October 18, 2006 6:51 pm

Congress must keep broadband competition alive

The question of internet “network neutrality” has been bounced around by Washington policymakers for more than a year. Yet most still have no idea what it means. Google’s gobbling of YouTube should make this critically important policy issue quite clear. For the phenomenal success of YouTube is testimony to the extraordinary value of a neutral internet.

YouTube is the internet’s latest marvel. Less than two years old, this video-sharing site draws an audience that rivals major television networks. Some videos are television shows or films a user thinks others would like to see. But many are user-created video, either funny or very serious. The internet pulses with the latest YouTube hits.

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But YouTube is not the only video-sharing service. Indeed, Google Video, launched just before YouTube, is one of its most prominent competitors. Google Video was good but YouTube was better. Precisely why is hard to say. YouTube aggressively deployed superior technology and no doubt many were happier to share content on this upstart site than with a company seen as The Establishment.

YouTube could beat Google because the internet provided a level playing field. The owners of pipes delivering video content to users on the internet did not prefer one service over the other. The owners of pipes simply passed the packets of data to users as the users chose. No doubt Google and YouTube worked to make that content flow as fast as possible by buying caching servers and fast connections. But once it was on the internet, the network owner showed no preference, serving each competitor equally.

Network owners now want to change this by charging companies different rates to get access to a “premium” internet. YouTube, or blip.tv, would have to pay a special fee for their content to flow efficiently to customers. If they do not pay this special fee, their content would be relegated to the “public” internet – a slower and less reliable network. The network owners would begin to pick which content (and, in principle, applications) would flow quickly and which would not.

If America lived in a world of real competition among broadband providers, there would be little reason
to worry about such deals. But it does not live in that world. In the US, at least, broadband competition is dying. There are fewer competitors offering consumers broadband connectivity today than there were just six years ago. The median consumer has a choice between just two broadband providers. Four companies account for a majority of all consumer broadband; 10 account for 83 per cent of the market.

This absence of competition puts new applications and content on the internet at risk. For if network owners are permitted to set up internet toll booths, imposing a special tax on providers of content and applications, then it will be the new innovators who bear the burden of these taxes most heavily. The point is obvious when you think about the history of YouTube. Had network owners been charging an access premium, investors in an upstart like YouTube would have had good reason to think twice. All taxes are a barrier, but this tax would be a particularly high barrier to innovation. It would hinder newcomers such as YouTube by favouring established companies such as Google and Yahoo.

Network owners say this is worth it as their tax will help fund the development of a faster network for everyone. But will it? When you can charge content providers a premium for access to a premium internet, what incentive is there to improve the rest of the internet? If the regular internet is fast and reliable, why would a Google or YouTube pay for the premium? The better the “public internet” is, the less valuable premium service becomes. Bandwidth scarcity becomes a business model that conflicts with the dream of a fast, ubiquitous network.

The answer is not a massive programme of regulation. It is instead a very thin rule for broadband providers that forbids business models that favour scarcity over abundance. That is the aim of the very best “network neutrality” legislation. Network owners would be free to compete in all the ways that push deployment and drive down prices. They would be blocked from models where more profit for them means less broadband for us.

The US is facing a competitive crisis in broadband deployment. Yet as it continues to fall behind its competitors, the Federal Communications Commission continues to live in denial. The more it has “deregulated” telecommunications, the worse (comparatively) broadband competition and service have become. When it was 10th in the world George W. Bush, US president, said that “10th is 10 spots too low”. The nation is now 16th. Broadband in the US is 12 times the price in Japan and six times the price in France.

Network neutrality legislation alone will not solve those problems. But it will make sure that the one bright spot in the internet economy – the one place where vigorous competition continues – will be protected. Congress needs to remove the incentive to keep broadband in its currently hobbled state. A thin rule of network neutrality could help do just that.

The writer is fellow at the American Academy in Berlin and a professor of law at Stanford Law School

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