The initial federal policies on these components are clear. Consumers have already won on the first component--the FCC or Congress will step in if incumbent networks are blocking or discriminating in ways that consumers can observe. But network owners will initially prevail on the rest. Until there is demonstrated competitive harm, the government is unlikely to limit network owners' flexibility to manage their networks or strike private deals for faster or different services.
The policy debate is effectively over on the federal level. But the battle is not over. Proponents of open networks--where all three of the Net neutrality components are implemented in ways favorable to the consumer or application provider--should adopt a market-based strategy of strategic bypass.
Two premises underpin this strategy. First, consumers prefer open networks. Many years of experience in U.S. markets show that if one network is open, competing networks will also be open. Both cable and wireless broadband networks have to date been open despite having no regulatory requirement. Why? Because it was the only way they could compete with the telco networks. The second premise is that it will be impossible for a network owner to have different "openness" or Net neutrality policies for different geographic regions in its network. Such variable policies might be technically possible, but they would be politically indefensible.
This leads to an interesting conclusion: If one broadband network in a geographic market remains open, its competitors will also have to remain open as a business imperative--and each of them will have to remain open across their entire networks.
This means you don't need to build a third pipe throughout the U.S. in order to force open broadband networks. Instead, you can engage in strategic bypass, constructing a "third pipe" in a handful of economically attractive, geographically dispersed markets. The third pipe would have to be a true, open broadband network (probably above 2Mbps symmetrical), and would have to be available to both residential and business customers throughout the market. The technology used is irrelevant--it could be BPL, fiber, Wi-Fi, WiMax or any other fixed or mobile wireless technology.
Bypass-market incumbents would have to either maintain their openness policies or close their networks and cede most of each market to the bypass technology. The second option is probably not viable. By ceding market share, incumbents would also be confirming that their ability to impose closed network policies in non-bypass markets resulted from their market power in the last mile, and not from efficiency, consumer demand or other acceptable market forces.
Markets presenting excellent characteristics for bypass would be Philadelphia, San Francisco, Denver, Milwaukee (or Chicago), Miami (or Atlanta), and New York (or Washington DC/Montgomery County, Md.). A third pipe in six (and possibly as few as four) of those markets would force seven of the eight largest incumbent RBOCs and cable MSOs to choose one of these two unpalatable options. In addition, the two largest wireless broadband networks (Verizon Wireless and Sprint) are in all of those markets and would probably also have to retain their existing openness policies.
Here's where it gets very interesting. Seven of the cities have issued RFPs or announced plans for citywide municipal Wi-Fi networks. The cost of putting in a Wi-Fi network will be between $10 and $20 MM per city. Annual operating costs would be only a couple of million dollars a year. So for somewhere between $75-120 MM over the next two years, content and application providers and other open network supporters could effectively guarantee open networks over the long term.
Google, EarthLink, Microsoft and others may have already figured out this strategy. If they haven't, they will soon. The battle over municipal Wi-Fi is now a battle over open networks, not municipal finances or the fairness of municipal competition.
Biography
Mark Del Bianco practices law and publishes on issues at the intersection of communications law, antitrust and new technologies. His clients include a variety of VoIP and competitive telecommunications providers and e-commerce companies. He can be contacted at mdelbianco@aya.yale.edu.
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There's open, and then there's relatively open. Real open networks actively seek out and cut off zombie PCs instead of blocking an entire port; customer applications are given bandwidth according to usage and not based on unfairly restricting choices.
-R
Would the provider have to run monitoring software on all PCs attached to the network? That's not feasible, technically or politically.
Second, the Bells are not going to change their plans just because there's a "third pipe" in a few cherry-picked markets. They would probably rather give up 10% of their business in Montgomery County than have to give up their "value-based" network plans in most of 22 states. Wireless networks in any case are very capacity-limited. About half of American consumers have a cable-DSL choice. Duopolies are rarely very competitive -- both parties have an interest in collusion.
Third, history is not going to illustrate future behavior. Until this year, ILECs have had to tariff DSL as common carriage, allowing third-party ISPs to ride their wires (for a fee that is usually higher than the ILEC predatory retail price, but at least they're allowed on). That rule expires this year, so the threat of independent ISPs largely goes away, except for a few wireless options.
Read the Verizon Wireless "Broadband Access" terms of service. It's extremely restrictive -- it's there for web browsing and mail fetching ONLY. No choice of application. That and WAP are the models that the ILECs want to impose.
The answer, though, is not to regulate ISPs, even Bell-owned ISPs. It's to require Bells to provide raw DSL service, as common carriage, to any and all ISPs who are willing to pay a Just and Reasonable price.
The owners of the last mile pipes or airwaves will be able to set rates based on the local competitive atmosphere and will open up their pipes to all that are willing to provide them content.
Another prediction: The Nationwide Central Content and Applications providers , like the Microsoft Xbox and Sony Multi Player on line gaming centers will eventually give in to and provide more of a distributed architecture where they co-locate their big servers as close to the consumer as possible-Local Telco or MSO, and allow these local last mile providers to support the Servers and maximize performance (symmetrical throughput)and minimize the latency/jitter that has limited delivery and interactivity on these Broadband Links. This distributed approach makes economic sense in that they pass on Overhead (OPEX)to local provider and maximize value in the last mile. Local Service provider wants this and will also benefit.
Jacomo
- The problem with this statement is
- by ordaj March 24, 2006 7:12 AM PST
- The problem with this statement is that the carriers make it impossible to prove. They will hide and play games and stall and buy off Congressmen. So this is a vacuous and misleading clause.
- Like this Reply to this comment
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(6 Comments)"Congress will step in if incumbent networks are blocking or discriminating in ways that consumers can observe. But network owners will initially prevail on the rest. Until there is demonstrated competitive harm, the government is unlikely to limit network owners' flexibility to manage their networks or strike private deals for faster or different services."