Network Neutrality Debate Focuses on Who Pays, How
LAS VEGAS -- The main question in the escalating network neutrality debate is who pays for the rapidly growing number of bits passing through networks, rather than about limits on certain kinds of content, speakers said here at the USTelecom conference Mon. Content providers want carriers to charge subscribers for higher capacity use. Carriers want options, including ad models and even billing content providers.
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The issue has gained weight as video download services, such as a movie service expected from Amazon, have multiplied. Using bandwidth to download video involves “pretty substantial costs,” said BellSouth CTO Bill Smith during an ATIS panel. He said if each consumer downloaded 2 standard definition movies monthly on average, that would almost double the data on the BellSouth network.
BellSouth already has seen “significant impact” on its data traffic from downloads in recent months, Smith told us later. In the future, he said, “we'll see tremendous impacts on our backbone capacity needs.” Many forget carriers pay to increase network capacity, and pay per megabyte for data carried on other networks, Smith said: “There is not some big interstate highway system that’s already paid for.”
Network neutrality is the main reason Amazon attended USTelecom, said Paul Misener, Amazon vp-public policy. He said it’s “clear that the operators intend to discriminate among content in a way they never have,” and one of Amazon’s main goals is to get rules assuring carriers’ “market power” over networks doesn’t extend to market power over content.
Asked on a Deloitte & Touche panel who should pay for bits Amazon’s video download service would require, Misener said it “makes perfect sense” for carrier customers to pay for bits they use. It’s up to consumers how many bits they use, he said: “Bits don’t flow unless the consumers want them.”
But BellSouth’s Smith told us limiting carriers to per- bit charges under net neutrality laws would have a “chilling effect” on new services. He cited the growth of package delivery services that many use more now due to e-commerce, which he said couldn’t have happened all at once. Others said many firms absorb delivery costs to generate business.
“Other models” exist besides simply billing consumers to pay for higher data demands, said Dorothy Attwood, AT&T senior vp-regulatory. Echoing Smith, she urged an advertising model to cover many increased network costs. Other “innovative ways” may be found to cover network costs of benefit to all, she said. Legislation to limit experimentation with such innovations would be a “disservice to consumers,” she said.
Network neutrality calls for “a fine line between the ultra-egalitarianism” of the Internet and assuring carriers can make a profit, said Paul Mitchell, chief of staff of Microsoft’s TV division. But Amazon’s Misener said it’s more about making sure the broadband “duopoly” of cable and telcos doesn’t assert market power.
Network neutrality is intertwined inextricably with video franchise reform, Misener said: Neutrality provisions are needed in franchises for perhaps hundreds of service providers to be carried on a network.
“I couldn’t disagree more,” Attwood responded. She said a barrier to creating the extra bandwidth such providers need is the “legacy franchise environment… This is about growing the pie, and Congress seems to be captivated by that.”
Attwood objected vehemently to references to a duopoly of broadband providers, saying key competition indices -- prices going down and availability going up -- show the environment to be competitive. “This is not indicative of a nonperforming market,” she said: “I had hoped to avoid the duopoly issue, but facts ought to get in the way of hyperbole.”
Net neutrality backers want to reimpose “stilted common carrier regulation” on carriers, Misener said: “There is a happy medium.” He said neutrality rules should apply only to extension of “monopoly from carriage to content.” In response to a question, Misener said adding wireless broadband doesn’t solve the market power problem, because economic theory says at least 4-5 competitors are needed.
The big change in regulation is the transformation of all communications to packetized IP, Microsoft’s Mitchell said: “It has to change from regulation based on services.” A model assuming one entity provides one kind of service is obsolete, Attwood said. Regulating in silos has a “potential for real regulatory restraint,” she said.
Congress likely will focus on bills doing a few “discrete” things, Jamie Hedlund, Yahoo dir.-communications policy, said. Action on consumer privacy, E-911 and universal service is likely, as well as possibly video franchising and broadcast flag, Hedlund said. Less likely, he said, is Hill action on audio flag and the analog hole.