What net neutrality?

Neutral Net? Who Are You Kidding? -- by Michael Grebb

WASHINGTON -- "Net neutrality" could be the most potent rallying cry for internet regulation in years.

It's also something of a surprise. Six months ago, few outside of internet policy wonk circles were aware of the issue. Now, the best-known brands on the net are flexing their lobbying muscles for and against it, and lawmakers have responded with a raft of competing bills. As the debate reaches fever pitch, it seems fair to ask: How neutral is the net right now?

Not very, it turns out.

"Net neutrality" has many meanings, but in the broadest sense refers to a cooperative principle whereby everyone on the net is supposed to make the same effort to help deliver everyone else's traffic. In fact, pushing bits through the network-of-networks that makes up the internet is an anarchic business and frequently an ugly one. ISPs must often fight to get their data carried on neighboring networks, and those who are willing to pay extra reap immediate benefits in the form of faster and better service. Vast amounts of traffic are rerouted and blocked every day. The system, while successful overall, seems to ride on the very edge of chaos, insiders say.

"I don't think the internet has ever been perfectly equal or neutral," says Khaled Nasr, a partner at venture-capital firm InterWest Partners. "There has always been some level of inequality." Seconds Matt Tooley, CTO of broadband optimization firm CableMatrix: "I don't think it's as egalitarian as people would like to think it is."

Arguments over net regulations are nothing new. But they have taken on fresh urgency as the industry absorbs a wave of megamergers and the internet rapidly evolves into a high-bandwidth pipe capable of replicating -- and perhaps even replacing -- both traditional telephone and cable TV services.

A dwindling list of corporate giants that control the pipes into consumers' homes are jumping into the video and internet phone businesses, creating an unprecedented threat to online competition, consumer advocates say. In a worst-case scenario, some speculate, a carrier like AT&T might launch its own internet video service and then conspire to hurt the performance of competitors, such as Google, Amazon.com and YouTube, at least where its own customers are concerned.

"They have been talking vocally about these new business models they're going to try out once they get these mergers done," says Alfred Mamlet, a telecom and intellectual-property lawyer at Steptoe & Johnson. "That's what's got the Googles and Yahoos concerned."

Opponents of regulation counter that examples of significant abuses have yet to be found, and any cases that do arise can be handled using current laws. The Federal Communications Commission can already stop discrimination and anticompetitive behavior when broadband gatekeepers go too far. Last year, for example, the agency fined Madison River Communications for blocking Vonage's voice-over-internet-protocol service.

However you feel about it, net neutrality has become a flash point. No less than six competing bills on the issue are currently being weighed on Capitol Hill, varying from a hands-off approach that would have the FCC adjudicate disputes to a House bill that cleared committee last week and would force internet service providers to offer everyone the same level of service (see chart, left).

The debate appears to have polarized into extreme positions. But a hard look at the current situation seems to show that both sides have a point, and the best long-range solution may well be a compromise. Giving the cable firms and telephone companies free rein to do exactly as they wish is almost certainly a mistake. But micromanaging their businesses by forcing them to treat everybody exactly the same would also be a blunder.

"There need(s) to be a wide range of options to experiment and try out new business models," says Robert Pepper, senior managing director of global advanced technology policy at Cisco Systems and a former policy wonk at the FCC.

It's true that since the days of dialup modems, internet traffic has mostly ridden on a "common carrier" phone network obligated to serve all comers. And the new content partnerships and premium service tiers being discussed by the cable and telephone companies could constitute dangerous new territory.

But don't be fooled. In a broad sense, the commercialized world wide web evolved almost from the start as a bastion of inequality and favoritism in every way imaginable.

For one thing, deep-pocket ISPs could always buy more long-haul fiber capacity on the internet backbone network from companies like Level 3 Communications than less-wealthy competitors. By definition, those with more backbone capacity can achieve superiority over other ISPs or web-based services.

At the same time, so-called peering agreements, which govern how disparate data networks connect to one another, favor bigger players by definition. The "Tier 1" guys with lots of customers peer with each other to terminate broadband traffic for free. But those with less traffic aren't peers and often must pay or go without.

"You don't get to peer with AT&T unless you have as much traffic as they do," notes Scott Cleland, chairman of NetCompetition.org , a cable-and-telephone-company-sponsored lobbying group that opposes new net-neutrality rules.

Peering is an unregulated staple of internet performance that has worked relatively well until now without government oversight. But in fact, it may be just a matter of time before formal regulations come.

In one of the most visible signs of strain yet, millions of U.S. internet customers saw large swaths of the web suddenly go dark last October. The culprit wasn't an errant backhoe slicing through a fiber-optic cable or some other physical breakdown in the network. Rather, it was the result of a business dispute between Level 3 and Cogent Communications -- two of the biggest internet backbone providers in the United States.

A similar breakdown roiled internet service for PSINet customers in 2001, when Cable & Wireless temporarily severed a peering agreement.

While ISPs generally pledge to carry traffic over each other's networks, they have wide latitude to set their own policies. For example, many ISPs attempt to filter peer-to-peer traffic and spam -- tactics that often land squarely in unregulated gray zones.

Verizon, for one, is mired in a lawsuit stemming from year-and-a-half-old allegations that it improperly blockaded all e-mail from parts of Europe and Asia in a bid to cut down on spam. A settlement agreement that was close to completion was postponed earlier this month by class-action lawyers eager to investigate new allegations of e-mail blocking in the United States.

In a similar vein, ISPs have long buried language in the fine print of their user agreements limiting the amount of bandwidth consumption allowed for each user and/or denying users' ability to use their computers as servers on the network.

That has penalized peer-to-peer usage. Some ISPs have even blocked specific ports used by P2P users. "If you become a real bandwidth hog, you can bring down the network if there aren't controls in place," says David Ostazewski, director of technology at web-development agency Refinery.

Cracking down on ISPs by enforcing one-size-fits-all rules could be costly, since such bandwidth management can have a utilitarian purpose. And it's hard to predict what measures will work best to optimize the network at any given time, or in the future. Cisco Systems' Pepper says that net neutrality in some of its purest forms could even lead to price regulation of broadband services, which could further erode investment and innovation -- the very things that net-neutrality proponents presumably would like to see thrive on the internet. "Regulation is not free," says Pepper. "It always has a cost."

That may be so. But if it's true that the net is currently a hodgepodge of policies mostly worked out by parties seemingly at war with one another, it's likely nothing compared to what's in store once ISPs start to replicate cable TV and telephone service in earnest. In order to work, these applications require guaranteed quality of service, something that's not usually available on the public internet today.

Vastly higher bandwidth and stronger rules for ferrying data between networks could well be required to make these types of services feasible. Even with greater oversight, it's hard to escape the conclusion companies that run the actual wires from the network cloud into the home will soon have an overwhelming advantage, should they choose to wield it.

Gary Arlen, president of Arlen Communications, notes that even during the height of common-carrier regulation, telephone companies managed to forge special marketing partnerships with content providers -- most notably Verizon and SBC/AT&T's cushy relationships with MSN and Yahoo, respectively. And cable operators have always had special content deals through their portals.

Such deals have "opened the door to such 'favored nation' status" for content providers that play ball with the broadband gatekeepers, he says. "So there's plenty of evidence that the situation has existed sub rosa for many years. Now, the telcos want to formalize it but eliminate the charade of 'neutrality.'"

Perhaps. But there are good reasons to suspect that the expanding gatekeeper clout of the cable and telephone companies is poised to change the entire game. After all, they control the "last mile" into the user's home. Competitors in the form of wireless and broadband over power line are so weak that it could be years before it's even possible to gauge their viability. Yet, the FCC recently deregulated telephone companies' digital subscriber lines to put them on par with unregulated cable-modem lines. That leaves the two primary broadband gatekeepers in positions of unchecked power for the foreseeable future.

"To say it's never been equal is obvious," says Paul Meisner, vice president of global public policy for Amazon.com and one of the key lobbyists pushing for strong net-neutrality safeguards on Capitol Hill. "But none of those services degrade other services on the internet. The problem arises when schemes are discussed that would prioritize some traffic over other traffic."