Will Broadband Carriers Block VoIP?

by on February 17, 2005 · 4 comments

VoIP provider Vonage is up in arms about a certain telecom carrier apparently attempting to block customer access to their services. See this Washington Post article for the details.

Before everyone runs to the FCC asking for broadband regulation, let me offer a few thoughts on this matter…


1–First, how many carriers are really engaged in any form of blocking? There were a few cable companies that initially had some fairly stupid language in their Terms of Service (TOS) contracts or Acceptable Use Policies (AUPs) regarding device attachments (and VPNs in particular) but: (a) they almost never followed through on the threat of blocking, and (b) as far as I can tell, that language has been excised almost universally from those contracts. (Yes, I have actually downloaded and read through all these boring TOS and AUPs documents! Most of the remaining language in those documents related to device connectivity involves theft of service threats related to the attaching wi-fi devices and then sharing the service with everyone in your neighborhood. I think that’s a fairly rational concern and probably should be forbidden.)

2–Second, let’s think seriously about this supposed blocking threat for a moment. Any carrier that is stupid enough to try to block Internet or device connectivity is a carrier that is doomed to lose customer allegiance and be the subject of intense public / media ridicule. There is just no way in our media-intensive age that any carrier is going to be able to take the heat associated with repeated attempts to block basic services. Bloggers, newsgoups, websites, and other media outlets will be all over them. It will be a PR nightmare for them. Moreover, should certain carriers persist and try to play such games, smart rivals will use it as an opportunity to differentiate themselves as more of an “open network” or “dumb pipe” provider that won’t block services / connectivity in a similar fashion.

3–Finally, there is a serious threat associated with enshrining those connectivity principles into law as I have pointed out in this piece on Net Neutrality regulation. Namely, the real threat here is that these “anti-discrimination” rules ultimately devolve into a cumbersome regulatory regime that also prohibits rational, beneficial forms of price discrimination for broadband pipes. The last thing we want is a set of connectivity principles that ultimately impose price controls on the pricing of the pipe. But I have no doubt that is exactly where we are heading. The real question is this debate is not whether carriers will try to block access to various service or devices. The vast majority will not attempt to do so. However, carriers might attempt to price access to the pipe differently in response to the added burden some applications might impose. They might even use metered pricing schemes in the future. As soon as they do so, some people are going to cry foul and run to the government for regulation. If Net neutrality rules are on the books, someone will try to use them to prevent such beneficial forms of price discrimination too.

I have recently completed a piece for the Journal of Telecommunications & High-Technology Law that elaborates on these points. The piece is entitled: “Are ‘Dumb Pipe’ Mandates Smart Public Policy? Vertical Integration, Net Neutrality, and the Network Layers Model.” If anyone is interested in seeing it, e-mail me and I will forward a draft copy.

  • Tim Wu

    Why Adam Is Wrong

    Adam is right about many things but not this. A carrier will rationally block or at least slow Vonage if the carrier offers a competing product. If the carrier can be sure nothing will be done or it can do so unnoticed, its interest in blocking increases.

    It is true that public and government pressure can stop a company from blocking Vonage, and indeed that would be preferable to regulation. But what creates public pressure is not arguing that regulation is out of the question, but rather the threat of regulation itself. Indeed the regulatory threat approach is exactly the one Michael Powell takes.

    Adam’s argument can be (unfairly) compared to an argument that we don’t need murder laws because the public is against murder and most people are decent. It is the bad actors that the law cares about, and what people might do in the absence of a regulatory threat. The closest comparison is to antitrust. Today, companies may not engage in anti-competitive behavior, like price-fixing, all that often. But we must ask whether that is because they don’t think it advantageous, or whether they threat of enforcement discourages such behavior.

    The actions of carriers, if true, are a textbook example of vertical foreclosure. To rule out possible enforcement against such anti-competitive behavior is folly.

    Tim Wu

  • Tim Wu

    Why Adam Is Wrong

    Adam is right about many things but not this. A carrier will rationally block or at least slow Vonage if the carrier offers a competing product. If the carrier can be sure nothing will be done or it can do so unnoticed, its interest in blocking increases.

    It is true that public and government pressure can stop a company from blocking Vonage, and indeed that would be preferable to regulation. But what creates public pressure is not arguing that regulation is out of the question, but rather the threat of regulation itself. Indeed the regulatory threat approach is exactly the one Michael Powell takes.

    Adam’s argument can be (unfairly) compared to an argument that we don’t need murder laws because the public is against murder and most people are decent. It is the bad actors that the law cares about, and what people might do in the absence of a regulatory threat. The closest comparison is to antitrust. Today, companies may not engage in anti-competitive behavior, like price-fixing, all that often. But we must ask whether that is because they don’t think it advantageous, or whether they threat of enforcement discourages such behavior.

    The actions of carriers, if true, are a textbook example of vertical foreclosure. To rule out possible enforcement against such anti-competitive behavior is folly.

    Tim Wu

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