RIP Net neutrality?

The concept of network neutrality centres on the idea that all traffic running over the network, generally taken to be the Internet, should be treated in the same way without discrimination, and without some content being given priority.

Inherent to this view is the belief that a neutral network promotes innovation, because network operators are not in a position to dictate how that network is used or which Web sites or online services should be favoured. Consumers should get to decide what they want without their choice being skewed by third-party commercial considerations.

Net neutrality advocates claim network providers should not prevent certain types of applications from running over the network, or ban specific devices from trying to connect to it. ISPs should also not favour traffic from one online service or content supplier over another as this may enable a larger player with deeper pockets to become dominant, even if its service is inferior in quality. Such an approach could also inhibit the entry of new players onto the market, which is anti-competitive and goes against freedom of trade principles.

However, even though the US Federal Communications Commission (FCC) came out in favour of the principle of network neutrality as early as 2004, followed by the US Federal Trade Commission at the end of 2005, over the last year or so, network operators such as AT&T and BellSouth have been raising the spectre of tiered Internet services.

Although few details have been forthcoming so far, the proposition mooted is that online content and service providers should pay a tariff to ensure their traffic is given priority over other non-paying suppliers. Alternatively, such providers could be charged for faster transmission if their offerings are particularly bandwidth-hungry. Or the network operators themselves could team up with their own favoured suppliers to provide premium access offerings.

The fear here, however, is that those providers which do not sign partnership deals, refuse, or are too small to pay the required fee, could find that access to their content and services are extremely slow or even blocked. Operators have repeatedly pledged that they will not block traffic or censor certain Web sites, but point out that they are having to invest billions of dollars to upgrade their networks to cope with future bandwidth-intensive applications such as music, TV and movies.

A tiered Internet, therefore, would not only provide them with the necessary revenues to upgrade infrastructure, but also ensure that service quality could be maintained for all classes of users, whether simply downloading email or using peer-to-peer files sharing applications such as BitTorrent to download movies.

Some experts have a different take on what might be motivating network providers to push for tiered Internet services. "Network operators are beginning to question what their business model is, what their role in the industry is and how they can make profits," says Ian Fogg, a senior analyst at Jupiter Research. "The broadband market is very price competitive, and while the operators say that they have to have cheap broadband products to win and keep customers, they're also asking themselves how they can boost revenues and manage their costs."

Although sales are still currently growing in line with rising subscriber numbers, once adoption hits saturation point, the issue for network providers becomes more one of customer retention than acquisition in a market that has become commoditised. As a rule, this generally sees companies cutting prices still further to remain competitive or providing additional services as a means of generating both loyalty and new revenue streams.

To make matters even more tricky for the operators in the US and Canada, however, more customers use cable broadband than DSL broadband, which provides scant opportunity for additional revenue generation, while in Europe, the opposite is true.

On both sides of the pond, however, network providers are also starting to see a raft of new players coming onto the market offering different content and services over the very broadband lines that they provide, the most worrying ones being voice-over-IP and video streaming.

"In content terms, wherever the operators turn, there are companies that will compete with them directly. But they're thinking ‘we built the Internet so how do we make money from it now' and that's what the debate's about. They're thinking. 'Why should the Googles of this world be able to deliver their services virtually for free, when we put all the money into this?'" explains Michael Philpott, principal broadband analyst at Ovum.

As a result, the issue of network neutrality is as much about revenue protection as it is about anything else. But the debate has reached such fever pitch in the US that attempts are now being made to enshrine the concept in law. In late 2005, various provisions were included in several Congressional draft bills as part of ongoing proposals to reform the 1996 Telecommunications Act. One such provision directs the FCC to keep an eye on any incidents that could be construed as violations of network neutrality principles and to report its findings to Congress.

By May 2006, however, following intense lobbying from online content and service providers such as Amazon and Microsoft, the US House of Representatives Judiciary Committee released a five-page bill to likewise embed several new provisions into existing federal anti-trust legislation. The provisions in the Internet Freedom and Non-discrimination Act would make it illegal under antitrust law for network operators to impose fees on online content and services providers or fail to provide their own services on "reasonable and non-discriminatory terms".

The goal, according to committee chairman Jim Sensenbrenner, is to "provide an insurance policy for Internet users against being harmed by broadband network operators abusing their market power to discriminate against content and service providers".

Government statistics indicate, says Sensenbrenner, that 98 percent of Americans have, at most, two choices of broadband provider, which means that this "virtual duopoly" is ripe for anti-competitive practices. As a result, a "clear antitrust remedy is needed".

While various other measures have also been put forward to advance the cause, dissent is starting to emerge in quarters other than the network operators themselves, which could slow the proposed legislation down. In mid-May, 34 of the largest hardware vendors, including 3M, Cisco, Corning and Qualcomm, many of which are key suppliers to the telco industry, sent a letter to Congress opposing the provisions.

Their argument was that: "It is premature to attempt to enact some sort of network neutrality principles into law now. Legislating in the absence of real understanding of the issue risks both solving the wrong problem and hobbling...