IPUrbia

This is part three of a three part series (outlined below) dealing with Net Neutrality; sections 1 and 2 are recommended reading before continuing.

1. Why is Network Neutrality essential?
2. Problems with Network Neutrality?
3. How to achieve Net Neutrality: the regulation question?

How to achieve Net Neutrality: the regulation question?

This is perhaps will be the most controversial section. Regulation is a hard matter and it is a rare occasion in regulatory history that does not create a bigger mess than originally existed.

In many ways, I do agree with the FCC in their basic premise that the markets should be allowed to sort the issue out. Still, for the markets to be effective (Economics 101), there has to be sufficient competition; a monopoly destroys the ability of the markets to self-correct. In this case, the problem is not a lack of Network Neutrality regulations and guarantees, it is a problem of too little competition in the last mile market that allows a provider the power to leverage one monopoly to build vertical monopolies. The end solution, then, is not regulation, but fostering competition, which will do more for Net Neutrality than legislation could ever hope to do, for reasons discussed in section 2. For a rare change, I tend to agree with the FCC in theory on their general approach right now; nevertheless, whether because of stupidity, ineptness, corruption, or some mixture thereof, the substance of their direction somehow is consistently at odds with the professed theory behind their rulings.

The question as to increasing last-mile competition is perhaps best developed another time; still, I will venture a few brief ideas. It is especially on this point that I am interested in generating discussion. Unfortunately, I don’t see wireless networks as particularly interesting in this regards simply for reasons tangential to the concepts involved in part 2 of this discussion: they can’t carry large amounts of bandwidth and are therefor limited in applications.

The fundamental problem that I see–and a relatively quick-fix–is the FCC ruling not requiring the telcos to lease out fiber. The economics of fiber build out mean that it is very economically inefficient to build multiple, competing fiber networks in the same city. Even if 5 companies raise capital to build out a fiber network in a market, at most 1-2 would survive, leaving a lot of dark fiber and no competition in the area. In this sense, building the infrastructure creates a natural monopoly; the only solution is to socialize the infrastructure (ala Muni Wifi, but with fiber) and lease access or to allow it to remain privatized but with requirements to resell unbundled fiber loops. I have many reservations about even this path, as touched on here, but I don’t really see an alternative, viable path to market competition. The only other approach is heavy, heavy regulation: if one is going to rely on the market to self-correct, one has to encourage a vibrant, active market with enough competition to start the process.

Please discuss below; if you have alternative viewpoints or would like to explore this further, make a note. I welcome guest bloggers regardless of standpoint as long as they don’t just rely on dogma.

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It is fitting that I am writing this portion of this series on the morning following the AT&T merger approval in the FCC as it provides ample material for this section dealing with problems with Network Neutrality. This is part two of a three part series (outlined below) dealing with Net Neutrality; section 1 is recommended reading before continuing.

1. Why is Network Neutrality essential?
2. Problems with Network Neutrality?
3. How to achieve Net Neutrality: the regulation question?

Problems with Network Neutrality?

Regardless of the industry, any sort of regulatory approach by the government is difficult at best. There are several problems inherent in regulation–forced changes in large, complex, chaotic systems always have unforeseen side effects (IE the Chaos theory) that are often negative; defining regulations is a nearly impossible task of describing a broad range of market behavior in specific legal terms that opens up new loopholes that become economic markets in and of themselves. A quick survey of blogs shows the difficulty of even clearly defining Network Neutrality in a journalistic sense; although I do think that a simple definition of no preference or hindering of traffic suffices and is easy enough to frame in legal terms. Still, the premise itself leaves big loopholes, as we will discuss.

The first major battle on Net Neutrality will be over video delivery. There are rumblings from the voice over IP world about occasional network provider induced problems as well. Still, voice over IP takes little to no traffic (several simultaneous calls can conceivably be carried over a dial up connection) compared to video, which even the low definition streams available on the Internet now can severely tax most broadband connections. These network infrastructure implications gives some measure of legitimacy for current and future arguments FOR a non-neutral network environment; coupled with the potential revenue involved, this will be the fight to watch over the next 5 years. Because of the immediacy of this particular facit of Network Neutrality, I will be focusing on it for the purposes of this section; other types of content have some of their own pecular caveats.

Technical Problems with Network Neutrality

The real problem with the concept of Network Neutrality comes from the technical details of data delivery. Network Neutrality aside, prioritizing network traffic is good networking practice and already employed by many independent ISPs, even the negative control of hindering peer to peer traffic. Fundamentally, it is good network practice to assure priority delivery to real time traffic such as video and voice over non-real time traffic such as file transfers, web browsing (although web 2.0 applications increasingly need some degree of prioritization), and so forth. Although some audio and video applications can be written to compensate–Real Player does this for example with buffering, and does a fairly admirable job of delivering content from CBS’s Innertube)–this is simply not possible with real-time interactive applications such as Internet telephony and video conferencing.

To some extent, issues can be mitigated by prioritizing the connection between the end user and the ISP, using a router at the customer premises that supports QoS (Quality of Service). As a side note, there is some indication from AT&T’s wording of their Network Neutrality concessions to the FCC that this is intergral to their IPTV delivery (more on this later). This does not do anything about congestion problems on the Internet at large, as this only affects a single piece of the connection and does not provide end-to-end reliability. Still, for our current generation of Internet content, this method of QoS does work, for the most part, most of the time. It also has the additional benefit of providing end-user control over their own connection.

Nevertheless, the viability of this method is at best short-lived. Current Internet television and video content is, simply put, a major regression in terms of signal quality compared to traditional television delivery systems. No one is really willing to watch the Matrix on You-Tube quality video–we may enjoy watching college students stuff Mentos in a coke bottle, but most of the videos are also 1-2 minutes in length because that’s about as long as we can stand watching low-quality, pixelated, jerky, mis-synced videos that inherently remind us of Aunt Gertrude’s vacation videos. At some point, the quality of the content in terms of viewability MUST increase to really become a replacement delivery method for television.

It is currently not even feasible to deliver SD television via the Internet; as we migrate to HD television, the network infrastructure implications are far from trivial and DO require extensive design considerations to be able to deliver a good customer experience, even from the providers own network. AT&T’s U-Verse product is somewhat of an engineering feat in and of itself, and it doesn’t have to compete with the congestion of best effort Internet traffic. A world where high-definition video content streams delivered over the Internet DOES require some prioritization in order to be viable; furthermore, delivering 5 million identical 10Mb/s streams to 5 million households (a reasonable scenario if everyone is watching their Tuesday night sitcoms over the Intenet) necessitates multi-cast delivery which mandates some level of integration between the content provider and the network service provider in order to really work in the immediate future.

Simply put, wide-scale high-definition video distribution does require some technical concessions that fundamentally violate Network Neutrality; given current (and immediate future) technology, I am simply unconvinced that there is a workable solution for using the Internet for significant video delivery that fits within the principle of Network Neutrality. We will discuss some solutions to this problem in part three of this series.

Legal Problems with Network Neutrality

The much greater problem with Network Neutrality, though, is that it is really a moot point–network providers already bypass any and all Network Neutrality arguments and will continue to bypass any and all regulations passed by FCC, Congress, or otherwise. As long as video traffic remains separate from the Internet traffic, it is somewhat of a pointless discussion. Hence, there are no bloggers crying foul against Comcast or Time-Warner on Network Neutrality grounds even though the video content available through their cable connection is generations better quality than the video content that their cable modem can handle; likewise, no one calls foul against BellSouth or AT&T because telephone calls placed over POTS are generally better quality than telephone calls placed over the Internet.

Even as the telcos are deploying their next generation networks that support triple play, their fundamental design simply technically and legally neatly sidesteps most of the Network Neutrality argument. In effect, they don’t give preference to their own services; they go much further and create two separate networks, one with guaranteed delivery (for their own services) and a small capacity, best effort network for third party services (Internet).

AT&T
AT&T’s U-Verse product is likewise sidestepping the whole issue by simply making a 25Mb/s ADSL2 connection a 5Mb/s U-Verse Internet connection; the other 20 Mb/s is used for their video delivery. They have absolutely no need to block, restrict, or degrade competing video traffic–simply put, they can always deliver a better video experience in their 20Mb/s portion than can be obtained from third parties in the 5Mb/s Internet portion. In effect, they are immune to legislation mandating an unrestricted Internet pipe (which may come sooner or later) and would only be affected IF the legislation went as far as to actually mandate use of the entire ADSL2 connection as “Internet”; I’m not sure of the feasibility of anti-monopolistic based legislation mandating MORE services to be offered by a corporation.

Verizon
Verizon’s FTTH solution also sidesteps the problem, although they are even clearer than AT&T. They deliver the video portion of their triple-play solution using RF (what cable uses) over fiber rather than using IP. Any legislation dealing with IP traffic (ie Net Neutrality) would entirely miss them.

It is important to note that, by using the right CPE (customer premise equipment), the methods mentioned above in use by cable companies, AT&T, and Verizon can be used (and are) in use for other types of content–be it voice, video, or even web applications. It especially can be an effective strategy because it also creates a disincentive to provide quality Internet access–indeed, if the Internet access is universally bad for real time content (and, as long as it is universally bad, it still is acceptable from a Network Neutrality viewpoint), then it simply steers usage of real-time applications to the network provider’s products and leaves the generic web-surfing relatively unhindered. Well designed CPE can make this transparant to the end-user while maintaining seperate networks for technical and legal reasons.

Although this is currently to some degree the status-quo and will be solidified over the next few years, this is not how it has to be. Stay tuned for part 3 in which we will start discussion on how to really ensure a free and open Internet.

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The Network Neutrality discussion is bubbling up again in my daily blog readings. It’s a fairly interesting discussion as it is does bear the hallmarks of both the demonstrable (although not unquestioned) need for regulation as well as the perils of regulation. Because of the complexity of the issue, I’ll be dividing the discussion into three sections:

1. Why is Network Neutrality essential?
2. Problems with Network Neutrality?
3. How to achieve Net Neutrality: the regulation question?

The first section will be largely rehash to lay some ground work for the second and third sections which will somewhat question the possibility of Net Neutrality in our current economic and regulatory environment.

Why is Network Neutrality essential?

I think it is perhaps prudent to start out the discussion by at least vaguely defining what Net Neutrality means. For purposes of this discussion, I tend to define Net Neutrality as an environment in which transport providers (carriers, ISPs, etc…) are content neutral: they do not give hinder or favor some types of traffic over another. It is important to note that Net Neutrality is often sometimes used to mistakenly refer to government regulations to force a content-neutral environment; the distinction is critical because regulations are just one approach to achieving and maintaining a neutral Internet.

The first and foremost reason for Net Neutrality is simple freedom of speech. In political terms, this is largely uncontroversial in the United States itself as a principle in terms of transit providers. There have been relatively few incidences of (major) ISPs censuring political or other content on the network layer. On the other hand, many of the content providers–some of the most vocal, and indeed, the very people who do depend on network neutrality–have failed to consistently honor this principle in terms of content that they host; notable examples include hosting companies, fearing legal and other repercussions, taking down sites along the lines of walmartsucks.com as well as the self-censorship of Yahoo, Google and others in order to gain access into foreign markets with regimes more oppressive than the United States. All of the regulations forcing transit providers to be hands-off does nothing if a large donation to a hosting company can sway them to shut off service to a political opponents blog or if, as does happen, private citizens are unable to find a forum to exercise their right to free speech because they don’t have the legal resources of Coca-Cola.

The other major incentive to Net Neutrality, one that does squarely target transit providers, is that of an economically open marketplace. If you want to experience an Internet without Network Neutrality provisions, look no further than the apps in your cell phone which are often restricted or “locked” to services that generate revenue for the cell phone company. While this does result in a more coherent customer experience, it also results in both higher costs to the consumer ($5-$10 a month for applications that are generally available free for PC customers, in addition to data charges, monthly cell phone charges, etc…) as well as a stifling lack of innovation. Real innovation in Internet history has usually come from nowhere with small, nimble companies stumbling into the market place and upstaging the status-quo in a big way. The economic necessity of such innovation is evident in the economic impact Google’s advertising engine, which has been key to the re-emergence of the dot.com economy in the past three years. A controlled, locked down Internet is not only boring and lifeless to end-users–it is economically boring, lifeless, and eventually whithers away to nothing. This is a lesson that has been learned the hard way again and again and one, I fear, that we are doomed to repeat. A quick look at the experience of the transition of AOL and Prodigy from glorified BBSs to ISPs should reinforce this point to the fearful and doubtful; or simply look at the Internet through an ISP portal, take away the Google link, and ask “what if THIS was the Internet in its entirety?”.

Monopolies, by definition, stifle competition and consequently kill innovation that is the characteristic of a free and open active market. The economic nature of telecoms tends to create natural monopolies, as is the case with most infrastructure that is characteristic of utilities (indeed, the plethora of telecom options on a nationwide is reduced to one or two options at best on a local level in most cases). As the Internet for many people is and for the remainder of society is becoming THE forum for social, political, and economic interaction in society, it is vital both to our democratic institutions and our economic systems that these natural monopolies not become vertical monopolies, leveraging their control of the physical infrastructure to control the content of Internet traffic. Failure to prevent such future marginalizes the economic vitality of the Internet for all of us as well as undermines the political vitality of our democratic participation.

Stay tuned for parts two and three, upcoming over the next week…

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I have to admit, I am definitely guilty of our favorite pastime of telco bashing. Having worked extensively with BellSouth as part of an NSP (basically a BellSouth reseller, when all is said and done), I have often launched into many a tirade about the evils of the ILECs and their negative influence on the industry.

Still, I am often wondering these days whether the industry hatred of BellSouth, AT&T, Verizon, etc.. is perhaps a little misguided. Don’t get me wrong–they are no angels. But, having had some recent exposure to the cable industry, I’m not sure that most of the independent service providers would be better if the ILECs take the much desired tumble, leaving only the cable companies as potential partners for physical infrastructure.

Most of the industry dislike is voiced by businesses whose livelihood is tied to an ILEC: CLECs, NSPs, VoIP providers, etc. I think, unfortunately, the familiarity breeds the contempt; the most aggressive telco-haters are generally the companies who need infrastructure partners since, in most cases, they lack the means to provide end to end infrastructure to even one of their customers, let alone thousands. So, they lease lines or interconnect with the ILECs, play marketing, branding, and semantic games, and, when all is said and done, simply game the system to provide the same basic services rebundled at a better value using the ILEC infrastructure. Down with AT&T? Down with Verizon? Who is ready to step up and take their place in the market? Who attempts to build real infrastructure? The only real nod here goes to the wireless guys and, when all is said and done, the technology is limited in its capacity.

We speak of deregulation increasing competition and, in some sense, it has. The market is much more open and vibrant than it was in ‘96 and ‘84. But, when all is said and done, I wonder if deregulation has failed in its basic objectives: there are still only a handful of companies that actually make the long-term investment to lay real infrastructure. The CLECs of yesteryear made billions of dollars off a favorable regulatory environment and billing loopholes; relying on a great UNE-P rates instead of actually getting their hands dirty. With a few notable exceptions, I don’t think the amount of CLEC infrastructure could make a dent in a third world nation, let alone in the US.

No matter how many different companies compete on selling services over that infrastructure, the only thing that will increase competition in that space is more companies actually building real infrastructure. I think, perhaps, the FCC is not being as foolish as we’d like to think–they are generally being supportive of the people who can actually provide real competition and broadband penetration (ie telcos, cable companies, and wireless) and making the rest of the industry operate as the resellers they have become. After all, a 1000 NSPs won’t provide increase broadband penetration in the least.

I’m not going to stop bashing the telcos: after all, they are fun to hate. Still, if the ILECs tumble, who really wins except the cable companies? Judging by how few people make a living partnering with the cable companies, I’m not sure that is the desired outcome.

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