September 2008

I contributed the Cato institute’s side in this debate at Opposing Viewpoints. I took the “no” position to the question “Should the Government Regulate Net Neutrality?” Arguing opposite are the Save the Internet coalition, the Open Internet Coalition, and Public Knowledge.

I wrote my points before seeing the other peoples’ contributions, but my take on the debate is best summarized by this comment which should be appearing on the site in the near future:

What’s striking about the arguments of all three pro-regulation contributors is that while they adopt the rhetoric of urgency, none of them has offered a specific explanation of what will happen if Congress does not enact new regulations. It may very well be true that the major incumbents would like to transform the Internet into a proprietary network, but thus far, there are precious few examples of them actually attempting to do so. Indeed, the only example of any significance that they’ve been able to cite is Comcast’s interference with BitTorrent. And that example certainly doesn’t support their argument.

Comcast interfered in a relatively minor way with one of the dozens of applications on the Internet. For its trouble, the company got a bunch of negative publicity, a customer backlash, and (thanks to header encryption technology) no real control over the use of BitTorrent on its network. By March, Comcast was in full-scale retreat, signing an agreement with BitTorrent, Inc, and pledging to stop blocking BitTorrent traffic by the end of the year.

By the time the FCC ruled on the issue in July, its involvement had been rendered completely superfluous by the progress of events. Comcast wasn’t posing a looming threat to network neutrality that the FCC had beaten back. Comcast had already surrendered months ago, and the FCC showed up long after the battle was over to claim credit for the victory.

The other examples network neutrality activists like to cite are even weaker. For example, Verizon briefly refused to give an SMS short code to a pro-choice group. Not only did this incident have nothing to do with the Internet, but Verizon voluntarily reversed itself just a few days later. Once again, any regulatory response would have been far too late to make a difference.

In short, there’s no “precipice” here. Network owners don’t have a magic wand that will transform the Internet into a proprietary network. The filtering and blocking tools network providers do have are clumsy and easily circumvented. There are plenty of people monitoring broadband providers’ behavior, and they will ensure that any network neutrality violations get widely publicized. Network owners saw what happened to Comcast, and they learned that interfering with network neutrality is a bad business strategy: it’s more likely to produce angry customers than larger profits.

The advocates of new regulation have been predicting the imminent death of network neutrality for three years now. Yet network neutrality is no more endangered today than it was at the height of the Congressional debate over network neutrality in 2006. If we do start to see real evidence that technological and market forces are inadequate to protect the neutral Internet, there will be plenty of time to debate and pass appropriate regulations at that point. But it would be a mistake to pass new regulations now based on purely speculative concerns.

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My favorite thing about Ars Technica (aside from the fact that I get to write for them) is their in-depth features on technical issues. Out today is the best discussion I’ve seen of transit and peering for the lay reader. One key section:

I once heard the following anecdote at a RIPE meeting.

Allegedly, a big American software company was refused peering by one of the incumbent telco networks in the north of Europe. The American firm reacted by finding the most expensive transit route for that telco and then routing its own traffic to Europe over that link. Within a couple of months, the European CFO was asking why the company was paying out so much for transit. Soon afterward, there was a peering arrangement between the two networks…

Tier 1 networks are those networks that don’t pay any other network for transit yet still can reach all networks connected to the internet. There are about seven such networks in the world. Being a Tier 1 is considered very “cool,” but it is an unenviable position. A Tier 1 is constantly faced with customers trying to bypass it, and this is a threat to its business. On top of the threat from customers, a Tier 1 also faces the danger of being de-peered by other Tier 1s. This de-peering happens when one Tier 1 network thinks that the other Tier 1 is not sufficiently important to be considered an equal. The bigger Tier 1 will then try to get a transit deal or paid peering deal with the smaller Tier 1, and if the smaller one accepts, then it is acknowledging that it is not really a Tier 1. But if the smaller Tier 1 calls the bigger Tier 1’s bluff and actually does get de-peered, some of the customers of either network can’t reach each other.

When I first learned about the Internet’s basic peering model, it seemed like there was a real danger of a natural monopoly developing if too many tier 1 providers merge or collude. But what this misses is that larger networks are facing a constant threat of having their customers bypass them and peer directly with other customers. As a result, even if there were only one tier 1 provider, that provider wouldn’t have that much monopoly power, because any time it raised its prices it would see its largest customers start building out infrastructure to bypass its network.

In effect, the BGP protocol that controls the interactions of the various network creates a highly liquid market for interconnection. Because a network has the technical ability to change its local topology in a matter of hours, it’s always in a reasonably strong bargaining position, even when dealing with a larger network.

Things are trickier in the “last mile” broadband market, but at least if we’re talking about the Internet backbone, this is a fiercely competitive market and seems likely to remain that way for the foreseeable future.

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