Decoding the Network Neutrality Debate in the United States Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law Penn State University web site: blog site: A Presentation at Diverging Electronic Communications Regulatory Trends in EU and US Florence School of Regulation, European University Institute Florence, Italy 21 June 2010

Explaining the Concepts— Network Neutrality Internet Service Providers (“ISPs”) want to diversify and engage in price and quality of service discrimination downstream among end users and upstream among content providers. Internet Service Providers (“ISPs”) want to diversify and engage in price and quality of service discrimination downstream among end users and upstream among content providers. Deep Packet Inspection and other innovations make it efficient and economical for ISPs to operate non-neutral networks offering “better than best efforts” traffic routing, variable quality of service, Digital Rights Management, and all kinds of “traffic shaping.” Deep Packet Inspection and other innovations make it efficient and economical for ISPs to operate non-neutral networks offering “better than best efforts” traffic routing, variable quality of service, Digital Rights Management, and all kinds of “traffic shaping.” Advocates for network neutrality want a non-discrimination mandate, but explicit common carrier regulatory authority does not exist. Advocates for network neutrality want a non-discrimination mandate, but explicit common carrier regulatory authority does not exist. Advocates for net neutrality claim ISPs have the incentive and ability to block, delay, or otherwise thwart the delivery of content in violation of consumers’ reasonable expectation of an open and free Internet. Advocates for net neutrality claim ISPs have the incentive and ability to block, delay, or otherwise thwart the delivery of content in violation of consumers’ reasonable expectation of an open and free Internet. How this debate plays out will have a major impact on the scope of lawful Internet regulation as well as the accessibility and affordability of Internet-delivered content. How this debate plays out will have a major impact on the scope of lawful Internet regulation as well as the accessibility and affordability of Internet-delivered content.

Stakes and Mistakes Converging and concentrating information, communications and entertainment (“ICE”) markets raise questions about the viability of self- regulation and an unfettered marketplace of ideas. Converging and concentrating information, communications and entertainment (“ICE”) markets raise questions about the viability of self- regulation and an unfettered marketplace of ideas. ICE technologies defy compartmentalization, yet mutually exclusive definitions apply and trigger different regulatory treatment. ICE technologies defy compartmentalization, yet mutually exclusive definitions apply and trigger different regulatory treatment. Technological and marketplace convergence means that three screens (TV, computer monitor and wireless device) can display the same content on demand. Technological and marketplace convergence means that three screens (TV, computer monitor and wireless device) can display the same content on demand. The FCC seems unable to apply more than one model to a single venture even when it delivers “triple play” services. Creative statutory interpretation and stretched jurisdiction recently rejected by an appellate court. The FCC seems unable to apply more than one model to a single venture even when it delivers “triple play” services. Creative statutory interpretation and stretched jurisdiction recently rejected by an appellate court. Despite the view that the Internet qualifies for limited regulation, the FCC has intervened extensively. Despite the view that the Internet qualifies for limited regulation, the FCC has intervened extensively. The FCC has issued a consultative document that outlines a proposal to establish enforceable rule designed to promote nondiscrimination and consumer freedom The FCC has issued a consultative document that outlines a proposal to establish enforceable rule designed to promote nondiscrimination and consumer freedom.

The Convergence Quandary ISPs combine conduit and content. ISPs combine conduit and content. ISPs have speaker rights, but the First Amendment and other legislated free speech rights do not cleave solely between ISPs and their subscribers. ISPs have speaker rights, but the First Amendment and other legislated free speech rights do not cleave solely between ISPs and their subscribers. In the U.S. ISPs gladly abandon editorial control to qualify for “safe harbor” exemption from tort and copyright infringement liability, but they also use such control to create “walled gardens” of content. In the U.S. ISPs gladly abandon editorial control to qualify for “safe harbor” exemption from tort and copyright infringement liability, but they also use such control to create “walled gardens” of content. Current media models, such as print, cable television and telephony, do not fully work for the Internet. Current media models, such as print, cable television and telephony, do not fully work for the Internet. Network neutrality seeks to preserve and open and free marketplace of ideas, but how can ISPs lawfully manage their networks and afford to make costly upgrades? Network neutrality seeks to preserve and open and free marketplace of ideas, but how can ISPs lawfully manage their networks and afford to make costly upgrades?

The FCC’s 4 +2 Network Freedoms/Proposed Rules In 2005 the FCC articulated four Internet “principles”: (1) consumers are entitled to access the lawful Internet content of their choice; (1) consumers are entitled to access the lawful Internet content of their choice; (2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; (2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (4) consumers are entitled to competition among network providers, application and service providers, and content providers. (4) consumers are entitled to competition among network providers, application and service providers, and content providers. In November, 2009 the FCC proposed to codify as rules the 4 Network Freedoms plus require Nondiscrimination and Transparency for both wired and wireless networks. In November, 2009 the FCC proposed to codify as rules the 4 Network Freedoms plus require Nondiscrimination and Transparency for both wired and wireless networks.

Can the FCC Lawfully Regulate Internet Service? The FCC uses service definitions that create a dichotomy between regulated telephone services and largely unregulated information services. The FCC uses service definitions that create a dichotomy between regulated telephone services and largely unregulated information services. Despite a regulatory safe harbor for information services, the FCC has invoked ancillary jurisdiction to impose burdens on ISPs, e.g., providers of Internet-delivered telephone calls must contribute to universal service funding and comply with several telephone company regulations. The FCC rejected Comcast’s claim of a right to thwart, delay and degrade certain bitstreams as legitimate “network management” even when congestion did not exist. An appellate court reversed the FCC’s assertion of jurisdiction calling into question what enforceable rules, if any, the FCC can establish.

Impact of Net Neutrality on Content Providers Positive Impact Positive Impact A nondiscrimination requirement attempts to maintain a level competitive playing field in the marketplace for content against the incentive and ability of ISPs to favor affiliates and protect revenue streams, Comcast’s pay per view/video on demand vs. IPTV and P2P file transfers. If Enron employees could create artificial bottlenecks and congestion in the switching and routing of electrons, then ISPs can achieve similar outcomes for Internet packets. Net neutrality could prevent, or penalize “dirty tricks.” “Walled Gardens” of easily accessed content not likely to support struggling new artists. Negative Impact Both users and content providers might want (and be willing to pay for) “better than best efforts” routing delivered to computer desktop monitors; faster delivery of “mission critical” bits. Likely to trigger regulatory uncertainty, litigation and claims that government involvement creates disincentives for private investment. The Internet has thrived with government incubation and early privatization. Exclusive access arrangements can serve lawful promotion and marketing goals.

Net Bias Versus Reasonable Price and Service Discrimination Impermissible Net Bias Deliberate Packet Loss Creating Artificial Congestion, e.g., 99/1 partition of premium and regular bit delivery. Targeting Large Volume Content Generators for Punishment or Extortion Most Types of Port Blocking (but not to control spam and denial of service attacks) Unilaterally Imposing Upstream and Downstream Rules That Violate Existing Service Level Agreements Affiliate Favoritism That Violates SLAs, Fair Trade and Antitrust Laws Fees for Overriding Firewalls and Filters Permissible Network Bias Variable Bandwidth and Throughput Bandwidth Partitioning Metered Service Better Than Best Efforts Routing Akamai-type Enhanced Traffic Routing and Management Special or Exclusive Content Deals

Conclusions and Recommendations The next generation Internet will not offer a one size fits all “network of networks.” Flexibility in pricing, service provisioning and quality of service options can make economic sense. The next generation Internet will not offer a one size fits all “network of networks.” Flexibility in pricing, service provisioning and quality of service options can make economic sense. However, deliberate blocking, or degrading traffic violate many nations’ communications laws and possibly non sector specific consumer protection law and competition policy. However, deliberate blocking, or degrading traffic violate many nations’ communications laws and possibly non sector specific consumer protection law and competition policy. Better than best efforts is not a contradiction, nor does it always constitute unlawful discrimination. Better than best efforts is not a contradiction, nor does it always constitute unlawful discrimination. ISPs should fully disclose terms and conditions as well as report on network usage. Requiring transparency does not foreclose net flexibility, but it can prevent Enron-type gaming and induced congestion. ISPs should fully disclose terms and conditions as well as report on network usage. Requiring transparency does not foreclose net flexibility, but it can prevent Enron-type gaming and induced congestion.

Additional Research Questions Is Net Neutrality a solution in search of a problem? What potential exists for anticompetitive practices in switching and routing content? Does a bottleneck, or market failure exist in first or last mile access to the Internet, or farther upstream? Is Net Neutrality a solution in search of a problem? What potential exists for anticompetitive practices in switching and routing content? Does a bottleneck, or market failure exist in first or last mile access to the Internet, or farther upstream? Would Google have any problems finding alternative ISPs to carry its traffic if AT&T refused? Would start-up ventures have the same opportunities? Would Google have any problems finding alternative ISPs to carry its traffic if AT&T refused? Would start-up ventures have the same opportunities? Would net neutrality rules create disincentives for investment in next generation networks? Would net neutrality rules create disincentives for investment in next generation networks? Can non-sector specific regulators and the courts remedy any actual abuses in lieu of ex ante regulation? Can non-sector specific regulators and the courts remedy any actual abuses in lieu of ex ante regulation? What is the scope of permissible jurisdiction over ISPs that fits within existing legislative authority and does not violate freedom of speech rights? What is the scope of permissible jurisdiction over ISPs that fits within existing legislative authority and does not violate freedom of speech rights?