Revisiting Net Neutrality
© Billing
World & OSS Today's - June 2006 - By Susana Schwartz
Not too long ago a firestorm of controversy
erupted over some broadband providers’ contention that
the “free ride” on their networks was in their
words “bull” or “nuts.” That touched
off a whirlwind of debate about what, if any, legislative
anti-discrimination action is appropriate and when.
It has led to opposing views of what
the FCC’s “four principles” mean, as a frenzy
of political jockeying for competitive advantage has gotten
underway since their release in August.
Although the House recently declined
to support network neutrality, the issue is still being bandied
about in the Senate as a re-write of the Telecom Act is considered.
Internet companies continue to push
Washington to mandate legislation that would force broadband
providers to offer the same service levels to all people.
Yet broadband providers are lobbying for government to stay
out of it, so that QoS-based pricing for tiers of service
levels can evolve naturally.
Each side is looking at “anti-discrimination”
legislation in different ways. The question is whether change
is necessary to drive innovation, or whether change would
unnecessarily burden the companies providing infrastructure
for that innovation.
“The Internet is not free even
now; it’s already a commercial enterprise. You can’t
fund a commercial enterprise without segmented pricing. You
use more, you pay more,” says Duffy Mich, CEO of Aperio
CI, which designs marketing systems around billing needs.
“Billing will be based on content and QoS. There will
be micropayments for viewing pages, and people will be willing
to pay for things like streaming video and other high-bandwidth,
QoS-based services.”
Many would consider government intervention
counterproductive to innovation. “If the [Federal Aviation
Administration] tells the largest airline that it has to start
offering its competition’s customers seats on their
flights at insignificant and incremental costs, the airline
would ultimately lose incentive to invest in new technology
and planes, as they’d feel they were giving it up for
free. And the smaller airlines wouldn’t invest in new
planes, because they’d be getting seats on the bigger
airline’s planes,” explains Ron Cowles, research
VP with Gartner. “Any government-imposed change to the
ecosystem will cause some difficulty; any laws imposed on
the public Internet will be influenced by the special interests
of large Internet companies who want to gain competitive advantage.
We have to be very careful at this critical point in time.”
Currently, one would be hard-pressed
to find another market where businesses get away with not
paying suppliers or don’t charge for providing superior
quality of service to higher-paying customers. We all pay
tolls to ride over road infrastructure, food companies pay
for prime shelf space, manufacturers pay for shipping goods,
and airlines pay other airlines for providing connecting flights
for customers.
Supermarkets would never be allowed
to charge consumers for three items, rather than the two they
actually bring to the check-out, just because three is the
“industry average.” And if a supermarket closed
down because it was forced to give away food for free, people
wouldn’t stop eating; rather, vendors on the street
would pop up all over the place to sell food, and consumers
would go to them.
So if the legislation ultimately allows
the Googles, EarthLinks and Yahoos of the world to get away
with not paying the “freight” to ship their goods,
is it fair to allow those very same companies to sell advertising,
promote certain goods or content, and block spam? Should they
be allowed to stop broadband companies from doing the same?
The push for widespread broadband access
through Wi-Fi and other new technologies means networks will
become increasingly burdened at some point. After spending
billions on fiber, is it fair to tell broadband providers
they can be no more than bit pipes for competing VoIP traffic
and growing IPTV traffic?
The fear of that is exacerbated by the
recent success of IPTV and fiber-to-the-home projects that
enable direct-to-consumer relationships. Phenomena like YouTube,
Digg.com, Reddit.com, Newsvine.com and other video-sharing
sites are scaring not only TV executives who are fearful that
these are the Napsters of the TV world, but also broadband
providers who carry IPTV traffic generated by these types
of sites for free. These start-ups will eventually turn into
commercial enterprises with millions of consumers that may
gum up networks in the not-too-distant future.
Already the YouTube site gets 200 million
page views a day, and Digg has as much traffic as the New
York Times, according to Alexa.com, a traffic tracking site.
Despite the threat of bottlenecks on
networks, some in Congress already are proposing bills that
say broadband providers cannot provide content if they provide
access. Does that increase consumer choice or reduce it?
But how would things evolve without
government intervention?
Broadband companies would possibly capitalize
on the real opportunity to profit from their experience with
billing, customer care and packaging, because they could become
the aggregators among all the pieces in the puzzle.
It’s inevitable that the high-bandwidth
and QoS-reliant services whose first iterations are available
under flat-rate plans, or for free, will have to give way
to a pay-for-what-you-get model. Too often, innovative services
are stifled by the lack of flexibility in systems to do the
rating, pricing and customer care. As more and more parties
become involved with the traffic flowing over broadband providers’
networks, the network providers have a clear opportunity to
orchestrate how this pans out, especially if their systems
are flexible enough to handle multiple services from multiple
partners.
“Typically, systems today support
the operational aspects of core services, but do nothing to
support market flexibility that the net neutrality issue brings
to the fore,” says Highdeal’s
David McNierney, VP of market development.
Rather than support just internal marketing
departments, broadband providers would morph into multi-service
providers that will support the business development organizations
of many content providers through a focus on product marketing
management. “They will have to support the marketing
departments of content partners to handle complex, tiered
pricing and packaged services, as well as complex settlement,”
says McNierney. That, he says, will require flexible billing
and pricing technology that focuses on the four p’s
of product, price, place and promotion.
The YouTubes of the world are trying
to bypass reliance on the broadband providers by going directly
to consumers for the time being. These direct-to-consumer
companies are having to learn about pricing models by observing
what happens to companies like Apple, who at first succeed
with flat-rate, dollar-a-download pricing schemes, but then
need more innovating packaging to continue to succeed. “Rather
than be a threat, broadband providers have an opportunity
to help emerging players to develop customer loyalty and long-term
relationships,” says McNierney. “The simple models
that first attract people will evolve to rewards for long-term
customers that help them see value beyond what they are downloading.
Just charging the customer is no longer enough.”
That sounds great in theory, but why
is there this paranoia and fear of an Internet “retail
model”? Why do advocates want to preempt something like
a free evolution of the market? Do they have reason to lack
faith in regulatory and lawmaking bodies that are supposed
to act as checks and balances against abuses on the Internet?
The Answer Is “Yes”
Internet “purists” have reason to think it is
inevitable that competition will force large broadband providers
to act as gatekeepers for content that threatens their own
supply of voice, video and music.
Indeed, it’s easy to see how a
cable company offering VoIP might exempt its own customers
from high-bandwidth premiums to attract customers to its own
product over its competitors.
The ISPs, DSL and broadband companies
are being unrealistic if they think they can just say “trust
us, we have the public good in mind.” If no checks and
balances are put in place beforehand, it is conceivable that
cable, DSL and broadband providers will prioritize, block
or degrade traffic according to their interests—ostensibly
controlling what customers can access on the Internet.
In his testimony before a Senate panel,
Google senior executive Vinton Cerf said competition is not
fierce enough in the U.S. market to prevent discrimination
against competing services or content providers. A case in
point is the FCC, which has been somewhat weak in requiring
cable operators and other broadband providers to open lines
to independent ISPs.
Also, consumers already pay for Internet
service through monthly access fees. Would additional prioritization
or quality of service fees be fair?
It depends on how net neutrality is
defined and what the definition will allow or ban.
The debate rages on as Senate and House
members draft bills to be part of any rewrite of the Telecom
Act. Congress could do such a rewrite this year or next.
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