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The War of Network Neutrality

bridges vol. 13, April 2007 / Feature Article

by Harold Furchtgott-Roth

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Harold Furchtgott-Roth

"Neutrality" - who could be against it? The very word evokes images of pacifism rather than belligerence, impartiality rather than advocacy. Often, "neutrality" is the rational middle ground between warring factions.

But "network neutrality" is different. The phrase represents the war itself, a conflict among competing views of the appropriate regulation of the Internet. The war has many competing factions - network operators, applications providers, equipment manufacturers, consumers, and others. "Network neutrality" is not the demilitarized no-man's land between the factions. Rather, the different factions compete to define "network neutrality" in their own terms, and they try to persuade governments to take corresponding regulatory actions.

Thus, paradoxically, we have the War of Network Neutrality, the war to shape the regulation of the Internet. Because the Internet is a ubiquitous network transcending national boundaries, many different governmental bodies have the potential to regulate the Internet. Each of these institutions becomes a potential battleground in the War of Network Neutrality. It is fought at international conferences. It is fought in national governments including Austria, the European Union, and the United States. It is fought in state and local governments.

It is much too early to tell if the war will ever be won by one group or another, much less by which group. Indeed, the war may be won by different groups in different regions. A single country may choose one form of Internet regulation; a Union of States like the EU or the US may choose a different form. But it is not too early to describe the contours of the many battles that have been fought.

The following article describes competing definitions of network neutrality, whether new laws are necessary to implement network neutrality principles, how network neutrality operates in an international legal environment, and the possible future of network neutrality.

Competing definitions

Potential government regulation depends on how network neutrality is defined. The term "network neutrality," while internationally known, has no universal definition, but most definitions of network neutrality fall into one of three broad categories: non-discrimination with respect to communications; non-discrimination with respect to equipment; and preservation of consumer choice. In each of these three areas, advocates in the War of Network Neutrality urge different definitions on government officials.

Non-discrimination with respect to communications


Network operators often have various technical capabilities including: blocking packets, assigning different priorities to packets, and monitoring packets. Network neutrality advocates often seek to have a government restrict one or all of these practices. As discussed below, consumer and governmental interests are not necessarily aligned with respect to strict prohibitions.

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i. Blocking packets

The first form of discrimination with respect to transportation is blocking packets or failing to deliver a transmission. Some network neutrality advocates would have the government ban the blocking of packets.

Different countries have different laws and practices governing the blocking of packets of information. To the extent that concepts of network neutrality depend on the degree of blocking, users in different countries face different degrees of network neutrality.

In an extreme form, a network owner could choose not to deliver packets originating or terminating with a specific network, as Madison River Telephone Company in the United States blocked traffic to and from Vonage subscribers in 2005. The Federal Communications Commission subsequently prohibited this form of traffic blocking.

The blocking of packets need not be limited to packets from a competing communications network. Nor is the blocking of packets discouraged by all governments. Many governments, including China and Iran, have political reasons for blocking international transmissions to and from specific Web sites. Many western countries block transmissions to and from sites associated with specific criminal activities such as child pornography. Other types of blocking pertain only to certain types of transmissions to certain Web sites. Thus, countries that outlaw online gambling may permit transmissions between a user and an online gambling site, but may not permit bank transactions with that Web site.

If all packets on the Internet had worthwhile and harmless purposes, and if the Internet transportation providers were rationally compensated for their services, consumers could be better off with bans on blocking packets. But these conditions are not always met. For example, consumers often choose to have certain harmful packets of information blocked from entering their computer, even if the packets are permitted on the network. Thus, consumers choose to block messages containing viruses, worms, and other harmful content. In addition, consumers choose to block spam and nuisance messages that are transported from senders at little or no charge but which merely serve to annoy recipients.

Proper blocking of packets can protect consumers, Web sites, and even the integrity of the Internet itself. Harmful packets attack not only consumers but also legitimate online sites as well top-level domain name servers that help route traffic on the Internet. Blocking can also apply to addresses of Web sites. Many consumers (firms) prefer not to have certain Web sites offering pornography or illicit drugs available to themselves or their families (employees).

ii. Prioritization of packets


The second form of discrimination is different prioritization of packets for transportation. Some network neutrality advocates would have the government prohibit network operators from assigning different prioritizations to packets. Laws and practices of prioritizing packets vary by country.

Applications providers and e-commerce companies fear that some network operators may use their position anticompetitively to favor transmissions to affiliated parties or parties that pay for additional capabilities, while other parties suffer with a lower service priority. Favored parties could be network subscribers or parties that pay additional amounts for preferred services. Even these forms of differentiated services are not necessarily anticompetitive. Many service providers offer enhanced services for consumers who pay for those additional services, but without competitive harm.

A different form of transportation discrimination is based not on the identity of the sender or receiver of a transmission but rather on the nature of the packet itself. Thus, some networks may favor audio, video, or gaming packets over data packets on the theory that voice calls, video transmissions, or electronic games are degraded by latency more than other forms of transmissions. Some networks will favor these packets only if a subscriber pays extra for that form of favoritism. Some network neutrality advocates would prohibit these forms of favoritism; others would not.

iii. Monitoring of packets


Selective monitoring of packets is a third form of discrimination. A network operator or a national government has the technical capability to monitor Internet transmissions from an individual or to a Web site. Monitoring can take many forms - from broad characteristics of traffic volume to detailed recording of the contents of all transmissions. Laws and practices concerning the monitoring of packets vary by country.

Civil libertarians reasonably worry about both privacy concerns and the integrity of communications that are monitored by either a government or commercial operator. Some forms of monitoring of either address or content are inherent in blocking packets or in assigning priorities for those packets. To block traffic containing worms, viruses, and other harmful content requires monitoring the content of packets.

On the other hand, some network neutrality advocates seek to preserve the ability of individuals to monitor various activities on the Internet, including some which might be described as monitoring or surveillance. The exercise of some network neutrality principles can infringe on the sensibilities of others. For example, the surveillance of an individual by other network users may be consistent with network neutrality provisions but harmful to an individual. Many Internet users want the government to monitor the activities of suspected or known wrong-doers, even on the Internet; others do not.

Non-discrimination with respect to equipment


A second form of network neutrality is non-discrimination with respect to equipment. Laws and regulations governing the connection of consumer equipment to the network of a private operator vary by country. In some countries, consumer electronic equipment is often sold unbundled from communications services. In other countries, such as the United States, equipment and services are often bundled together.

Some equipment manufacturers and users are concerned that network operators will limit Internet access to certain equipment in which the operator has a financial interest. In the United States, for example, the VOIP firm, Skype, has filed a petition with the FCC to require that any piece of equipment be permitted to connect with any carrier's service to access the Internet.

The opportunity to engage in anticompetitive behavior with respect to consumer equipment depends on the extent of competition for access to the Internet. For wireless services, for example, most countries have several operators. Each operator offers a wide range of handsets compatible with wireless services. Although some handsets will not operate with a particular carrier's service in many instances for technological reasons, consumers have great latitude in selecting combinations of handsets and services.

Preservation of consumer choice


Network neutrality is sometimes defined strictly in consumer terms. In August 2005, the FCC adopted four consumer-oriented network neutrality principles:

- Consumers are entitled to access the lawful Internet content of their choice;

- Consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement;

- Consumers are entitled to connect to their choice of legal devices that do not harm the network; and

- Consumers are entitled to competition among network providers, application and service providers, and content providers.

Each of these consumer principles can be interpreted in terms of discrimination for communications or equipment. The first principle prohibits blocking consumer access to lawful content. Interestingly, it does not prohibit different priorities of access to content.

The second principle prohibits blocking specific applications or services. Again, the principle does not prohibit different priorities of services for different applications or services.

The third principle prohibits restrictions on legal devices connecting to the Internet. The third principle, however, does not require an operator to offer any and all types of equipment to consumers.

The fourth principle reinforces competition at all levels of the Internet: network, application and services, and content.

An absence of urgency for new laws to implement network neutrality

Network neutrality advocates claim that new laws and regulations are necessary to protect consumers on the Internet. For at least four reasons, new network neutrality laws do not have any urgency.

First, and perhaps most importantly, many of the concepts of network neutrality are presently in place without additional laws. Anticompetitive discrimination of communications and equipment by commercial network operators is the exception rather than the rule. Much of the public concern about network neutrality is based on the potential for future abuse rather than documented instances of past abuse.

Second, many of the concepts of network neutrality, particularly those related to non-discrimination, are intended to avoid abuse of market power particularly by network operators. Yet many governments already have antitrust and other laws to protect consumers against abuses of market power. Those laws can and do protect consumers from potential abuses of network neutrality.

Third, many major companies - including AT&T and Verizon - already have network neutrality obligations as the result of merger conditions. Company-specific rules, while an inefficient and discriminatory means of law, still may serve to restrain potential abuses of market power and network neutrality.

Fourth, as discussed in more detail below, in an international setting for the Internet, network neutrality laws and rules in one company may have some nationwide effects but cannot govern behavior throughout the Internet.

Network neutrality in an international environment


One of the strengths of the Internet is that it spans every country in the world. One of the weaknesses of the Internet is that, as a consequence, governments and businesses in every country have opportunities to engage in harmful activities within some realms of the Internet. As a consequence, imposing laws and rules regarding network neutrality in one country, or even several countries, has value for the Internet locally, but not for the entire international reach of the Internet.

As an example, consider the blocking of Web sites by some governments such as China and Iran. Consumers in these countries are unable to reach certain Web sites not because of anticompetitive behavior of commercial operators but because of political decisions of governments. Adopting network neutrality principles in one country will do little to make that country's Web sites accessible to everyone around the world, or to open up Web sites in countries that already routinely shut down Web sites. Similarly, it does limited good to protect consumers from monitoring or surveillance on the Internet in one country, if other countries routinely use the Internet to monitor the activities of individuals, including individuals outside their border.

Many of the network neutrality principles pertain to the relationship between network operators and Web sites. Yet many network providers operate internationally, as do many Web sites. Laws of network neutrality in one country may govern the relationship between a specific network operator and a particular Web site within that country, but not between the same network provider and Web site in a different country, and even less between a network operator in one country and hundreds of millions of Web sites in other countries around the world.

Ultimately, the Internet and its users span every international boundary. In such an environment, national laws on any topic have limited reach and limited enforceability.

The future of Network Neutrality

The War of Network Neutrality only began in recent years. It is aimed at imposing new laws and regulations for the Internet that, according to its proponents, will protect users, both consumers and businesses, from abuses of market power. According to its opponents, network neutrality will do little more than stifle competition and innovation.

Already, network neutrality is one of the most common topics in Internet legal and regulatory discussions in many countries. Today, there are more than 700,000 Google citations for "network neutrality." No doubt, a year from now, the number will be substantially greater.

For all of its recent popularity as a topic for discussion, the actual passage and implementation of network neutrality laws remains uncertain. In many countries, advocates and opponents of network neutrality laws are stalemated. Moreover, there is little urgency, as consumers largely enjoy network neutrality without the widespread passage of laws.

Even without urgency of action, the War of Network Neutrality is already engaged. It will last for many years; and the outcome cannot be predicted.

***


A former commissioner of the Federal Communications Commission in the United States, Harold Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr[at]furchtgott-roth.com.
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