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Net Neutrality: Getting Down to Cases

By 12 August 2010 No Comment

Internet discussion of the Verizon-Google proposal on Net Neutrality has soaked up a lot of bits this week, but I do not feel enlightened. My problem is one that is endemic to the whole NN debate – the debate is conducted at a high level of abstraction, rarely getting down to cases on the question “what are the particular problems that Net Neutrality is designed to solve or the particular practices that it is needed to prevent?”

Being a lawyer, I was trained through the case system, in which one looks at specific fact patterns and then considers how changes in these affect one’s assessment. The method has its flaws, but it has the virtue of reigning in rampant abstractionism by anchoring it to practical reality.

So here are some situations involving neutrality that might confront a telecom regulator. The question for the class is what the regulator should do, assuming it has plenary power to act pro bono public, unconstrained by the current statutes.

  • A telecom provider (TP) offers plain old telephone service, broadband Internet, and a new VOIP service. The telephone service is barnacled with all sorts of obligations concerning depreciation rates and rate-of-return, universal service payments, and other obligations dating back to the old telephone monopoly days. The telephone service also paid for the basic infrastructure to which the Internet service has been added. The Internet service is free of these historic obligations. —  Suppose an outside company wants to offer the customers VOIP only, thus avoiding the obligations that attach to POTS while cannibalizing the revenues used to support the whole system. Should the TP be allowed to block the outsider, insisting that customers use only the telecom’s own VOIP?  Are there intermediate positions, such as allowing the outsider to connect its VOIP but also allowing the telecom provider to levy a charge on to pay for overhead costs?
  • A TP is figuring out how to prioritize its Internet traffic. Which of the following schemes are acceptable?  (a) Prioritize according to sensitivity to latency, with interactive uses receiving top priority; (b) Allow uses that are sensitive to latency to buy priority treatment; (c) Set up classes of service and let users decide which they want to buy.
  • A TP discovers that 99% of the traffic used by a particular P2P program is devoted to downloading unlicensed content. What result if the provider blocks the program (let’s add that the provider sets up a mechanism by which legitimate users can register)? What if the TP blocks it after being paid a fee by the Motion Picture Association?
  • A giant brokerage house has built an expensive data center near the NYSEs’ computers so as to gain tiny advantages in trade execution time. A small, scrappy competitor cannot afford such extravagance, so it pays a TP to expedite its bits. The giant brokerage house protests to the regulator that this violates neutrality. What result?
  • Metcalfe’s Law says that the value of a network increases with increase in the number of nodes connected. Suppose a venture capitalist thinks that there is a market for a network based on the opposite premise – that value is proportional to the number of bozos that are excluded. So it proposes to build a private network which will be totally controlled by the operator – hardware; software; search; apps; connected sites – available for a price (high) and designed to maximize the overall value to subscribers by screening out repetition and irrelevancies and saving them time. Advertising is not allowed, except in response to specific requests for information. Should the regulator allow the service?
  • A TP contracts with a search engine provider to give the SE an exclusive on the TP’s network. Or the reverse – an SE configures its engine to work only on particular network. Does it matter if the combination produces convincing evidence that the integration allows the creation of substantial security and efficiency benefits for customers?
  • A TP installs a program that prevents connection to any Internet site that has not registered with the TP and paid it an annual fee of $XX.  Or a variation – the site must pay a fee based on the total bandwidth used in connecting to it.
  • A TP charges customers according to total bandwidth used, possibly with variation according to the priority given the bits and time of day.

I can make a case for any of these. For some of them, I know pretty well where important participants in the debate would stand, though for others it is hard to tell. Some should be acceptable if there is competition (or ease of entry) but not if there is monopoly power. Some might be acceptable if announced in advance, but not if sprung as a surprise. But I would love to see the participants in the debate get down to cases and take a position on these and other hypotheticals.

To Be Continued Tomorrow: How the Google/Verizon proposal fits with these issues.

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