Monthly Archives: August 2010

Is Net Neutrality – Neutral?

Google and Verizon have raised the public discourse on the thorny issue of “Net Neutrality”.  In case you have missed this firestorm…..

Net Neutrality is the principle that the Internet is an open data pipe available on the same terms to all content and service providers.   This is a nice in theory, but in practice the lines are already blurry.    Content providers can pay for faster content acceleration and local storage of their media assets throughout the Internet.  These content delivery networks are what powers most video sites such as YouTube.  Bigger media companies can afford better, faster servers, geographically distributed content and larger Internet pipes to funnel their services to their customers.  Like many commercial issues, everything is equal, unless you have more money to pay for an advantage.  The neutral part of “Net Neutrality” is that the local Internet Service Provider does not inspect the content sources once they enter their network.  If they happen to arrive at a local point of presence through a faster mechanism than the average website, then sobeit. The Verizon Google proposal was compelled by a recent court ruling against the FCC’s ability to enforce net neutrality.

The main points of the Verizon/Google proposal are:

-Internet Providers should not be allowed to discriminate against or prioritization legal content in a way that harms customers or competition.  This includes paid prioritization.

-Internet Providers can develop new premium services and features that are not included in basic broadband.  (This is similar to basic cable TV and premium services)

-The FCC should enforce the nondiscrimination rules with heavy fines

-These proposals do not apply to wireless

-Endorsement of the reform of the Federal Universal Service Fund to allow government to deploy broadband Internet in rural areas.

There are three issues that are at the heart of this latest debate on Net-Neutrality.

The recent court ruling on Comcast’s desire to limit peer-to-peer networks, the co-ownership of delivery networks by major content providers, and the explosion of smartphone services.

Taking these one at a time

1-Federal Court Ruling

The event that triggered this latest round of corporate posturing was the Federal Court ruling on behalf of Comcast and against the FCC.  This ruling was a blow to net-neutrality as it would permit Comcast to prioritize different content services.  The case was brought up by Comcast trying to limit the use of peer-to-peer services such as Bit Torrent and Limewire.  These p-p services consume huge amounts of network resources and are the prime culprit in the distribution of “free” unauthorized content from  music to movies to porn.  A potential outcome from such a ruling might be for the FCC and C to legislate tighter regulation of broadband services.   Since this ruling has upset the status-quo, and since the industry does not want additional governmental regulation, Verizon and Google seized the moment to make a joint proposal.   The element that has drawn significant fire from critics is the provision to permit a premium service tier for broadband internet.

2- Co-Ownership of content and delivery

There is a significant intersection of broadband delivery networks and content ownership.  Comcast will soon own NBC/Universal.  Time Warner is a content giant with such proprieties as CNN and Turner.  Cablevision owns Madison Square Garden, its sports franchises and television network.  While AT&T and Verizon do not have significant content holdings, they are highly vested in Wireless Broadband services.

In theory, and in practice, if you own content assets and have a delivery network you can discriminate your content above your competitors and even not offer your content to competing delivery networks.

One example of this discrimination is Cablevision’s refusal to permit MSG high definition sports on Verizon Fios.  Cablevision owns MSG and the associated NHL and NBA franchises.  (Their mismanagement of the Knicks and the Rangers could fill 20 blog articles, so I will resist!) Since Cablevision competes with Verizon in cable access, they wield their content power to the disadvantage of Verizon.  Comcast, which does not directly compete with Cablevision, but also compete with Verzion, is granted access to the high definition sports feeds.  I case they figure the enemy of their enemy is their friend.

This example is not so much an example of bad net neutrality as content neutrality, and how the two are really the same issue.  The more content and net access ownership is intertwined, the more likely we will see the abuses of Cablevision.

Suppose Fox purchased Cablevision (not likely).  Fox could then, in theory, give better access to content providers that share their same political leanings.

As long as Internet providers do not own content, then the Google Verizon proposal should be viewed with a sense of today’s reality.  The problem is that there is already an intermingling of content and access providers in the Internet.  This co-ownership goes back to the early days of AOL, and continues today with many of the broadband providers.

In this view it is not surprising that Google , an almost 100% content player, and Verizon , an almost 100% network player, would join forces in their proposal.  But then there is something else that binds them….Android

3-Wireless Broadband

The other factor that binds Verizon and Google is their cooperation on Android powered phones.  The success of Motorola and HTC’s Android smartphones has created a real competitor to Apple’s iPhone.  This phenomenon has also changed the nature of wireless networks.  Wireless networks have historically been architected and optimized to deliver voice services.  The data capabilities of mobile devices must transit a hierarchy of switches and locations necessitated by legacy voice design, not data.  The new reality for wireless carriers such as Verizon and AT&T is that they are now mobile broadband service providers, which happen to carry voice.  This is a major paradigm shift that has the wireless providers scrambling to keep up with data demand.    By excluding wireless broadband from the net neutrality restrictions of their proposal, Verizon and their partner Google are indicating that the cost of maintaining a completely neutral wireless network with an acceptable level of service to all is becoming cost prohibitive.   Verizon and AT&T are victims of their own success.    With the ability to limit certain content providers and types, the wireless carriers hope to regain investment control on their networks.

There are other ways around the wireless broadband problem, and that will be the topic of a future article.

With the three driving factors of Court Ruling reaction, Co-Ownership and Wireless Broadband, the recent Net-Neutrality proposal seems logical and better positioned for the broadband marketplace than the potential chaos the Comcast ruling has created.   With the court ruling as the new law of the land, Net Neutrality is dead.  The opponents of the Verizon Google proposal seem to miss that important point.

What are your thoughts?

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