At Stake: The Net as We Know It

[David Farber <dave () farber net>]

Begin forwarded message:

From: Dewayne Hendricks <dewayne () warpspeed com>
Date: December 16, 2005 12:40:06 PM EST
To: Dewayne-Net Technology List <dewayne-net () warpspeed com>
Subject: [Dewayne-Net] At Stake: The Net as We Know It
Reply-To: dewayne () warpspeed com

DECEMBER 15, 2005

NEWS ANALYSIS
By Catherine Yang

At Stake: The Net as We Know It

<http://www.businessweek.com/technology/content/dec2005/ 
tc20051215_141991.htm>

Google et al fear broadband carriers will tie up traffic with new  
tolls and controls. Ultimately, it could mean a world of Internet  
haves and have-nots

The Internet has always been a model of freedom. Today the Web is  
flourishing because anyone can click to any site or download any  
service they want on an open network. But now the phone and cable  
companies that operate broadband networks have a different vision. If  
they get their way, today's Information Highway could be laden with  
tollgates, express lanes, and traffic tie-ups -- all designed to make  
money for the network companies.

That prospect is the worst nightmare of Internet stars such as Google  
(GOOG ) , Amazon (AMZN ), and eBay (EBAY ). They're gearing up for a  
clash with the phone and cable giants early next year as Congress  
begins to redraft the telecom laws for the broadband era. The  
Internet gang fears that unless they get lawmakers to intervene, the  
network operators will soon be able to put a chokehold on the Web.  
"The issue is about the future of the Internet," says Alan Davidson,  
Google's Washington policy counsel.

BLOCKED OUT.  Doug Herring, 48, got a glimpse of that specter last  
November. Traveling on business in Tennessee, the General Electric  
(GE ) sales manager phoned his wife at their Elberta (Ala.) home.  
Herring had just signed up with Web-phone provider Vonage Holdings  
and was pleased with the service. But this time, he couldn't get  
through. He switched Web-phone providers, but still couldn't make calls.

Frustrated, Herring contacted Madison River Communications, the rural  
phone company that provides his digital subscriber line (DSL)  
connection. The company said it was blocking calls from Internet  
phone companies. Outraged, Herring and Vonage complained to federal  
regulators.

"For me to get the Internet where I live, [Madison River] is the only  
provider," Herring fumes. In March the Federal Communications  
Commission fined the company $15,000, and the carrier agreed it would  
no longer block Internet-calling services.

INTERNET FIEFDOMS?  Most phone and cable companies are no longer  
content just to sell Web access to consumers. After investing in high- 
speed pipes, they also want to peddle more lucrative products, such  
as Internet-delivered TV programs, movies, and phone calls. "Building  
these networks is expensive," says Link Hoewing, vice-president for  
Internet policy at Verizon Communications (VZ ). "If I can find new  
ways to pay for this network, it's gravy for everyone."

But selling those extras puts the phone and cable companies in  
competition with Web services big and small. The network operators  
could block consumers from popular sites such as Google, Amazon, or  
Yahoo! (YHOO ) in favor of their own. Or they could degrade delivery  
of Web pages whose providers don't pay extra. Google's home page, for  
instance, might load at a creep, while a search engine backed by the  
network company would zip along.

"This new view of the world will break apart the Internet and turn it  
into small fiefdoms" divided between the network providers' friends  
and foes, says Vonage Chief Executive Jeffrey Citron.

LOBBYING HEFT.  That's just crying wolf, retort the Bell and cable  
operators. The Web companies' push for rules requiring "network  
neutrality is a solution in search of a problem," says Daniel  
Brenner, senior vice-president for regulatory policy at the National  
Cable & Telecommunications Assn.

But recent court and regulatory rulings have given the carriers more  
room to discriminate. In June, the U.S. Supreme Court ruled that  
cable broadband services were almost free of regulation. Two months  
later, the FCC granted the same liberty to the Bells' broadband  
services. The FCC made two newly merged megaphone companies --  
created from AT&T (T ) and SBC Communications and Verizon and MCI  
(MCIP ) -- vow to keep their Internet lines open to all for the next  
two years. But FCC Chairman Kevin Martin favors a light regulatory  
touch until he sees widespread abuse by the networks.

Lawmakers updating the telecom laws are more likely to act. The House  
Commerce Committee will probably vote early next year on whether to  
require Net neutrality. And while Google and its Internet brethren  
are the darlings of Wall Street and a Web-wild public, these New  
Economy powerhouses could find themselves outgunned in Washington.  
After decades as regulated carriers, the Old Tech phone and cable  
companies employ legions of lobbyists and funnel hefty checks into  
Congress's campaign coffers. Google, by contrast, just hired  
Davidson, its first lobbyist, in June.

BANDWIDTH ROAD HOGS.  For their part, the phone and cable companies  
protest that they have no plans to use their pipes unfairly. Madison  
River is the only carrier known to have blocked rivals or degraded  
their service. "We have no intention of controlling where you can and  
can't go on the Internet," says Bill Smith, chief technology officer  
at BellSouth (BLS ). "If [phone companies] restrict where people go  
on the Net, they'd leave in droves" for cable competitors.

Yet in a Nov. 7 interview with BusinessWeek Online, AT&T CEO Edward  
Whitacre Jr. declared: "What [Google, Vonage, and others] would like  
to do is to use my pipes free. But I ain't going to let them do  
that." Whitacre and AT&T argue that they need flexibility to exact a  
toll from Web services that hog bandwidth.

As broadband use grows, the Bells and cable companies say that  
intensive users aren't paying their fair share. File-sharers swapping  
music and movies account for 60% of North American residential  
broadband use, estimates Dave Caputo, CEO of Sandvine in Waterloo,  
Ont., which sells technology to manage network traffic. "Your  
overeaters get preferential treatment over weaker ones," he says.

IT'S OUR NET.  Carriers could raise their prices for consumers who  
clog the network. But when Korean phone giant KT noted that 5% of its  
users accounted for half of its traffic and floated the idea of  
volume pricing earlier this year, the public outcry quickly quashed  
any plan.

[snip]

Weblog at: <http://weblog.warpspeed.com>



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