Why Nobody's Neutral on Net Neutrality: Implications for Smalltown, USA

Net neutrality has become a contentious issue within the media, among pundits and in Congress, generating an edginess on par with healthcare reform discussions.

On the face of it, net neutrality is a fairly simple issue, but beneath the surface complex potential benefits and competing interests are churning up a lot of turbulence. In particular, incumbents – the large telecom and cable companies such as AT&T and Comcast, with existing Internet access services – are not happy.

Recently Federal Communications Commission Chairman Julius Genachowski laid out six principles that, he believes, will ensure that the Internet remains a neutral communications medium. “Net neutrality” fundamentally means that everyone receives equal treatment in accessing and delivering data, services or applications over the Net.

Genachowski wants these six principles to have the force of law:

1. Consumers are entitled to access whatever lawful Internet content they want.
2. Consumers are entitled to run whatever applications and services they want, subject to the needs of law enforcement.
3. Consumers can connect to networks with whatever legal devices they want, so long as they do not harm the networks.
4. Consumers are entitled to competition among networks, applications, services and content providers.
5. Service providers are not allowed to discriminate among applications, services and content outside of reasonable network management.
6. Service providers must be transparent about the network management practices they use.

Bottomline: Consumers can get whatever legal content they wish, using whatever computing devices they want, without fear of service providers’ favoring, or discriminating against, content that flows over the networks that link to the Internet.

Network operators would not be able to limit data traffic to companies that are willing to pay added fees to get their content through (for example: ABC operator couldn’t limit rural customers’ access just to Facebook because MySpace and others won’t pay a surcharge ABC wants to levy on content). An operator couldn’t prohibit applications on the network, such as a local telemedicine service (because the operator has an exclusive deal to sell a big-city medical center’s services), or prevent you from using a BlackBerry (because the operator has an exclusive deal to sell iPhones).

At its core, the net neutrality debate pits those who believe the Internet is a channel for open communications against those whose best financial interests lie in a controlled Internet. Net neutrality’s negative impact on their ability to do business is often cited as the reason why the biggest incumbents, and most mid-sized ones, declined to apply for funding in the first round of federal broadband stimulus grants. (Note that the primary reason so many rural areas don’t already have broadband is because incumbents can’t cost justify providing service here.)

The incumbents complain that companies such as Yahoo and WebEx are taking a free ride on “their pipes”; thus, the incumbents argue, they need to be able to charge extra fees to “free-riders,” fees that net neutrality rules would prohibit. The incumbents are raising this argument once more in their attack on net-again neutrality requirements in the stimulus grant rules.

To see the “free-ride” myth for what it is, consider how those who provide and consume content will affect the networks of organizations that apply for stimulus grants.

Grant applicants will (or should) have institutional customers – like local governments, school districts, and hospitals -- that transmit and receive huge amounts of data; for this heavy use of the network they would pay a sufficient price to offset much of an applicants’ network operating costs. Individual subscribers who live on YouTube may pay more than people than those who just check their e-mail. The heavy network users aren’t getting a free ride or harming operators’ revenue.

Content providers such as Travelocity, WebMD and applications yet to be born connect to the Internet via other service providers (imagine the server capacity that Travelocity requires). They pay big bucks for access, private infrastructure and others expenses to enable their content to reach subscribers of grant applicants’ networks. They’re not getting a free ride either, nor are they impacting grant applicants’ operating costs since local institutional and premium customers pay for the capacity to receive the content.

Net neutrality doesn’t change these dynamics. It just ensures that if Joe’s Local Hardware Emporium and Smallville Data Storage Co. both want to move 500 gigabits of data through a provider’s network to the Internet, the provider can’t show favoritism moving either company’s data. If Smallville is moving 500 gigabits and Rural Telemed is moving 100 gigs, it’s ok if Smallville pays more, but under net neutrality the operator cannot arbitrarily slow down RT’s data traffic because they’re the smaller customer.

Detractors claim that net neutrality will lead to the demise of investment and innovation. Incumbents played the death-to-innovation card when they didn’t submit stimulus proposals. But 2,200 proposals from local governments and smaller service providers prove plenty of others are willing to step in with plans to build networks and offer innovative services without being tripped up by this rule.

Most of the big companies currently providing Internet service oppose net neutrality and therefore chose not to apply for federal broadband stimulus grant monies. The large cellular wireless providers such as AT&T and Verizon also claim that they should be exempt from net neutrality. They argue that because wireless capacity – how much speed you can deliver through a wireless network to be shared by subscribers - is limited, they need be able to throttle network content from and to bandwidth hogs. However, a list of 10 communities I compiled from dozens in the U.S. that have built their own networks or partnered with private companies reveals some interesting numbers about wireless networks.

Franklin County, Virginia’s wireless network gives you a max of 3.5 mega bits per second (mbps) down to consumers’ computers, 2 mbps up from the computers to the Internet. Prestonsburg, Kentucky, with its humble city-run WiFi network offers 3.5 mbps. Cambria County, Pennsylvania, offers 15 mbps. Allegany County, Maryland, offers commercial users up to 100 mbps on its wireless network.

The large cellular wireless companies worry about capacity (and thus network neutrality) because the most data speed their networks offer is less than a third of the slowest among the community networks listed. These communities don’t worry about throttling content because their networks’ wireless technology enables capacity that exceeds subscribers’ need for speed.

Expect the stimulus program to produce a lot of wireless networks with faster speeds than cellular networks. Of the 1,130 last-mile proposals for federal broadband stimulus money, 60% are for wireless networks, many designed to use technology similar to what the aforementioned communities are using now.

So don’t let the incumbent PR blitz fool you. Net neutrality, applied fairly to big and small Internet service providers is good for consumers, businesses and providers.