NQ Logic

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NET Neutrality

As expected, the Federal Communications Commission agreed unanimously today on the proposal made by Chairman Julius Genachowski last month about a set of Net neutrality rules based on the long-favored six principles.

Why, in that case, are all Telecommunications companies and Hardware Manufacturers in the USA are raising their arms in the air invoking a defeat that could lead once again to another internet bubble?

What is Net Neutrality?

Net (as in NETwork, and not InterNET) Neutrality was a term first invented by Columbia University Law Professor Timothy Wu in a paper he published in 2002. He described it as a network design principle based on the idea that "information networks are often more valuable when they are less specialized — when they are a platform for multiple uses, present and future." His term was a natural business extension from a more technical idea called the end-to-end principle in which “communications protocol operations should be defined to occur at the end-points of a communications system.” In others words the network is here to transport from A to B leaving intelligence outside of it.

In the 2004 FCC's debate, Michael Powell (Chairman of the commission at the time) defined in his now famous speech the “Four Freedoms” non-discrimination principles called the principles of "Network Freedom"

  1. Freedom to Access Content: consumers should have access to their choice of legal content.
  2. Freedom to Use Applications: consumers should be able to run applications of their choice.
  3. Freedom to Attach Personal Devices: consumers should be permitted to attach any devices they choose to the connection in their homes.
  4. Freedom to Obtain Service Plan Information: consumers should receive meaningful information regarding their service plans.
Recently his successor, Chairman Julius Genachowski, added the extra two:

  1. The fifth principle is one of Non-discrimination -- stating that broadband providers cannot discriminate against particular Internet content or applications.
  2. The sixth principle is a Transparency principle -- stating that providers of broadband Internet access must be transparent about their network management practices.

Why is it Important?

The exact same neutrality principles were defined a century before on another very successful network: the power grid. That network is based on the promises that it will delivered the same outcome of electricity no matter what is plugged in at the end of a socket, so be it an electric boiler or a flat-screen TV. This principle defines the very success of the power network, making it widely used, spreading around the world, building what we call today a business ecosystem around itself and encouraging waves of constant innovations across ages.

To make the internet network as successful as the power network is the challenge of regulators of the world today. And when it comes to the internet everybody is looking toward the USA to see what’s coming up next.

As Tim Berners-Lee, the inventor the internet, stated "freedom of connection, with any application, to any party, is the fundamental social basis of the Internet, and, now, the society based on it."

What are the Issues?

The first major one is the fifth principal that causes large debate today in the telecommunications industry. The others principals are less of an issue or at a lesser point of confusion in regulators' and major industry player’s minds. The second major concern is the potential extension to wireless networks.

On one hand are the large US broadband providers, such as Verizon, AT&T or Comcast, have argued that imposing new regulation will obstruct investment in the network and suppress innovation, preventing new business models from happening that could allow, for example, network operators to sell different tiers of service. In Short: “too much regulation kills innovation”.

Afraid of becoming like the Verizon Communications CEO, Ivan Seidenberg, who said a “dumb pipes versus smart apps”, the other telecom CEOs would rather propose a middle ground and provide an alternative: smart pipes.

On the other end, are all Non-Government Organizations & Consumer Association (such as Open Internet Coalition for example) involve around the WWW, large Internet companies (such as Amazon, Facebook, and Google) and distinguished individuals (R.E.M or Moby) are all backing the new FCC two-pages draft rule document on Net Neutrality and users' freedoms.

What are the Real Problems?

  1. Private / Public
    Mixing in the debate for public and private networks is not a simple semantic error. The internet is today a public network and should be considered as is. And any private networks can still run on different principles on this public network. Many successful business ideas rely on private networks today, and AT&T’s IPTV, Cisco’s WebEx to name a few, are reliable services running outside the public internet, on smart pipes. Dumb pipes and smart pipes can co-exist side by side, under different regulations.

  2. Wireless / Wireland
    The possible extension to wireless broadcasters is a very interesting challenge that wireless companies are not pleased to face. Incapable technically today to fulfill the FCC recommendation, Wireless and other Cellcos will focus on defining legally what constitutes "reasonable" network management in the coming months. One thing for sure that will give some fuel to anti-neutrality lobbyists is the fact that a regulator is moving into the space on How should a facilities manager perform (dictating the wireless operations) rather than What has to exist in an ecosystem for consumers' benefits.

  3. Network Capacity
    We would have never talked about traffic prioritization if we did not have any under-capacity issues both on internet and mobile networks. The networks' congestions are not only a consequence of their successes and wide adoption, but also due to “broadband hogs" who use a disproportionate amount of bandwidth. Today P2P traffic represents roughly 27-55% of all Internet traffic depending on geographical location (Eastern Europe accounting for 55%). Fixing the P2P challenge would free up a large portion of today’s bandwidth, allotting space to other services to run at a higher quality of service (QoS) and for free on a unique public network, triggering finally the data, internet and voice convergence on the IP network.

  4. Economic Considerations
    With the convergence of different networks toward IP, and with the strong demand imposed by consumer’s organizations or legislations, Telecommunications companies are under tremendous pressure to sustain their cash flow, manage their network and justify large capital investment to their shareholders for the next upgrade (for which by the way they will make a fraction of what they earn today). Even though MPLS technology solution coupled with cloud computing is a multi-billion dollar industry, it will not replace the dollar amount lost in the IP convergence. Defending their unstable yet lucrative position should not come as a surprise to anyone. Pushing back for a statu quo is the only easy solution Telecommunications companies have in their hands for now.

What are the Real Answers?

  1. More Regulation
    We know now that after this international economic crisis, that more regulation is better in the long run than less regulation. The market does not decide everything, guidance should be given. When should regulations occur and by whom are still a debate though.

  2. More Competition
    More competition, the better. At a time when sustainability and collaboration are the words used in every other sentence, maybe it’s time to invoke the less friendly but perhaps more market-efficient “competition” as well for the balance sheet front ("revenue sharing").

  3. More Solutions
    The debate that exists today on whether or not broadband service provider companies should be dumb pipes or smart pipes is irrelevant. Both will co-exist for different purposes. Large consumer-facing companies will streamline their offerings to become large pipes with less functionality, as opposed to large business-facing companies will evolve to a high tech and more premium services-driven offerings. As it is today each will help each other to penetrate different market segments and fulfill different market needs.

  4. More Openness
    The Internet was given as a gift by a small group of people to humanity on the premises that access to knowledge is powerful in resolving asymmetric information imbalance that cause so many irrational decisions in today's world. By being open, built on open standards and reached with open tools, the internet will become even more central in our future lives. Each and every rule against this principle will be defeated by the sheer passion and the number of people involved in the WWW.

The draft rules are now open for public debate. Stakeholders have until January 14, 2010 to file the first round of comments and until March 5, 2010 to file their reply comments.

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