Network Neutrality - What does it really mean? Dollars

Network Neutrality is an issue that will affect everyone who uses the Internet, both consumers and web content producers. It is a complicated issue that involves billions of dollars and lots of politics. The US Department of Justice (DoJ) issued a statement to the Federal Communications Commission (FCC) arguing against Net Neutrality. It said in part "

The Department said in its filing that it may make economic sense for content providers who want a higher quality of service to pay for the Internet upgrades necessary to provide such service, arguing that “any regulation that prohibits this type of pricing may leave broadband providers unable to raise the capital necessary to fund these investments.”

“Consumers and the economy are benefitting from the innovative and dynamic nature of the Internet,”said Thomas O. Barnett, Assistant Attorney General in charge of the Department’s Antitrust Division. “Regulators should be careful not to impose regulations that could limit consumer choice and investment in broadband facilities.”

What is Net Neutrality? It means that all web sites and services are equal and get the same rights to bandwidth from the carriers. So, email, web site content, music files, video, VoIP, IPTV, etc., all get equal access to bandwidth without any additional charge.

Who pays for Internet bandwidth? The telecom "carriers" get paid on both ends by consumers, and by web content producers. Consumers can pay $10 a month for dial up service or $50 a month for broadband service. Consumers usually have two choices for broadband service; your cable TV provider, or your telephone service DSL.

Web sites and content owners also pay for Internet bandwidth. Web sites pay their ISP (Internet Service Provider) for the bandwidth they use to push their content to users. The charges are based on how much bandwidth they use. The ISPs then pay the big telecom "carriers" who own the infrastructure.

What do the telecom carriers want? They want the right to charge extra for certain applications at their discretion. The carriers are rethinking "unlimited usage" in cases where applications consume huge amounts of bandwidth. Things like video, IPTV, and VoIP could be the target of extra charges from the carriers. Companies like YouTube, BrightCove , Skype, and Vonage might be asked to pay surcharges for bandwidth.

What is the problem? What happens if Verizon decided to charge Skype and Vonage extra for VoIP but allows its own VoIP service to go over its network for free? What happens if Comcast decides to charge BrightCove and other IPTV companies extra and has its own competing IPTV service? What happens if Comcast and Verizon coincidentally decide to add a surcharge YouTube traffic?

What if they decide to charge Google a surcharge for traffic? The telecom carriers are very jealous Google's revenue stream...and they want a piece of it. Executives at AT&T and Verizon have publicly said they think Google, Yahoo, and Microsoft should pay a percentage of their revenues to them for use of the network.

Will competition prevent surcharges? How many broadband Internet carriers are there? Most consumers only have two choices. If one adds a surcharge and the other does not, consumers might switch over to the other one. But, if they both add surcharges...what is likely to happen?

We haven't heard the last of Net Neutrality. Expect the truth to get twisted in bizarre ways by both sides of the argument.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column.

Comments

[kayvaan]

Even other price-regulated utilities still allow providers to meter usage. Think electric, water, etc.

I don't understand why the internet, which is really becoming another public utility, should be any different.

Is it a metering problem? If not, why do telecom carriers not even get to meter usage like other utilities. We could have price caps, etc. so it would still be regulated. But why should the net be completely neutral when other utilities are not?

Am I missing something. I'm not saying that Net Neutrality is intrinsically a flawed idea. Just that I don't understand why it's different than other utilities. Somebody explain the differences cogently and I'll see if I buy it.

[Don Dodge]

Internet bandwidth usage is metered on the provider side. Web sites like MySpace and services like YouTube pay enormous bandwidth fees to their ISPs, or directly to the telecom carriers. Businesses pay for tiers of service and bandwidth for their Internet usage. These fees are in turn paid to all the carriers through "peering" arrangements.

Consumers pay for Internet usgae too. In the old days we paid by the minute. AOL introduced tiers of service, which later evolved into a flat fee per month. Think about all the home owners in America paying $50 a month, or $600 per year. It adds up to billions...on top of what the web sites and businesses pay.

[Michael Clarke]

Good overview...One additional point is that (certainly in the UK) broadband users pay for a certain amount of bandwidth per month. Or for unlimited bandwidth. What the two-tier proposals have made very clear is that whilst carriers are happy for people to pay for bandwidth, they are far from happy about people actually using it.

Or in other words, everything was fine up to the point that people suddenly had the content available (i.e. the BBC iPlayer) to watch TV, download from iTunes - to do all the wonderful things that service providers have always marketed but never had to worry about delivering...

[Andy Freeman]

> But why should the net be completely neutral when other utilities are not?

Really? Do you pay more when you call IBM to make a deal that is worth $1M than you pay to call the car repair shop to find out when your car will be ready? I don't, because telcom is relatively neutral.

Why should my bit service be different than my voice service?

Why should the cost of my bandwidth depend on what I'm doing with it?

[Wade]

I suppose my biggest concern about non-neutral networks is that they potentially give network providers the chance to "tax" my company. After all, I sell online, so I rely on the fact that people half the country away have the same access to my site that people next door have. But suppose that stopped being true? What if I had to buy into some advertising program, or become an exclusive provider to some walled system? Back in the days of AOL, Prodigy, and CompuServe, either you were on those systems or not. Could I be effectively locked-out? And what will it cost me to get in?

Sure, this is catastrophizing, but the problem is that I have no idea what network providers' intentions are vis-a-vis small business, or how high they intend to make their "tax."