Net Neutrality Debate: The Mistake that Keeps on Giving

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Again, a long post on Net Neutrality.  Again, my apologies.

The fallout continues from FCC Chairman Julius Genachowski’s call to initiate new rulemaking to implement Net Neutrality principles promised by candidate Obama during the campaign.

The bottom line:  what proponents wish with all their hearts was a simple matter of mom and apple pie (“play fair, work hard, and get ahead” as Craiglist’s Craig Newmark explains it) is in fact a fight for leverage among powerful interests in the communications, software, and media industries.  Net neutrality, if nothing else, is turning out to be a complex technical problem—technical in both the engineering and regulatory sense.

As I write in Law Four of The Laws of Disruption, there’s nothing neutral about the rules under which Internet provisioning is regulated today, with broadband offered by phone companies subject to one set of rules (“common carrier”) and access offered by everyone else subject to, for the most part, no rules at all.  (Wireless Internet providers, who have far less bandwidth to offer, greatly restrict user behavior, but Genachowski indicated they too would be brought under the neutrality principles he outlined.)

There’s also nothing rational about the current rules.  That’s becoming abundantly clear as neutrality proponents start to back away from the firestorm they helped fund and as the messy details of current network management behavior becomes clearer.  As Vishesh Kumar and Christopher Rhoads of The Wall Street Journal noted in late 2008, Microsoft, Yahoo and perhaps Amazon have quietly backed away from their initial enthusiasm for more FCC oversight of Internet access and traffic management.  Microsoft’s official position:  “Network neutrality is a policy avenue the company is no longer pursuing.”

Nor should they.  Even as the regulatory process grinds on at its naturally-slow pace, Moore’s Law continues to change the technological landscape with breathtaking speed.  Which is a good thing.  Despite all the think-tank and lobbyist hand-wringing, every aspect of digital life has improved dramatically in the last decade—access options, connections speeds, applications, content, devices, you name it.  It’s possible that in the future all of this could come to a grinding halt because of uncompetitive and ultimately irrational behavior by a few market dominators.  But why legislate ahead of a problem in the area most certain to change dramatically regardless of regulation?

Here are just a few of the most recent developments:

  • Google complains to the FCC about Apple’s rejection of Google Voice from the iPhone (The full letter, originally redacted, is now available here)
  • AT&T complains to the FCC about Google Voice’s refusal to connect certain calls (a luxury that common carriers don’t have)
  • Seventy-Two Democrats urge the FCC to tread carefully into Net Neutrality, encouraging Genachowski to “avoid tentative conclusions which favor government regulation.”
  • Wireless network providers object to being included under the Chairman’s proposed six rules for Net Neutrality (“The principles I’ve been speaking about apply to the Internet however accessed, and I will ask my fellow Commissioners to join me in confirming this.”)

AT&T’s complaint about Google Voice is informative.  On October 8th, the FCC announced it was investigating Google Voice’s treatment of calls to certain rural areas, where under FCC rules common carriers are required to pay higher connection fees to complete calls from their subscribers.  These fees are intended to help offset the extra costs rural phone companies must otherwise absorb in order to serve a dispersed customer base.  Unfortunately, as everyone knows, the local companies have abused that rule by hosting a variety of non-local services, including free conference call services and sex chat lines and then splitting the profits with the service providers.

(The technical implementation of Google Voice is largely confidential.  The application, among other features, provides its users a single phone number and  routes incoming calls to any phone device they have and places outbound calls managed by Google (through its wholesale partner, for free or a small charge.  Free, that is, in the sense of being supported, of course, by ads.)

The response from Google?  Google Voice, as the company acknowledges, “restricts certain outbound calls from our Web platform to these high-priced destinations.”  But Google Voice is a “Web-based software application,” not a “broadband carrier,” and so is not subject to common carrier rules or existing Net Neutrality principles.  “We agree with AT&T,” Google says, “that the current carrier compensation system is badly flawed, and that the single best answer is for the FCC to take the necessary steps to fix it.”

Not surprising, AT&T argues that Google is violating both common carrier and Net Neutrality principles.  AT&T reports that its tests of Google Voice indicate the service blocks calls to ALL numbers of the rural exchanges, not just those for sex chat lines and teleconferencing services.  (Note in the quote above that Google says only it restricts calls to “high-priced destinations,” leaving it unclear whether by “destination” they mean the over-priced services or the actual area codes.)

The argument between the two companies breaks down to two simple but largely irresolvable questions:  (1) do Internet phone applications that look like traditional phone services, but which rely on customer-leased connections to initiate and terminate calls, need to abide by common carrier rules? (2) does non-Neutral behavior by an application mimicking many of the core functions of a broadband provider violate Net Neutrality, or do the principles (and those proposed by Genachowski) apply only to providers of last mile service?

Regardless of the answers the FCC reaches, here’s the point:  common carrier rules cannot be untangled from the Net Neutrality debate.  Personally, I believe consumers would be better off without either, a position neither company has publicly taken.

In a seemingly unrelated story, Wired’s Ryan Singel reports that Google appears to pay nothing to broadband carriers for its Internet connections.  This despite the fact that Google, in significant part because of its ownership of YouTube, may now account for as much as 10% of all Internet traffic.  That’s because during the great telecom meltdown that followed from the dot com boom, the company wisely snapped up a great deal of unused new fiber optic capacity on the cheap.  Google is now trading (the technical term is “peering”) that capacity with broadband providers in exchange for the company’s own connection.

The story has some interesting quotes from Arbor Network’s chief scientist, Craig Labovitz.  “[T]he real money is in the ads and the services in the packets, not in moving bits from computer to computer,” he told Wired.  Then this:  “Who pays whom is changing.  All sorts of negotiations are happening behind closed doors.”  Most of the net’s architecture, as Singel notes, “remains a secret cloaked in nondisclosure agreements.”

Don’t get me wrong.  I think Google is a great company that has introduced a tremendous range of innovative products and services to consumers, nearly all of which are paid for by an advertising model (which increasingly raises the ire of privacy advocates, but that’s another story).  Consumers, as I said before, have benefited from the technical and business decisions of the companies now publicly airing their dirty laundry in the Net Neutrality fight.  We get more stuff all the time, we get is faster and, for the most part, the cost is either holding steady or declining.

But irony, as Bart Simpson once said, is delicious.  The peering arrangements almost certainly means that Google traffic is getting priority.  Not necessarily transit priority—that is, special privilege through the network.  But they do get what Internet Research Group’s Peter Christy calls “ingress priority,” that is, how you get into the provider’s network.  As Christy says, “If you go through some kind of general exchange then it is sort of a free for all and if traffic is heavy there may well be congestion and packet loss at this point.  With specific private peering you can assure that your traffic will get into the network unimpeded.”

It may not be a “fast lane,” in other words.  But it is a dedicated on-ramp.

So, does ingress priority through peering arrangements violate Net Neutrality?

Consider this explanation for why Neutrality is imperative:  “Some major broadband service providers have threatened to act as gatekeepers, playing favorites with particular applications or content providers, demonstrating that this threat is all too real.”

Guess who?  That’s right—it’s from Google’s own policy blog from 2008. The post goes on: “It’s no stretch to say that such discriminatory practices could have prevented Google from getting off the ground — and they could prevent the next Google from ever coming to be.”

Well I think that’s an awfully big stretch—now, and in 2008.  Nonetheless, if the company continues to beat the drum for completely open gates, they will find themselves increasingly hard-pressed to justify peering arrangements, content restrictions on use of their applications, and other deals aimed at improving performance for Google applications.  “Such discriminatory practices” could just as easily prevent new services—competitors to Google—from “getting off the ground.”  AT&T’s complaints that Google is straddling both sides of the fence sound increasingly accurate, regardless of their motivation for saying so.

(At the end of 2008, recall, the company was similarly forced to beat a rhetorical retreat when it was revealed that it had been negotiating peering arrangements for edge-caching devices—that is, for co-locating Google servers with broadband provider equipment to ensure faster access to Google content when consumers called for it.  What seemed again a contradiction to Net Neutrality principles was explained weakly as a “non-exclusive” arrangement that any content provider could also negotiate.  Any content provider with money to spend on caching servers and unused fiber optic cables, that is.)

It’s just going to get worse.  The FCC can no more likely navigate its way through these murky waters than it can decide whether an errant nipple on a live broadcast violates its broadcast decency rules.  (An appellate court recently threw out the Janet Jackson fines.)  The Commission is quite simply the worst possible arbiter of these complex business and technical problems.

So here’s an open invitation to Google, AT&T, Apple, and everyone else in the Net Neutrality slugfest.  Let’s call the whole thing off, before someone—that is, consumers—really gets hurt.