Network Neutrality and an Internet with Vision

In recently-aired plans by telephone companies, content providers who are willing to pay extra would get their content delivered at a higher bandwidth. While it's easy to wax indignant over telephone companies' presumptuousness in deciding what packets should travel at what times, it's harder to step back and take in the economic issues driving the proposed change. And there are technical questions about it as well. On Digg.com

The rhetoric is whipping through the air in Washington and racing at a dizzying pace across the Internet, as highly publicized hearings on a "network neutrality" bill were held on February 7. Vint Cerf testified that the issue would determine "the future of the Internet." In opposing the bill, the incumbent Bell telephone companies suggest that without their paternal care, the Internet doesn't have a future in this country.

The target of the bill (introduced by Senator Ron Wyden, D-Oregon) is recently-aired plans by telephone companies, which I reviewed a few weeks ago, to be decidedly non-neutral on how they deliver Internet traffic. Content providers willing to pay extra would get their content delivered at a higher bandwidth.

While it's easy to wax indignant over telephone companies' presumptuousness in deciding what packets should travel at what times, it's harder to step back and take in the economic issues driving the proposed change. And there are technical questions about it as well. All of which I'll try to cover in this article.

Pay before you play

The most telling moment in the Senate hearings, philosophically, came during a presentation by J. Gregory Sidak of Georgetown University. He said that ideally, each "product" going over an Internet connection would pay its fair share of the cost of the connection. This principle places all communication at the mercy of financial considerations. Taken to its conclusion, the principle would eliminate any communication that lacks a financial justification.

And that goes, of course, for communications that have no business model yet, but could have one in the future. With apologies for restating the familiar, I have to remind readers that the Internet and the World Wide Web started as noncommercial initiatives.

Sidak's written testimony (PDF) pretty baldly indicates that the value of each communication (an online chat, a file transfer, etc.) should be determined by the company providing the connection. What legal or economic doctrine, I ask, justifies that assertion?

Sidak also explains, through a principle known as "Ramsey pricing," that companies should use their control over highly desirable content--such as TV broadcasts--in order to lower prices for infrastructure. For example, everybody could get to pay a little less for their telephone line is some pay a premium to get HDTV sporting events over that line. Even better (one might think) is that everybody could pay less for the line because Google and Yahoo! pay extra to deliver ads. This is certainly nice, but the catch is that the strategy gives the one company--the telco--control over the line, the broadcast, and (indirectly) the choice of ads.

To understand the conflict over network neutrality, we should consider the architecture of the Internet. Sometimes the builder determines the architecture. For instance, when I made a major addition to my house several years ago, I talked to a building contractor who said, "I won't work with the design your architect has chosen." We made major changes to the architecture, on his advice. The lesson is to choose one's builder carefully. And given today's telephone companies, I will ask later in this article--are we stuck with this builder?

Fiber without vision

To sell their two-tier Internet proposal, the telephone companies hold out a juicy prize: an optical fiber network that would transmit traffic through light waves with a hundred times greater bandwidth than we now have, even with cable modems or DSL.

As the hearings started, the two sides faced each other off with dramatic rhetorical differences: the network neutrality side tried to take the moral high ground--talking of openness, ethics, and vision--while the telephone company supporters asked pragmatically how the building of the next generation of networks would be funded. I thought the hearings became most useful and interesting when the network neutrality side picked up the theme of the telephone companies and addressed the economic aspects. The critics of the telephone companies thereupon pointed out that:

• Telephone networks have traditionally been built by billing the users (not the content providers).

• The Bells have repeatedly promised the same thing they're promising now without actually building the network (see the new book, The $200 Billion Broadband Scandal).

• Content providers already fund the network through their own ISP and telephone line fees.

I'm cocky enough to add here my own assessment of the chances for an optical fiber network. The telephone company strategy of charging content-providers will, I think, hold back fiber upgrades--not promote them.

The telephone companies will evaluate customers at each central office and decide whether the demographics of that neighborhood can pay back their investment through orders of video or other premium services; roll-outs will be leisurely to say the least. I predict the companies would also play games with their existing servers and pipes to ration content. They will milk their existing lines to the hilt before investing in optical fiber. That's what happens when a company is driven by incremental business models rather than some kind of vision.

Yeah, sure, the president of the United States Telecom Association, Walter McCormick, talked in his testimony (PDF) of the benefits his proposed network could hold for telemedicine and telecommuting. But I doubt the pricing structure he wants would lead to those valuable applications.

In theory, hospitals could pay for telemedicine by reducing costs and using it to attract more clients. But making them anticipate and account for bandwidth charges puts more barriers in the way of this difficult culture change.

And does anybody believe businesses would pay extra to promote telecommuting among their staff? They don't support telecommuting now, except perhaps for a handful of star performers.

So the telephone company proposal leads squarely to better bandwidth for action games and sports channels.

Why do I take such a cynical attitude toward the phone companies? I've been studying them for years. They are conservative with their investments. Certainly they've sunk a lot of money into their infrastructure--few companies have invested more than they have. But they've done it with the security of monopoly status. They invest only on the basis of well-understood paybacks. You can't imagine a phone company acting with the boldness of Microsoft jumping into the consumer electronics business, or Google offering WiFi networks to communities.

Technical issues: what are the telcos betting on?

Maybe you don't approve of my pre-judging telephone company plans. Well, then, let's look at the technology. I'm not convinced it can even deliver what the telephone companies want.

There's nothing new about using smart routing to direct different types of traffic along different paths and get different quality of service. ISPs and major Internet users have been doing it for a long time. But they do it for systems that are directly connected, and Internet users do it on generally friendly systems.

Plans to charge different rates on an Internet-wide basis are a horse of a different color. These plans assume that different users can be recognized by addresses or by some kind of tagging. They also assume that a single router at the telephone company can reliably shape the bandwidth to a large number of recipients. Both assumptions, I think, are unviable.

Both addresses and other tags are easy to spoof. To ensure that they are favoring traffic from the people who paid them to expedite it, telephone companies would have to make some major architectural change to the Internet, essentially creating their own new network. I wouldn't mind their creating a new network based on any system they like (Internet protocol designer David Clark has suggested doing so), but they shouldn't call it Internet traffic.

I also don't believe telephone companies can predict user behavior well enough to deliver the quality of service they promise. Quality of service has been tried for years; it works only under strictly controlled conditions, normally on local area networks. Gary Bachula of the Internet2 research project summarized this finding in his testimony (PDF) at the hearings. Routers just don't know what users are going to do, or when. An unexpected spike in usage could topple the carefully constructed tower of smart protocols that were supposed to guarantee premium service.

Industry issues: what else are the telcos betting on?

Preliminary appeals to the sanctity of the Internet suggest that content providers will resist telephone company plans. But if the telcos get to institute the plans, I predict the big Internet sites will come around.

AOL has been in the entertainment business since its merger with Time Warner; announcements by Google show that it wants to get in too. And other large Internet companies are showing interest. I've looked at their possible business model in an article on a possible "webcasting" treaty. This treaty is a mysterious proposal so unintuitive that it looks like it was designed by a Geneva institute bureaucrat rather than by anybody in the Internet industry, but it is actually backed by major portals.

The proposed treaty on webcasting sets the legal status of Internet portals to be like TV or radio broadcasters. It further gives them rights over fixation (that is, making a copy of Internet content) and reuse. It seems to be a way of guaranteeing a revenue stream for the mere service of providing a host computer for streaming content. Note that if Google became a monopoly, it could do what the phone companies want to do: charge money to promote some search results over others. (Other search engines have done it.)

Will a reliance on entertainment strengthen the Internet portals? Well, news from the record industry's Grammy awards says that viewers have declined for the over the past few years. This is just one indication, along with declining movie attendance and CD purchases, that content is not king (as Andrew Odlyzko has been saying for years) and that it will be hard to get rich by skimming off profits from entertainment.

I can sympathize with the Internet portals' distress. We have entered a period of intense competition among Microsoft, Google, Yahoo!, AOL, and other companies with offerings that could quickly become interchangeable. This is great for the public. We enjoy a wealth of new services verging on a second dot-com boom. But it's exhausting and anxiety-provoking for the companies' staff and management. It would well lead to a pact between content providers and telephone companies to slow the pace of innovation.

Alternatives to the Bell company proposal

None of us like to feel we have to sit there and take it when anybody dishes out a bitter feast. So a lot of people raise hopes of bypassing the Bells and bringing high bandwidth to the public a different way. Some have gone so far as to declare the incumbent telephone companies hopelessly outmoded and destined for the dust heap. Other people take a proportionately moderate view and look forward to alternatives that would raise the competition a little and lead to a healthier marketplace.

That last attitude is the one I find most realistic, if not the most inspiring. None of the proposed alternatives sound strong on their own, but if we put them all together we may have a future we can live with.

WiMAX white knight

It's conceivable that an entirely new species of data/voice company will arise to use WiMAX to conquer the last mile. WiMAX, which is a kind of marketing term for networks based on the 802.16 IEEE standard, is similar to Wi-Fi but offers a wider geographic range (city-wide coverage) and higher bandwidth. It achieves these benefits partly by using more spectrum (usually licensed, and therefore noise-free) and partly by using protocols that allow more flexible and robust service. Already, companies have erected cell towers to offer Internet and voice over early versions of the protocols that have recently been standardized.

WiMAX is a welcome newcomer, but it probably won't provide the big bandwidth fix for several reasons:

• It will never be as high-bandwidth and reliable as fiber. You can't expect 100 MB or a gigabit of data throughput with wireless, and there are always security issues and the risk of interference.

• The spectrum that's best for WiMAX is owned by cellular companies, many of them the exact incumbent telephone companies WiMAX was hoped to bypass. The space will not be a great culture in which young, muscular companies will sprout, such as those that drove forward the Internet. Because the spectrum is overpriced and companies spent huge amounts of money just to license it, a healthy market in that spectrum will not develop. In fact, companies have been sitting on the best spectrum for years, doing nothing with it. They probably want to develop it into a walled garden with even higher fences than those recommended by the Bells for their fiber offerings.

• Even if WiMAX develops into a real Internet option, we are not likely to see the magic number of competitors--three--that supposedly pushes forward innovation. The first competitor, incumbent telephone companies, are conservative and slow-moving. The second competitor, cable companies, are architecturally limited by old copper and a shared network.

Municipalities take the last mile

When we complain about bandwidth, we forget how lucky we are. The really hard legs of the journey--the cross-continent and intercontinental stretches--are well provisioned, at least in the developed world. They got filled with fiber during the dot-com boom. And there's enough competition left to keep costs reasonable while ruling out the two-tiered nonsense pushed by the Bells. So we're free to focus on the last mile.

Cities and towns are well-placed to pick up coverage of this last mile. They have a history of utility development that extends naturally to data networks. I've reported on their efforts for years, as far back as 1999.

The best practice seems to be a strict separation between conduit and service: the municipality provides the physical infrastructure (perhaps through a private contractor) and opens it to all interested network providers.

But there are problems with the municipal solution too:

• Governments are poor, and government investment is frowned on in the current neoliberal climate.

• It's quite possible to make bad technological or financial choices, without a market in place to correct the course of action. This is, of course, part of the neoliberal critique.

Still, the promise of municipal data networks is powerful enough to scare telephone companies, which have spent millions to push bills through state legislatures preventing the cities from exercising their rights to create such networks. Pennsylvania was the most well-publicized arena for this fight.

Hold your own

The wildest proposition, and therefore the one that might just work, is for everyone to buy his or her own fiber. This is what large institutions have been doing for years. In particularly, Canadian universities are doing it, aided by laws that make it easy for private institutions to connect to public networks.

Stringing fiber from a telephone company's central office to a local building could cost in the tens of thousands of dollars. Sounds like a lot of money for you in me. But if several households on the block combine to buy a line, it could come out to a few thousand dollars per home. Now consider that possessing your own line saves you the cost of monthly Internet service--presumably you'd just pay a small fee for interconnection--and gives you access to video and other advanced services. Sounds cost-effective all of a sudden.

Who I'm mad at

Invoking my right as an American (the politicians and media told me it was my right in the 1990s) to be an angry white male, I'll list here all the forces that I feel have let us down in the high-bandwidth world.

Of course, I'm mad at the Bell telephone companies. The telcos have tried to control everything they touch for over a century. They're playing games with a critical social infrastructure now.

I'm mad at Congress, who designed laws around the interests of big existing companies (admittedly, it's hard to design laws around the interests of companies that don't exist). And at regulators who glimpsed the emerging vision of wireless, Voice over IP, and competitive opportunities but never quite followed through. Congress and the FCC are struggling now to avert a flood, after spending years weakening the levees.

So far, nothing new. But I'm also mad at my favorite companies, the dot-com commerce sites. They took no responsibility for developing the Internet connections that form their life blood, but just assumed the lines would be there when needed. I recommended a more active approach in a recent blog.

The reason Google made its offer to build WiFi networks is that it recognized the growing value of local content. It saw cellular companies building a business model on offering information in customers' geographical locations, and it wanted to play in the same space. Competition worked the way it's supposed to, driving bold new proposals.

Moving on, I'm mad at Internet2, a research project that has enjoyed a network of mind-boggling capacity for over a decade and has come up with nothing to show for it, as far as the public is concerned. Internet messaging, Napster, BitTorrent, Flickr, search engines--none of them emerged on Internet2. The big advances in Internet services, driving forward Internet use among the public, were all thought up by independent entrepreneurs. Internet2 was meant to stimulate interest in high bandwidth, but hasn't even made a ding on the public noggin.

And finally, I'm mad at the public for taking the lazy route and accepting the cheapest form of half-crippled Internet access instead of a high-capacity bidirectional connection that could make us full Internet citizens.

Let's not blame the telcos--or at least not stop with them. No one in a position to care has cared enough.

Ultimately we may have to depend on the vestigial competition that comes from the various alternatives I listed early. Different market structures will come into being in different places. But what I'd really like is a company with a vision--a willingness to leap into the unknown future and bring us an unencumbered wealth of bandwidth.