[Ecommerce] Berninger: If It's Not Neutral, It's Not Internet

[Seth Johnson]

> http://www.danielberninger.com/dbessays/2006/05/if-its-not-neutral-its-not-internet.html


Monday, May 15, 2006

If it's not neutral it's not Internet

By Daniel Berninger, VP, Sr Analyst, Tier1 Research,
dan@tier1research.com


Definition: Internet - collection of all networks that choose to
beinterconnected by standard Internet Transport Protocol(s).
(Reference: David P. Reed, http://www.reed.com)


The success of a proposal by AT&T and Verizon to end net
neutrality does not threaten the Internet. The broadband
customers of AT&T and Verizon willjust no longer have access to
the Internet. The development appropriatelycreates alarm among
AT&T and Verizon's customers, but the combined customerbases of
these companies represent less than 2% of the billion or so
usersof the Internet. The fact access to the Internet requires
net neutralitydoes not depend on laws passed by the US Congress
or enforced by the FCC.Neutrality arises as a technical and
business imperative facilitating the interconnection 250,000
independent networks that choose to participate inthe Internet.
Net neutrailty will remain a requirement as long as it servesthe
interests of the global Internet community.

Nothing stops AT&T and Verizon proceeding with their non-neutral
networks. They just can't label their offers Internet access. We
call non-neutralnetworks - private networks. There already exists
a market for privateconnectivity serving needs not addressed by
the public Internet. AT&T andVerizon can pitch their various
ideas about quality of service to the providers of commercial
Internet content like Google as well as their respective end user
customers. AT&T and Verizon already have a portfolio ofprivate
network offers only the attempt to frame them as some sort of
"enhanced" Internet access is new.

Selling private networks as Internet access amounts to false
advertising of the type prosecuted by state AG's and the FTC. The
Federal Trade CommissionAct requires advertising be truthful and
non-deceptive. Advertisers musthave evidence to back up their
claims. The difference in the number ofavailable end points makes
it easy to distinguish between private networks and the Internet.
Calling a service Internet access means providing
fullconnectivity. The continuously expanding Internet presently
reaches about400 million computers even before considering end
user devices. AT&T and Verizon may believe the owners of these
computers should pay a toll for theprivilege of reaching end
users, but they still need to demonstratesufficient value to
justify these tolls. Any attempt at enforcement ofgatekeeper
status will inevitably leave their customers with limited
connectivity to large swaths of the Internet not unlike people
stuck behind the Great Firewall of China.

The present attempt to unwind Internet neutrality represents just
the latest (and unlikely the last) of ongoing efforts by
telephone companies to defend legacy revenue streams. AT&T
resisted interconnection of the 56k modems associated with the
original Internet links in the 1960's until the arrival of
intervention by the Department of Defense. The Bells complained
bitterly (all the way to the bank) about modem traffic associated
with the dial-up Internet in the 1990's. The Bells resisted
offering DSL and then worked to undermine the independent
companies like Northpoint and Covad that tried to deploy the
service. Efforts to derail municipal broadband initiatives andnow
net neutrality all fit the same pattern. Claim rules leave no
incentive to invest. Win regulatory concessions against
competitive threats. Repeat. Hint: Incentive to invest = monopoly
market power in Bellco speak.

These longstanding efforts have not achieved the goals of
derailing the Internet or producing prosperity for the Bells, but
they did manage to slow progress enough to allow a dozen
countries pass the US in Internet penetration rates. The
resolution of the policy issues in the net neutrality debate will
determine the extent to which the US enjoys the benefits of the
Internet, but the Internet as a global phenomena will proceed
with or without the permission of the Bells, the US Congress, or
the FCC.

The Internet certainly suffers from a range of maladies, but only
companies with large at risk legacy revenue streams see the
solution as discrimination by use and user. Network
infrastructure companies like Cogent, Earthlink, Abovenet,
Savvis, and Global Crossing accept neutrality as fundamental to
the health of the Internet. There exist a number of forums for
the Bells to pitch the merits of their ideas for improving the
Internet. The fact they plan to proceed on a unilateral basis
demanding a ransom for their customers reveals their true agenda.

The customers of AT&T and Verizon did not ask to get cut off from
the Internet. Only the lack of alternatives (aka monopoly) will
prevent a customer exodus with the loss of net neutrality. There
exist no examples of success with the "walled garden" approach,
because the nothing can match the breadth of content and
innovation of capacity of the public Internet. The decoupling of
connectivity from use and user associated with neutrality makes
this breadth of content and innovation possible.

The opposition to net neutrality arises like all regulatory
debates as the means to raise prices, but people in the US
already pay more for less bandwidth than citizens of Europe and
Asia. Communication serves as aninput to all economic activity,
so expensive communications drags on the economy in the same way
as high energy prices. Policy makers must decide between
protecting the Bells 20th century business model or working to
make sure US enjoys the benefits of the Internet. Internet
traffic outside the US already dwarfs the traffic from within the
US, and the failure of policymakers to defend net neutrality will
only continue the trend of the US toward third world status in
connectivity.

posted by Daniel at 5:39 AM