Net Neutrality Likely Needed; Details Uncertain, Leibowitz Says

The agency is not monolithic on the matter, Leibowitz implied. The notion that broadband providers have no rational reason to “mistreat customers” -- by discriminating against content and applications -- “resonates with many at the Commission,” he said. But lethargy can be bias, he said: “Frankly, broadband providers do not have a history of being interested in… developing new applications and services” that, once developed, turn out to be very popular, such as YouTube, he said.

“Some form of net neutrality” probably is needed to ensure innovation in applications and services, Leibowitz said. But “I haven’t reached any final conclusions,” he added. The “competitive swell” between cable and telco -- intensified by muni wireless projects -- means “we need to be careful not to create a policy that stops this competition before it really gets underway,” he said. Neutrality elements in AT&T’s merger agreement may provide a “point of departure” from today’s intractable debate and its “dystopian worlds where each side warns of the misery to come [and] listens to the other [side] just enough to mock it,” Leibowitz said. Perhaps if a carrier showed that, under such a regime, closed use of a “3rd pipe” to deliver advanced services would be procompetitive, the FTC would endorse that service, he said.

Absent neutrality rules, one ISP’s charges to popular websites may be borne by all ISP customers, said Joe Farrell, economics prof. at the U. of Cal.-Berkeley. That’s the precedent from the “terminating access problem” -- long distance prices rose across the board when one company charged others to call its customers, said Farrell, author of a study on competition, switching costs and network effects. Using antitrust law to fix disputes between access and content providers would require “rapid and predictable enforcement,” or such stiff penalties that violations would occur less often, he said.

House Telecom Subcommittee Chmn. Markey’s (D-Mass.) “badly worded” net neutrality bill hurts the climate for innovation, said Simon Wilkie of the U. of Southern Cal. The former FCC chief economist said a better way might be to require a certain level of open Internet service -- perhaps 1.25 Mbps -- then let providers and 3rd parties strike preferential deals for services above the basic level. But under that scenario tiering and prioritization would have to be offered based on functionality, not customer identity, he said: “There is a fair amount of consensus on those ideas.”

Broadband is a “young business” with large up-front costs, and so far concerns about market failure are “pretty hypothetical,” said Progress & Freedom Foundation’s Tom Lenard, who once held senior FTC and OMB positions. Bundling of content and access may be necessary to even pay for initial services and introduce competition among access providers, but that says nothing about blocking or degrading services running over the network, Lenard said.

Cornell U. Prof. Emeritus Alfred Kahn warned against regulatory “meddling,” mocking neutrality advocates’ tendency to invoke the Madison River-Vonage blocking case. “A more obvious case of the abuse of a vertical position, I cannot imagine,” he said. The matter, resolved “peremptorily,” offers little guidance on handling subtler disputes between providers and content, he said. Preventing preferential carriage deals is tantamount to telling newspapers they can’t carry advertising, he said: “It’s absurd to say ‘Charge only you and me.'” -- Greg Piper

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On a later panel, Google lined up for -- and USTelecom and Level 3 Communications against -- net neutrality regulations. “Net neutrality is critical for the health of a competitive Internet,” said Alan Davidson, Google Washington policy counsel, noting that open architecture “enabled companies like Google to rise.” Google doesn’t want some traffic prioritized at the router level “at the expense of other traffic,” he said: “We're afraid that this puts new entrants at a disadvantage” and that “the next Google will have a very difficult time getting access to these faster lanes.” But trying to level the field for all packets would “make a variety of new services and applications… impossible to provide,” said USTelecom Pres. John McCormick. Level 3 agreed new rules are unnecessary and the company “wants to preserve a dynamic and ever-changing Internet experience for all users,” said John Ryan, the company’s senior vp-commercial & public policy: “We're fans of the market.” - AF