Net neutrality and the future of the Internet

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Net neutrality and the future                                                                             June 2007
of the Internet

Foundations for a debate
A recent session of the United States Senate Committee on Commerce, Science and Trans-
portation has exposed to public opinion a debate that was being covertly deliberated in re-
stricted circles: net neutrality, the principle that establishes that all traffic that circulates by the
Internet should be treated under equal conditions, no matter what the content may be and
who may be the sender and receiver.

This session, at which some of the most representative figures of ICT companies the aca-
demic world and US civic associations attended, engaged in the polemic about whether net
neutrality should be expressed
as a legal principle or remain as  Types of network, according to where control is located
a de facto reality of the Internet
architecture, as has been hap-             Centralised                           Open
pening till now.

Contrary to possible appear-
ances, it is not about a con-
troversy between only techno-
logical or exclusively American
companies. Around the debate
about net neutrality questions
are being asked that will sig-
nificantly affect the future of the
                                     Network with intelligence at the centre Network with intelligence at the periphery
Information Society. This is so
                                                   ‘CORE’                                     ‘EDGE’
because two different concep-
tions about the structure of the            Telephone service                                Internet
Internet are being resolved: on               Postal service                         Motorway network
the one hand, whether it should
remain neutral as it has been since its beginnings or, on the contrary, whether it should to
some degree be privatised in order that it can face up to new demands, due precisely to its
social, technological and commercial development.

The implications that opting for one approach or the other would entail go further than config-
uring the Internet as a good public or private space, reaching areas such as the promotion of
innovation, investment in broadband networks, the structure of markets, policies on competi-
Opinion Enter
Net neutrality and the future of the Internet                                                            2
   Structure of the Internet according to its functions (layers)

                                                CONTENIDOS                       Video

              Use control

                                                APPLICATIONS                     Web Browser
                                                AND SERVICES                     Word Processors

                Neutral                         ARCHITECTURE                     TCP/IP

                                                                                 DSL / Cable
             Control of the                INFRASTRUCTURE                        Fibre Optic
               operator                         (transport / access)             WiFi


Enter based on Y. Benkler

tion, and the models and role of regulation                  ers, but only from its privatisation and com-
in the new convergent markets, which gives                   mercialisation at the beginning of the 90s
an idea of the strategic interests in play.                  did it start its process of expansion that has
                                                             done nothing other than accelerate since
In this sense, one has to hope that the analy-               then in a virtuous spiral of innovation and
sis of and reflection about a theme such as                   consolidation to a degree and in proportions
this deserves to be dealt with while excluding               historically unknown. However, this success
preconceived ideological concepts and re-                    would not have been possible without a key
jecting schematic simplifications. Only from a                aspect – its neutral structure.
rigorous knowledge of what net neutrality is,
of why it is being discussed, of what is in play,            In the theory of communication networks
of the various interests present, of the exist-              there are two basic structural models de-
ing alternatives for dealing with it and of the              pending on where the intelligence is located.
repercussions that it entails, will it be possible           One, of centralised intelligence would be like
to take the decision that ensure that the Inter-             the telephone, in which traffic is directed by
net continues being the crucial infrastructure               the switches of the central nodes, or com-
for economic progress in the digital era.                    mercial aviation whose system of navigation
                                                             is controlled centrally. Also the mail system
                                                             would be of centralised intelligence where
Control of the Internet: the                                 the sending of post is controlled and pri-
                                                             oritised in accordance with categories and
centre versus the edge                                       conditions of delivery previously established
                                                             centrally. A decentralised model would be,
The Internet constitutes a unique phenom-                    for example, the motorway network in which,
enon in history. Never before has a new                      once you have accessed it, you can travel
technological area been popularised so ex-                   with complete freedom subject only to some
tensively nor developed so rapidly.                          prior conditions (speed limit, drive on the
                                                             right, etc) that are the same for all.
The Internet had a public origin; essentially
military and academic, driven by a limited                   It means that, whereas in decentralised
community of technologists and research-                     models the intelligence is in the edge, in
Opinion Enter
Net neutrality and the future of the Internet                                                     3
the motorway example it is in the cars, in            a) To provide security in the face of hos-
the centralised ones it is located in the core           tile behaviour
(nodes, control towers, post offices) and
not in the telephones, planes or letters.               While, in its beginning, the Internet was
                                                        used by a limited and homogenous com-
At the time of designing the structure of the           munity, basically academics and scien-
Internet a decentralized model was decided              tists, motivated by the same interests
on, thinking, amongst other reasons, that in            and with trustworthy behaviour, with the
this way it would be more flexible and adapt-            expansion of its use and the huge he-
able to its future and for its unforeseeable            terogeneity of surfers has come a pro-
further evolution. It was assuming, in prac-            liferation of hostile behaviour (hackers,
tice, that in the Internet intelligence would be        fraudsters, etc.) and undesirable content
in the applications (edge) and not in routers           (pornographic, terrorist…), encouraging
(core). It is what is termed as an end to end           the trend to call for the need to establish
(e2e) structure or point to point. That results         some kind of control that avoids or mini-
in the packets containing the information cir-          mises the potential damage of those ty-
culating freely around the structure of Inter-          pes of behaviour and content.
net, which addresses them blindly, without
bothering about their content.                          However, such an eventuality faces a se-
                                                        rious problem: the Internet does not have
The significance of this type of structure be-           any established security mechanism in
ing chosen for the Internet goes much further           its architecture.
than purely technological issues, since it has
been configured as an open network, flexible            b) To make available quality of new
and easily scalable. Thus, any new applica-              applications
tion only needs one requirement: that it uses
the IP protocol and not that it be accepted by          The development of the Internet and the
the network since the latter in its e2e condi-          advance of technologies, especially those
tion is, by definition, neutral. And it is precisely     related to broadband, that support it, are
this open and neutral character of Internet that        making intensive applications increasingly
has been the fundamental cause of its initial           possible in media streaming, basically vi-
success and extraordinary later expansion.              deo, that for its effective commercialization
                                                        require certain quality levels. In particular,
                                                        it is a question of avoiding what in techni-
Why is net neutrality being                             cal terms is known as latencies or delays
                                                        in the reception of the image, that result
questioned?                                             from the neutral architecture of the Inter-
                                                        net not discriminating between applica-
Paradoxically it could be that the same con-            tions, giving the same priority level to one
ditions that have made the Internet’s suc-              of these video applications as to a simple
cess possible, its open and neutral charac-             email one. But while a certain delay in an
ter, could become the main threats for its              electronic mail is not important, the occu-
future viability.                                       rrence of latencies in a video application
                                                        could make it infeasible to develop busi-
Nevertheless, it is what may happen precisely           ness models for their commercialization.
as a consequence of its enormous success;               That makes it essential to consider as a
new challenges are arising, to which the In-            necessity the establishment in the Internet
ternet will have to give satisfactory answers,          of some QOS (Quality Of Service) functio-
which are those that call into question the             nality that enables discrimination between
principle of neutrality of its e2e structure.           different applications.

These challenges can be grouped around                The problem is that to satisfy these demands
two main requirements:                                imposed by the new Internet reality requires
Opinion Enter
Net neutrality and the future of the Internet                                                         4
the core of the network to be penetrated and                alerting to the danger implied by broadband’s
some intelligence to be located there that                  enormous potential that was granted to op-
can control the circulating packets, stopping               erators to become the Internet gatekeepers,
them (for security reasons) or prioritizing                 being able to decide what content, applica-
them (for business reasons)                                 tions and services could circulate around
                                                            their networks and under what conditions.
In summary, the neutrality principle, that has
been a key factor in the success of the Inter-              In any case, not only Whitacre but also Cerf
net, confronts its first crisis of maturity, fac-            did no more than represent the main inter-
ing new demands that call its open configu-                  ests in game: those of old operators, like Ve-
ration and neutral operation into question.                 rizon and BellSouth, and cable companies,
                                                            in one corner; and of suppliers of services
                                                            like Yahoo or Vonage, in the other, though
AT&T and Google: two                                        this latter may be supported by prestigious
                                                            university professors, like Lawrence Lessig,
interests face to face                                      and associations dedicated to the defence
                                                            of the rights of surfers.
In the more visible part of the debate on
net neutrality, leading roles are played by                 The basic argument of the operators in
on the one hand the new AT&T, and on                        defence of their position is that they have
the other, Google, according to statements                  invested and they must continue investing
made by high profile representatives of the                  thousands of millions of dollars in the de-
two companies.                                              ploying of their networks and, therefore, they
                                                            have the right to prioritize their own content
The chief executive officer of AT&T, Ed                      or that of those who pay for them, above all,
Whitacre, stated that suppliers of services in              they add, in an expanding context of inten-
the Internet such as Google or Yahoo were                   sive content in broadband that can imply a
mistaken if they thought that they could load               problem of network congestion.
its networks more and more with new serv-
ices without any cost. In Google’s defence,                 On the part of the service suppliers, their
its vice-president, Vinton Cerf, responded by               arguments do not directly attack the opera-

 The various interests in conflict in the debate about Net neutrality


        Service                                                                        Content
       Provider                                                                        provider
                                                Network operator
Opinion Enter
Net neutrality and the future of the Internet                                                    5
tors’ position in the sense of having the right   It would be a case of reinforcing a romantic
to charge those who use their networks,           vision of the Internet which, through a purely
because that would not be easy, but turn to       democratic process of technological Dar-
two arguments to defend their position; that      winism made possible by its neutrality, has
the operators already make a profit on their       even become the public arena of creativity
investments through what they charge the          and innovation (‘innovative commons’) that
users, which is why any charge that was ap-       it is at the present time.
plied to the service suppliers would end up
having an effect on the former (the users).       Their opponents, for their part, comment that
Second, that this process of privatization        much worse than the possible diminution of
would end the open and neutral character          innovating capacity that the Internet would
of Internet, creating power concentrations        suffer if it lost its neutral character, would be
that would harm the consumers, decisively         the introduction of the principle of net neu-
threatening the capacity to promote creativ-      trality as a regulatory ‘before the event’ rule,
ity and innovation, which would seriously         in a context ever more inclined towards an
damage the competitiveness of the Ameri-          ‘after the event’ regulation, motivated by the
can economy in a globalised world.                negative regulatory experience accumulat-
                                                  ed in recent years. Hence, the continuation
What is certain is that both positions sym-       of a ‘before the event’ regulation, given the
bolize the confrontation between the rights       background, could be enormously detrimen-
of property and those of use. In this respect,    tal for the future of the Internet.
it is advisable not to forget that the institu-
tional judicial ecosystem on which the de-        On the other hand, this debate would have to
veloped economies have been built are not         consider an essential factor: the demands of
understood without first considering those         high speed broadband development impose
rights as a fundamental pillar.                   on the telecommunications operators the
                                                  need to continue a process of investment of
                                                  very significant dimensions. It will be difficult
What is at stake?                                 to obtain adequate profitability from these
                                                  investments if the ability to obtain returns
What is at stake in the debate about net neu-     from its use is not protected.
trality goes beyond the scope of the specific
interests of network operators and service
suppliers: it reaches what could be termed        Does only net neutrality
the public interest. This is so because the
Internet is, and will be more and more, an        guarantee innovation?
essential sphere of economic activities and
social connections. This has caused the de-       One of the most powerful arguments that
bate to be ideologised.                           is used in favour of net neutrality is that it
                                                  guarantees innovation. That is because the
Thus, those in favour of net neutrality have      success or failure of any new application is
even constructed a class of Internet social       determined by its greater or lesser accept-
theory by which a higher value is given to it     ance on the part of surfers and not, as would
than the parties that compose it.                 have been the case if the Internet had had a
                                                  centralized structure, the interest or conven-
In this line, it is said that the ambitions of    ience of those who controlled the network
the operators would end up by changing            Core.
the essence of the Internet that would pass
from being driven by the users (user-pow-         That would explain, for example, the enor-
ered) to being controlled by the operators        mous success experienced by an applica-
(carrier-controlled), which would put at risk     tion like the World Wide Web (www) that,
the efficacy that it has demonstrated until        thanks to the neutral character of the Inter-
now.                                              net, could roll out all of its functional qualities
Opinion Enter
Net neutrality and the future of the Internet                                                    6
with no need to accommodate them to the              opinion, an alternative concept is being de-
requirements or conditions of a hypotheti-           veloped as an inspiring principle of the ar-
cal controller. Another more recent example          chitecture and the operation of the Internet
consists of telephony by Internet, or VoIP.          called net diversity.

It is necessary to emphasise that the merits         It is about an intellectual position that, while
of this position are undeniable. The Inter-          continuing to recognize the merits of net
net as an innovation space has no histori-           neutrality, questions that its adoption as a
cal precedents on the scale in which it has          regulating mandate is an opportune option,
taken place and the speed of its adoption.           at least at this moment. And that is for a fun-
Therefore it is claimed that reinforcing the         damental reason: because it would imply
principle of net neutrality is essential to con-     discarding prematurely that certain limita-
tinue guaranteeing that exceptional rate of          tions to the principle of net neutrality could
innovation.                                          provide certain benefits. Which is not only
                                                     not dismissible, but even probable.
But things cannot be as simple as they seem.
An alternative vision has arisen versus the          Its position is reinforced with a series of le-
previous position that, whilst not refuting it, it   gal and economic rationalisations:
does incorporate interesting nuances:
                                                     • The principle maintained by the Supreme
• As important as the innovation at the                Court of the United States by which no
  applications level in the edge of the net-           business practice should be prohibited a
  work (resulting from net neutrality) is that         priori; it should only be prevented when
  which takes place in its core. This is be-           its anticompetitive effects are demonstra-
  cause both the availability and the capa-            ted and always case by case.
  city of broadband are critical aspects for
  the development of the Information So-             • To establish net neutrality as the perma-
  ciety and, therefore, key factors for the            nent architecture of the Internet, exclu-
  competitiveness of economies.                        ding other less dogmatic alternatives, at
                                                       such a preliminary stage, would probably
• It is precisely at the applications level            be more detrimental than beneficial; es-
  where, at the moment, greater compe-                 pecially, at a time of technological uncer-
  tition exists and therefore more innova-             tainty and experimentation about what
  tion, the opposite of what is happening at           may be successful business models.
  the network level.
                                                     • To enable differentiation of the network ow-
• Only if they privatize networks to some              ners (teleco and cable operators) networks
  extent, will the telecommunications and              would better satisfy an ever more diverse
  cable companies have incentives to in-               and exacting demand. On the contrary, net
  vest in their improvement and without                neutrality reduces significantly the incenti-
  investment there is no innovation. An                ves to develop new networks.
  aspect that, without a doubt, leads us to
  consider wisely the favourable arguments           It is therefore realistic, to predict a market
  for including net neutrality as a regulating       structure in which specialized networks co-
  principle.                                         exist as being desirable: some for traditional
                                                     applications, like electronic mail, surfing, et
                                                     cetera; others, for transactions with special
Net diversity as an alternative                      requirements of security, such as electronic
                                                     commerce; and some for intensive applica-
to net neutrality                                    tions in video streaming, VoIP, etc.

Contrary to the dominant trend in favour             All in all, the advocates of net diversity, rec-
of net neutrality, at least in terms of public       ognizing that this is not a panacea either,
Opinion Enter
Net neutrality and the future of the Internet                                                 7
raise the alarm about a legal establishment         that the FCC may give a regulatory charac-
of net neutrality, warning that it is premature     ter to the net neutrality principle, until now
and, what is more disquieting, of its prob-         just a de facto established characteristic for
able counter-productive effects.                    the Internet.

                                                    The American regulator has defended net
Internet, between regulation                        neutrality, but to date he has been reluctant
                                                    to formalize it legislatively. In February of
and the market                                      2004, his then president, Michael Powell,
                                                    specified the body’s policy on freedom in
The debate on net neutrality reflects, to a          the Internet. In a speech in the University of
great extent, the tension between whether it        Colorado (the U.S.A.) he defined the Inter-
is necessary to regulate the Internet or not        net as the right of the consumers to a four-
and, in the case that it is necessary to regu-      fold freedom: of access to content, of use of
late it, how to do it. A tension due, in part, to   applications, to connect any device and to
the fact that that the American Telecom Act         receive information about its plan of connec-
of 1996 emerged without considering the             tion to the Web.
then embryonic reality of the Internet, is to-
day strengthened by, among other reasons,           Powell requested industry to respect those
the takeoff of broadband and its extraordi-         principles, but the FCC has never promot-
nary potential.                                     ed a rule that protects the neutrality of the
                                                    Internet. It has depended on market forces
To integrate the expansive reality that is the      being sufficient to guarantee it. Whereas,
Internet into a regulatory framework that it        however, it has acted, when neutrality has
had not anticipated at that time and is over-       been threatened by specific actions. The
whelmed by technological and market dyna-           most outstanding example was the Madi-
misms, constitutes a constant preoccupation         son River Communications case. In March
of the regulating agencies in most countries,       of 2005, the American regulator, in answer
in particular the Federal Communications            to a complaint of Vonage, forced local op-
Commission (FCC) in the United States. In           erator Madison River Communications to
fact, the focus of the debate is the proposal       lift the blockade that it was maintaining on

 Probable alignment of the interests in conflict

                         IPR*                                     ‘Innovative

                     Network                                       Application
                     operators                                      Providers

                      Content                                        Service
                     Providers                                      Providers

                    Telcos / Cable                                    Google
                    Record labels                                     Skype

   * Intellectual Property Rights
Opinion Enter
Net neutrality and the future of the Internet                                                8
the access of its users to VoIP services. The     All the parties agree, however, in that the
current president of the FCC, Kevin Martin,       incentive problem is real and must be tack-
maintains his confidence in the regulating         led, although they differ in the solutions.
effect of the market and has affirmed pub-         Those who defend the stance that neutral-
licly that no regulation that protects neutral-   ity must be legally protected propose that
ity is nor will be necessary.                     the end customers pay for access services
                                                  by usage. Powell himself has already de-
In this sense, Martin agrees with the opera-      fended the compatibility of freedom in the
tors who defend the freedom of the market         Web with services differentiating by vol-
and competition between access technolo-          ume. In accordance with this model, using
gies as the best protection of the Web. On        the example of the electricity grid, users
the contrary, the content and application         who consume more would pay more, in-
suppliers warn against the dangers of rup-        dependently of the type of traffic that they
ture of the neutrality principle and plead for    generate. In this way, the neutrality of the
a regulation that preserves it. They doubt        Network would be protected and deploy-
that the American market, where obliga-           ment would be stimulated.
tions of local loop unbundling do not exist,
where most users are limited to the duopoly       But the model also presents technical dif-
local-cable operator and where the roll out       ficulties. The main problem is to find a so-
of alternative technologies is minimal, has       lution that allows users to easily and very
sufficient force to avoid certain operators        intuitively associate the applications and
discriminating against traffic. They observe       content used with their consumption. And no
with concern the fusion of AT&T and Bell-         less important, it implies that it is necessary
South, which will create the premier opera-       to break the habit acquired by consumers
tor in the country and will significantly rein-    used to flat rates and, therefore, reluctant to
force its market power.                           adopt new pricing models

   Opinion ENTER

   We are, therefore, facing a debate of undoubted importance. It deals with the first
   regulating dilemma that takes into account the complexity of a convergent world,
   which makes it necessary to avoid the adoption of measures based on fashion-
   able debates or ideological options.

   In the regulation or otherwise of what is called net neutrality, the challenge lies
   in making compatible the neutral and decentralized essence of the Internet, that
   has made its huge development possible, and to carry on advancing in the de-
   ployment of high capacity broadband networks that demand investments that can
   only be dealt with in a scenario of appropriate returns.

   Neither should the possibility be avoided that, under the pretext of restraining the
   threat which the strength of the telecommunications operators could pose to the
   development of Internet, it may continue nurturing a new possibility not based on ac-
   cess price but on the position of control of certain services and content suppliers.

   Obviously, it is not only about nor could it be about a conceptual dilemma. It is
   known, experience demonstrates it, that regulation and business models are in-
   fluenced and conditioned reciprocally, to the point of collectively determining the
Opinion Enter
Net neutrality and the future of the Internet                                          9
   reality of the sector, that will be one or the other based on which is the chosen

   These deliberations cannot ignore the very limited role that Europe, and conse-
   quently Spain, is playing in the possible determination of regulatory measures of
   global application; measures that, whilst advisable to bear them in mind, once
   adopted will be very difficult to avoid and even more so to modify. At least with this
   opportunity, the Union should try to avoid the development of the Internet being
   made, once again, without considering the interests of the sector, companies and
   European citizens.

   In conclusion, we are witness to a debate of capital importance that affects the
   regulation of digital convergence in the coming years. It could, perhaps, be com-
   parable to that which earlier on meant for the industrial society bringing the labour
   relations model up to date. Or what the debate, also currently on-going, with
   respect to the protection of content and intellectual property rights may involve.
   And one should not forget, in any case, that one is dealing with an enormously
   complex subject, with greater implications than those often imagined, nor that the
   consequences of the measures that finally are adopted will be much more impor-
   tant than those that a simple theoretical debate reveals.