Debate heats up over Net neutrality

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By Marguerite Reardon
Staff Writer, CNET News.com
Published: March 15, 2006, 4:00 AM PST

SAN JOSE, Calif.--Speculation that the two biggest phone companies in the country, AT&T and Verizon Communications, are planning to create a tiered Internet system that would require big bandwidth hogs like Google or Yahoo to pay more for their access has become a hot-button issue in the tech industry.

Increasingly, it's also an issue on Capitol Hill, where some lawmakers are developing rules to maintain so-called Net neutrality--also called network neutrality--and prevent the emergence of a tiered system.

Network owners such as AT&T, Verizon and BellSouth are among the Net neutrality opponents who advocate allowing carriers to develop some sort of tiered system that would allow them to charge the Internet's data-intensive services, such as Google, Yahoo and eBay, more for the use of the Net. Revenue from these charges would be used to further improve the network, carriers say. Net neutrality proponents say a tiered system would simply favor the online services that can afford the fees, leaving other online content providers to cope with inferior network delivery and opening up the Net to abuse by the carriers.

At the Voice over the Net (VON) conference at the San Jose Convention Center on Tuesday, companies on both sides of the bandwidth isle debated how much Net regulation is needed. But the broader discussion was what exactly Net neutrality means and whether legislators are discussing a solution to a problem that doesn't yet exist.

"I am hopelessly confused about Net neutrality," said Blair Levin, a managing director and regulatory analyst for Stifel, Nicolaus and Co., a financial research company. "I know what the Bells are saying, but it's unclear what they mean."

CEOs from network owners AT&T and Verizon Communications have made comments suggesting they plan to create a system where some companies would have to pay more for their data-intensive use of the Net, which, they argue, slows access for regular customers. But for the most part, details of those plans are still unclear.

On the other side of the debate are companies such as Google, eBay and Yahoo, which are against any companies taking on the role of "IP traffic gatekeeper." They support the idea of federal rules that would further restrict network owners from blocking or restricting traffic.

That idea doesn't sit well with cable companies and phone companies-—namely AT&T and Verizon Communications—-which argue that new regulations could have unintended consequences that would stifle innovation and hurt consumers in the long run. And while they do not support new legislation that has been introduced to protect Net neutrality, they have filed petitions with the Federal Communications Commission to loosen existing regulations to give them more flexibility in what they do with their own network infrastructure.

Cisco Systems, which supplies the phone companies with networking equipment, has joined its telecommunications customers in cautioning Congress about introducing new laws. Last week, Cisco CEO John Chambers wrote a letter to Rep. Joe Barton, a Texas Republican and the chairman of the House Committee on Energy and Commerce. In short, Cisco's position is that no legislation is needed at this time and that phone companies should be allowed to experiment with different technologies within their networks to form new business models and alleviate network congestion.

Robert Pepper, senior managing director of technology policy for Cisco, attended VON and echoed Chambers' thoughts.

"We don't think that new regulation is needed on (Net) neutrality," Pepper said in an interview. "The FCC needs to use the existing policies to punish bad actors and bad actions. Additional regulation could end up hurting innovation rather than helping it."

Bandwidth hogs

The debate is heating up as new applications such as voice and video make their way onto the Internet. These features require a certain quality of service for them to work properly. Network owners argue that these services, which are often offered by other companies, eat up bandwidth.

Cisco believes the phone companies could use their technology to manage their network resources more efficiently and prioritize services for consumers. Today consumers who want access to high-bandwidth applications like video must subscribe to expensive broadband packages. These consumers may not need all this bandwidth all the time, but today they're forced to pay a flat fee for a set slice of Net access.

If network operators were able to provide priority to this video traffic through their network and charge the content providers for this priority, their customers could access their content over lower-speed broadband connections. In this scenario, a tiered service could actually benefit consumers, they argue.

But Google, PacWest Telecom and others, which have written a letter to Rep. Barton urging him to preserve Net neutrality, fear that network operators will abuse their market power and give their own services priority over their competitors. They also fear that the fees they charge competitors will keep some small companies from being able to deliver new services.

"They shouldn't be able to give preference to their own content over someone else's content," said John Sumpter, vice president of regulatory affairs for PacWest. "The solution is a form of Net neutrality that would not allow them to discriminate against other companies' applications."

Representatives from the phone companies say these fears are unfounded because customers would not allow this to happen.

"We have no intention of blocking or degrading other services on our network," said David Young, vice president of federal regulatory issues for Verizon. "We are giving customers what they want, which is fast pipes at a low cost. Anyone who tries to take that away from consumers will be punished by the market."

How Congress will handle Net neutrality is still up in the air. Barton has introduced a draft bill to the House Commerce Committee that would prohibit network operators from blocking or interfering with access of applications on the Internet. And Sen. Ron Wyden, an Oregon Democrat, is working on a measure that will foster "equal treatment" for all Internet content and dispel worries that telecommunications providers will play favorites in the future.

But on Tuesday, Sen. Ted Stevens, the Alaska Republican who chairs the Senate Commerce Committee, said that a proposal to overhaul U.S. telecommunications laws may not require network providers to follow Net neutrality principles.