Florence School of Regulation, European University InstituteFlorence, Italy

21 June 2010

Explaining the Concepts—Explaining the Concepts—Network NeutralityNetwork Neutrality

Internet Service Providers (“ISPs”) want to diversify and engage in price and Internet Service Providers (“ISPs”) want to diversify and engage in price and quality of service discrimination downstream among end users and upstream quality of service discrimination downstream among end users and upstream among content providers. among content providers.

Deep Packet Inspection and other innovations make it efficient and economical for Deep Packet Inspection and other innovations make it efficient and economical for ISPs to operate non-neutral networks offering “better than best efforts” traffic ISPs to operate non-neutral networks offering “better than best efforts” traffic routing, variable quality of service, Digital Rights Management, and all kinds of routing, variable quality of service, Digital Rights Management, and all kinds of “traffic shaping.”“traffic shaping.”

Advocates for network neutrality want a non-discrimination mandate, but explicit Advocates for network neutrality want a non-discrimination mandate, but explicit common carrier regulatory authority does not exist. common carrier regulatory authority does not exist.

Advocates for net neutrality claim ISPs have the incentive and ability to block, Advocates for net neutrality claim ISPs have the incentive and ability to block, delay, or otherwise thwart the delivery of content in violation of consumers’ delay, or otherwise thwart the delivery of content in violation of consumers’ reasonable expectation of an open and free Internet. reasonable expectation of an open and free Internet.

How this debate plays out will have a major impact on the scope of lawful Internet How this debate plays out will have a major impact on the scope of lawful Internet regulation as well as the accessibility and affordability of Internet-delivered regulation as well as the accessibility and affordability of Internet-delivered content.content.

How does this threat to Internet freedom affect you? Small businesses—The little guy will be left in the "slow lane" with inferior Internet service, unable to compete. Innovators with the next big idea—Startups and entrepreneurs will be muscled out of the marketplace by big corporations that pay Internet providers for the top spots on the Web. Bloggers—Costs will skyrocket to post and share video and audio clips—silencing citizen journalists and putting more power in the hands of a few corporate-owned media outlets. Google users—Another search engine could pay dominant Internet providers like AT&T to guarantee another search engine opens faster than Google on your computer. Ipod listeners—A company like Comcast could slow access to iTunes, steering you to a higher-priced music service it owns. Online shoppers—Companies could pay Internet providers to guarantee their online sales process faster than competitors with lower prices—distorting your choices as a consumer. Telecommuters—When Internet companies like AT&T favor their own services, you won't be able to choose more affordable providers for online video, teleconferencing, Internet phone calls, and software that connects your home computer to your office. Parents and retirees—Your choices as a consumer could be controlled by your Internet provider, steering you to their preferred services for online banking, health care information, sending photos, planning vacations, etc. Political groups—Political organizing could be slowed by a handful of dominant Internet providers who ask advocacy groups to pay "protection money" for their Web sites and online features to work correctly. Nonprofits—A charity's website could open at snail-like speeds, and online contributions could grind to a halt if nonprofits don't pay Internet providers for access to "the fast lane."

What They've Got Planned

The threat to an open internet isn't just speculation -- we've seen what happens when the Internet's gatekeepers get too much control. These companies, even, have said as much about their plans to discriminate online.

Ed Whitacre of AT&T told BusinessWeek in late 2005:

Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?

It's Already Happening

Such corporate control of the Web would reduce your choices and stifle the spread of innovative and independent ideas that we've come to expect online. It would throw the digital revolution into reverse. Internet gatekeepers are already discriminating against Web sites and services they don't like:

In 2004, North Carolina ISP Madison River blocked their DSL customers from using any rival Web-based phone service. In 2005, Canada's telephone giant Telus blocked customers from visiting a Web site sympathetic to the Telecommunications Workers Union during a

contentious labor dispute. Shaw, a major Canadian cable, internet, and telephone service company, intentionally downgrades the "quality and reliability" of competing Internet-phone

services that their customers might choose -- driving customers to their own phone services not through better services, but by rigging the marketplace. In April, Time Warner's AOL blocked all emails that mentioned www.dearaol.com -- an advocacy campaign opposing the company's pay-to-send e-mail scheme.

This is just the beginning. Cable and telco giants want to eliminate the Internet's open road in favor of a tollway that protects their status quo while stifling new ideas and innovation. If they get their way, they'll shut down the free flow of information and dictate how you use the Internet.

Stakes and MistakesStakes and Mistakes Converging and concentrating information, communications and Converging and concentrating information, communications and

entertainment (“ICE”) markets raise questions about the viability of self-entertainment (“ICE”) markets raise questions about the viability of self-regulation and an unfettered marketplace of ideas.regulation and an unfettered marketplace of ideas.

ICE technologies defy compartmentalization, yet mutually exclusive ICE technologies defy compartmentalization, yet mutually exclusive definitions apply and trigger different regulatory treatment.definitions apply and trigger different regulatory treatment.

Technological and marketplace convergence means that three screens (TV, Technological and marketplace convergence means that three screens (TV, computer monitor and wireless device) can display the same content on computer monitor and wireless device) can display the same content on demand.demand.

The FCC seems unable to apply more than one model to a single venture The FCC seems unable to apply more than one model to a single venture even when it delivers “triple play” services. Creative statutory even when it delivers “triple play” services. Creative statutory interpretation and stretched jurisdiction recently rejected by an appellate interpretation and stretched jurisdiction recently rejected by an appellate court.court.

Despite the view that the Internet qualifies for limited regulation, the FCC Despite the view that the Internet qualifies for limited regulation, the FCC has intervened extensively.has intervened extensively.

The FCC has issued a consultative document that outlines a proposal to The FCC has issued a consultative document that outlines a proposal to establish enforceable rule designed to promote nondiscrimination and establish enforceable rule designed to promote nondiscrimination and consumer freedomconsumer freedom.

The Convergence QuandaryThe Convergence Quandary

ISPs combine conduit and content.ISPs combine conduit and content.

ISPs have speaker rights, but the First Amendment and other ISPs have speaker rights, but the First Amendment and other legislated free speech rights do not cleave solely between ISPs and legislated free speech rights do not cleave solely between ISPs and their subscribers. their subscribers.

In the U.S. ISPs gladly abandon editorial control to qualify for “safe In the U.S. ISPs gladly abandon editorial control to qualify for “safe harbor” exemption from tort and copyright infringement liability, harbor” exemption from tort and copyright infringement liability, but they also use such control to create “walled gardens” of content.but they also use such control to create “walled gardens” of content.

Current media models, such as print, cable television and telephony, Current media models, such as print, cable television and telephony, do not fully work for the Internet. do not fully work for the Internet.

Network neutrality seeks to preserve and open and free marketplace Network neutrality seeks to preserve and open and free marketplace of ideas, but how can ISPs lawfully manage their networks and of ideas, but how can ISPs lawfully manage their networks and afford to make costly upgrades?afford to make costly upgrades?

The FCC’s 4 +2 Network Freedoms/Proposed Rules The FCC’s 4 +2 Network Freedoms/Proposed Rules

In 2005 the FCC articulated four Internet “principles”:In 2005 the FCC articulated four Internet “principles”:

(1) consumers are entitled to access the lawful Internet content of their (1) consumers are entitled to access the lawful Internet content of their choice; choice;

(2) consumers are entitled to run applications and services of their choice, (2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; subject to the needs of law enforcement;

(3) consumers are entitled to connect their choice of legal devices that do (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and not harm the network; and

(4) consumers are entitled to competition among network providers, (4) consumers are entitled to competition among network providers, application and service providers, and content providers. application and service providers, and content providers.

In November, 2009 the FCC proposed to codify as rules the 4 Network In November, 2009 the FCC proposed to codify as rules the 4 Network Freedoms plus require Nondiscrimination and Transparency for both wired Freedoms plus require Nondiscrimination and Transparency for both wired and wireless networks. and wireless networks.

Can the FCC Lawfully Regulate Internet Service? Can the FCC Lawfully Regulate Internet Service?

The FCC uses service definitions that create a dichotomy between The FCC uses service definitions that create a dichotomy between regulated telephone services and largely unregulated information regulated telephone services and largely unregulated information services.services.

Despite a regulatory safe harbor for information services, the FCC Despite a regulatory safe harbor for information services, the FCC has invoked ancillary jurisdiction to impose burdens on ISPs, e.g., has invoked ancillary jurisdiction to impose burdens on ISPs, e.g., providers of Internet-delivered telephone calls must contribute to providers of Internet-delivered telephone calls must contribute to universal service funding and comply with several telephone universal service funding and comply with several telephone company regulations.company regulations.

The FCC rejected Comcast’s claim of a right to thwart, delay and The FCC rejected Comcast’s claim of a right to thwart, delay and degrade certain bitstreams as legitimate “network management” degrade certain bitstreams as legitimate “network management” even when congestion did not exist. even when congestion did not exist.

An appellate court reversed the FCC’s assertion of jurisdiction An appellate court reversed the FCC’s assertion of jurisdiction calling into question what enforceable rules, if any, the FCC can calling into question what enforceable rules, if any, the FCC can establish.establish.

Impact of Net Neutrality on Content ProvidersImpact of Net Neutrality on Content Providers

Positive ImpactPositive Impact

A nondiscrimination requirement attempts to maintain a level competitive playing field in the A nondiscrimination requirement attempts to maintain a level competitive playing field in the marketplace for content against the incentive and ability of ISPs to favor affiliates and protect revenue marketplace for content against the incentive and ability of ISPs to favor affiliates and protect revenue streams, Comcast’s pay per view/video on demand vs. IPTV and P2P file transfers.streams, Comcast’s pay per view/video on demand vs. IPTV and P2P file transfers.

If Enron employees could create artificial bottlenecks and congestion in the switching and routing of If Enron employees could create artificial bottlenecks and congestion in the switching and routing of electrons, then ISPs can achieve similar outcomes for Internet packets. Net neutrality could prevent, or electrons, then ISPs can achieve similar outcomes for Internet packets. Net neutrality could prevent, or penalize “dirty tricks.”penalize “dirty tricks.”

““Walled Gardens” of easily accessed content not likely to support struggling new artists.Walled Gardens” of easily accessed content not likely to support struggling new artists.

Negative ImpactNegative Impact

Both users and content providers might want (and be willing to pay for) “better than best efforts” routing delivered to computer desktop monitors; faster delivery of “mission critical” bits.

Likely to trigger regulatory uncertainty, litigation and claims that government involvement creates disincentives for private investment. The Internet has thrived with government incubation and early privatization.

Exclusive access arrangements can serve lawful promotion and marketing goals.

Net Bias Versus Reasonable Price and Service Net Bias Versus Reasonable Price and Service DiscriminationDiscrimination

Impermissible Net BiasImpermissible Net Bias

Deliberate Packet Loss

Creating Artificial Congestion, e.g., 99/1 partition of premium and regular bit delivery.

Targeting Large Volume ContentGenerators for Punishment or Extortion

Most Types of Port Blocking (but not to control spam and denial of service attacks)

Unilaterally Imposing Upstream and Downstream Rules That Violate Existing Service Level Agreements

Affiliate Favoritism That Violates SLAs, Fair Trade and Antitrust Laws

Fees for Overriding Firewalls and Filters

Permissible Network BiasPermissible Network Bias

Variable Bandwidth and Throughput

Bandwidth Partitioning

Metered Service

Better Than Best Efforts Routing

Akamai-type Enhanced Traffic Routing and Management

Special or Exclusive Content Deals

Conclusions and Recommendations Conclusions and Recommendations

The next generation Internet will not offer a one size fits all The next generation Internet will not offer a one size fits all “network of networks.” Flexibility in pricing, service provisioning “network of networks.” Flexibility in pricing, service provisioning and quality of service options can make economic sense.and quality of service options can make economic sense.

However, deliberate blocking, or degrading traffic violate many However, deliberate blocking, or degrading traffic violate many nations’ communications laws and possibly non sector specific nations’ communications laws and possibly non sector specific consumer protection law and competition policy. consumer protection law and competition policy.

Better than best efforts is not a contradiction, nor does it always Better than best efforts is not a contradiction, nor does it always constitute unlawful discrimination.constitute unlawful discrimination.

ISPs should fully disclose terms and conditions as well as report on ISPs should fully disclose terms and conditions as well as report on network usage. Requiring transparency does not foreclose net network usage. Requiring transparency does not foreclose net flexibility, but it can prevent Enron-type gaming and induced flexibility, but it can prevent Enron-type gaming and induced congestion. congestion.

Additional Research QuestionsAdditional Research Questions

Is Net Neutrality a solution in search of a problem? What potential exists Is Net Neutrality a solution in search of a problem? What potential exists for anticompetitive practices in switching and routing content? Does a for anticompetitive practices in switching and routing content? Does a bottleneck, or market failure exist in first or last mile access to the Internet, bottleneck, or market failure exist in first or last mile access to the Internet, or farther upstream?or farther upstream?

Would Google have any problems finding alternative ISPs to carry its Would Google have any problems finding alternative ISPs to carry its traffic if AT&T refused? Would start-up ventures have the same traffic if AT&T refused? Would start-up ventures have the same opportunities? opportunities?

Would net neutrality rules create disincentives for investment in next Would net neutrality rules create disincentives for investment in next generation networks?generation networks?

Can non-sector specific regulators and the courts remedy any actual abuses Can non-sector specific regulators and the courts remedy any actual abuses in lieu of in lieu of ex ante ex ante regulation?regulation?

What is the scope of permissible jurisdiction over ISPs that fits within What is the scope of permissible jurisdiction over ISPs that fits within existing legislative authority and does not violate freedom of speech rights?existing legislative authority and does not violate freedom of speech rights?