Wednesday, December 24, 2008

Do Transparency and Non-Discrimination Requirements Impose De facto Common Carriage Duties?

Birtelcom has asked whether a Network Neutrality requirement of transparency and nondiscrimination in effect imposes a common carrier responsibility on ISPs serving Goggle to provide edge caching. Fair question.

As Information Service providers, not subject to Title II telecommunications service regulation of the Communications Act, ISPs do not have to provide any service they do not care to offer. This means that any ISP can elect not to offer edge caching, or any form of premium, better than best efforts routing. An ISP serving Goggle can decline to offer Google what it wants—as ill-advised as that would appear.

A Title I (ancillary jurisdiction) requirement of transparency and nondiscrimination would require any ISP, voluntarily electing to provide edge caching service, to do so in such as a way as to provide any similarly situated client the option of taking the premium service. This requirement does not impose common carriage and tariff filing duties. It only would prohibit ISPs from cutting exclusive, “most favored customer” arrangements that no other client would know about and have an opportunity to take.

ISPs should have the opportunity to offer tiered services that offer different levels of service. But in doing so, ISPs should not have the option of making exclusive deals, obscured by nondisclosure agreements.

Quality of service and price differentiation can provide legitimate and lawful discrimination, subject to conditions and sanctions. ISPs would trigger sanctions for engaging in unfair trade practices by degrading service, e.g., dropping packets, to non-premium customers in the absence of severe congestion, and by deliberately partitioning their networks so that best efforts routing options are guaranteed to achieve unacceptably inferior service.

Tuesday, December 23, 2008

Wall Street Journal 100% Record Sustained—Deliberately Getting it Wrong on Network Neutrality

Month after month the Wall Street Journal (“WSJ”) pursues what appears to be a deliberate strategy of misinformation on the issue of Network Neutrality. The latest installment appears in Dec. 23rd editorial written by Gordon Crovitz who attempts to equate Google’s enhanced use of edge caching as evidence that the entire matter of Network Neutrality has been much ado about nothing. See

Mr. Crovitz starts by referring to a widely discredited WSJ article that reported on Google’s edge caching strategy and implied that such a strategy would violate Network Neutrality principles and evidences Google’s abandonment of advocacy for such principles. I would think the WSJ would applaud Google’s apparent change of heart from free rider of Internet resources to conscientious underwriter of the links that take content from the Googleplex to various servers closer to people making Internet searches. Instead Mr. Crovitz reiterates the red herring that companies like Goggle, Yahoo and Microsoft (key Network Neutrality advocates) “don’t want to have to pay tolls to the companies that provide the Web infrastructure.”

Does anyone see the irony in this statement? Goggle intends on paying more than it previously has paid for what I call “better than best efforts” routing of traffic. The existing traffic routing (“peering”) arrangements of the Internet Service Providers (“ISPs”) that carry Google’s traffic on a plain vanilla, “best efforts” basis do not include premium service. So Google will have to pay for superior distribution of the most commonly searched for results, just as CBS pays for ISPs to deliver “mission critical” bits corresponding to webcasts of March Madness college tournament basketball games.

Previously Google was pilloried for allegedly not paying for any access to consumers, a falsity that many believed despite the fact that Goggle does pay its ISPs and apparently has expressed a willingness to pay more. By the way, the downstream ISPs that also handle Google traffic also have received payment, directly from subscribers and also through barter agreements where ISPs offer access to their networks in lieu of direct payments.

As I have written in my blog, (see premium routing of content does not violate my sense of Network Neutrality, provided ISPs offer such service in a transparent and nondiscriminatory manner. My sense of Network Neutrality would only require ISPs not to drop packets deliberately as a ruse to force either end users or content providers to trade up in service, or to so partition their networks to all but guarantee that plain vanilla, regular service (best efforts routing ) becomes inadequate.

No fair minded advocate for Network Neutrality has rejected reasonable efforts by ISPs to manage their networks, nor does Network Neutrality somehow convert ISPs from information service providers into common carrier, public utilities as Mr. Crovitz alleges. He also makes the bold assertion that the United States’ poor standing in terms of broadband access directly results from Network Neutrality advocacy that creates disincentives for ISPs to invest in infrastructure.

Surely Mr. Crovitz knows that the FCC does not treat ISPs as telephone companies. Likewise neither the FCC nor any reasonable interpretation of its Internet policies foreclose ISPs from providing tiered services, or from accruing triple digit rates of return for Internet access, a reality some of the WSJ’s buy side stock analysts could confirm.

Perhaps Mr. Crovitz sees common carrier regulation in the manner in which the FCC responded to complaints about how Comcast throttled peer-to-peer traffic. Of course the FCC did not mandate common carrier nondiscrimination. The Commission did state that an ISP cannot use software that deliberately drops packets and thwarts delivery of traffic all the time without regard to whether actual network congestion exists. It strains credulity to characterize Comcast’s tactics as nothing more than ensuring that non peer-to-peer traffic “could move more smoothly,” unless Mr. Crovitz has some new evidence to prove that if Comcast did not resort to traffic throttling its network would perform in an inferior manner.

Lastly Mr. Crovitz appears to dismiss the Network Neutrality as nothing more than a tactical strategy by major content providers to avoid having to pay their fair share of the costs ISPs incur to provide Internet access. Like other opponents of Network Neutrality he ignores the major investments Google and other content providers have made to create compelling content which provide reasons for consumers to pay sizeable rates for Internet access. He conveniently ignores that the ISPs providing content delivery offer reciprocal access in lieu of cash payment, or perhaps he has bought into the notion that somehow Goggle and other content providers have managed to cheat ISPs of the right to charge both end user subscribers and upstream content providers.

Unlike telephone networks, the Internet seamlessly combines telecommunications bit delivery with access to content. Monthly Internet access subscriptions amply compensate ISPs and one would think Mr. Crovitz and the WSJ would use their bully pulpit to praise Google and others for providing new revenue streams for incumbent telephone and cable companies.

Sunday, December 21, 2008

No Way to Put the Public Back in Public Utilities?

Several years ago many state legislatures embraced the concept that technological innovations would stimulate robust competition in previously monopolized industries such as electricity, gas and telecommunications. The legislatures so bought into the certainty of competition that laws created a glide path to deregulation and the near complete elimination of consumer safeguards. The legislature accepted the premise of lobbyists and sponsored academic researchers that public utilities should qualify for treatment as competitive businesses surely entitled to cut off services to nonpaying customers, an outcome that has contributed to 81 deaths in Pennsylvania. See

With the passage of time, it has become quite clear that infrastructure industries with substantial investment needs do not typically have many facilities-based competitors, especially for the last mile of service to residential and small business consumers. Yet most state legislatures have not revise their laws, even after the Enron debacle showed how crafty public utility employees could exploit their less regulated status to create expensive, but artificial bottlenecks, congestion and shortages of power.

Having cut a deal based on the certain expectation of competition, state legislatures did not think to condition deregulation on confirmation that the competition arrived and flourished. Without such a safeguard, deregulated public utilities surely will claim that they relied on the promise of deregulation and any revision would unfairly and unlawfully confiscate their financial resources. So public utility consumers in many states have the worst of all worlds: deregulation based on competition that did not arrive and apparently no remedy for resumption of consumer safeguards in the absence of a self-regulating marketplace.