<h1 class="articleHeadline">Keeping the Internet Neutral</h1> <span><h6 class="byline">By <a rel="author" href="http://topics.nytimes.com/top/reference/timestopics/people/p/eduardo_porter/index.html?inline=nyt-per" title="More Articles by Eduardo Porter" class="meta-per">EDUARDO PORTER</a></h6>
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<h6 class="dateline">Published: May 8, 2012 </h6><div class="articleBody">
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Imagine a network of private highways that reserved a special lane for
Fords to zip through, unencumbered by all the other brands of cars
trundling along the clogged, shared lanes. Think of the prices Ford
could charge. Think of what would happen to innovation when building the
best car mattered less than cutting a deal with the highway’s owners.
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<p class="caption">Reed Hastings of Netflix finds fault in Comcast’s offer of unlimited streaming through the Xbox. </p>
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<h6><a href="http://www.nytimes.com/interactive/2012/05/09/business/a-more-expensive-internet.html?ref=economy">
A More Expensive Internet</a></h6>
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<ul class="flush"><li><a href="http://www.nytimes.com/auth/login?URI=http://www.nytimes.com/2012/05/09/business/economy/net-neutrality-and-economic-equality-are-intertwined.html">Netflix Inc</a></li><li><a href="http://www.nytimes.com/auth/login?URI=http://www.nytimes.com/2012/05/09/business/economy/net-neutrality-and-economic-equality-are-intertwined.html">Comcast Corporation</a></li>
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<p class="caption">Verizon does not plan to expand its FiOS network
beyond the 18 million homes it set out to reach six years ago.
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A few years ago, Tim Wu, a professor at Columbia Law School and a
leading thinker about the evolution of the “information economy,” <a title="Mr. Wu’s prepared testimony." href="http://commdocs.house.gov/committees/judiciary/hju27225.000/hju27225_0.HTM">warned members </a>of
the House judiciary committee that this could be the fate of the
Internet. Companies offering broadband access, he said, should not be
allowed to discriminate among services online. If they did, the best
service would not always win the day. “It’s not who has a better
product,” he explained. “It’s who can make a deal with AT&T, <a href="http://topics.nytimes.com/top/news/business/companies/verizon_communications_inc/index.html?inline=nyt-org" title="More information about Verizon Communications Inc" class="meta-org">Verizon</a>, <a href="http://topics.nytimes.com/top/news/business/companies/comcast_corporation/index.html?inline=nyt-org" title="More information about Comcast Corporation" class="meta-org">Comcast</a> or Time Warner.” </p>
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That world may be right around the corner. Last month, the online video powerhouse <a href="http://topics.nytimes.com/top/news/business/companies/netflix-inc/index.html?inline=nyt-org" title="More information about Netflix Inc" class="meta-org">Netflix</a>
started a political action committee to complement a budding lobbying
effort in support of the idea that all content must be allowed to travel
through the Internet on equal terms. Netflix is trying to build a
coalition of businesses to make the case for this open access, also
called <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/n/net_neutrality/index.html?inline=nyt-classifier" title="More articles about Net neutrality." class="meta-classifier">network neutrality</a>. </p>
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“<a href="http://topics.nytimes.com/topics/reference/timestopics/subjects/n/net_neutrality/index.html?inline=nyt-classifier" title="More articles about Net Neutrality." class="meta-classifier">Net neutrality</a>
has broad consumer and voter support,” Reed Hastings, the chief of
Netflix, said in an interview. “It is important for the sake of public
access that the rules apply equally.” </p><p>
Netflix’s immediate concern is Comcast, the biggest broadband provider
in the country, whose cable brings the Internet to one in five connected
homes. In March it announced that watching its Xfinity TV service on
the <a href="http://nytimes.com.com/consoles/microsoft-xbox-360-elite/4505-10109_7-32390552.html?tag=api&part=nytimes&subj=re&inline=nyt-classifier" title="" class="meta-classifier">Microsoft Xbox</a> 360 <a title="A related Bits blog post." href="http://bits.blogs.nytimes.com/2012/03/27/comcast-xbox-net-neutrality/">would not count</a> against subscribers’ broadband data allowance of 250 gigabytes a month. </p>
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This, Mr. Hastings says, will give Comcast’s television lineup an edge
over rival shows streaming through the device, which will consume
subscribers’ data allotment. And nobody cares more than Netflix, whose
movies and TV programs account for about a third of the peak online
traffic. </p><p>
“If I watch last night’s ‘S.N.L.’ episode on my Xbox through the Hulu
app, it eats up about one gigabyte of my cap, but if I watch that same
episode through the Xfinity Xbox app, it doesn’t use up my cap at all,” <a title="The post." href="https://www.facebook.com/reed1960/posts/10150706947044584">Mr. Hastings wrote</a> on his <a href="http://www.facebook.com/reed1960">Facebook page</a>. “In what way is this neutral?” </p>
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Comcast argues that its Xfinity move is not subject to the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_communications_commission/index.html?inline=nyt-org" title="More articles about the Federal Communications Commission." class="meta-org">Federal Communications Commission</a>’s neutrality rules because the video travels exclusively on its network and not on the public Internet. </p>
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But the issue is not a mere business spat to be resolved between Comcast
and Netflix. Comcast’s data cap policies are reportedly giving Sony <a title="A related article." href="http://arstechnica.com/tech-policy/news/2012/05/sony-warns-comcast-cap-will-hamper-video-competition.ars">second thoughts</a>
about a planned Internet video service to compete against cable and
satellite television. It’s not even just a spat about TV. </p><p>
The emerging dispute between Netflix and Comcast underscores the core
weakness of the Internet economy. To reach the multitude of online
services competing for your attention, you must first get through a
bottleneck that is not competitive at all: high-speed broadband access.
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Today, 96 percent of Americans have a choice of at most two broadband
providers — a cable company and a phone provider. For consumers who
desire very high speeds, cable is often the only choice — along with
Verizon’s FiOS and AT&T’s U-verse in small pockets of the country.
If given free rein, these gatekeepers could determine which services get
to drive through the pipes that make up the Internet at what speeds and
prices. </p><p>
Costs are higher when there is little competition. If only <a title="A related government report." href="http://www.ntia.doc.gov/report/2011/exploring-digital-nation-computer-and-internet-use-home">43 percent</a>
of American households with income under $25,000 a year have wired
access into the home, it’s because most of the rest cannot afford it.
The cheapest available broadband package is <a title="An Excel document." href="http://www.oecd.org/dataoecd/22/42/39574970.xls">more expensive</a>
in the United States than in 28 of the 34 industrialized countries in
the Organization for Economic Cooperation and Development, when measured
in dollars per megabit of speed. </p><p>
Just look at your phone or cable bill. In New York, Verizon offers its
fast FiOS triple-play plan — including unlimited national calls and
downloads at 25 megabits per second — for a promotional rate of $84.99 a
month. In France, <a title="A related report." href="http://cyber.law.harvard.edu/pubrelease/broadband/">Iliad offers</a>
packages that include free international calls to 70 countries and a
download speed of 100 megabits per second for less than $40. </p><p>
There is little mystery here. About a decade ago, the government forced
France Telecom to lease capacity on its wires to rivals for a regulated
price, allowing competitors like Iliad to storm in. The United States
took a different path: the Telecommunications Act of 1996 had opened the
possibility of similar unbundling, but the F.C.C. decided against such
action out of concern it would discourage investment in physical
infrastructure. </p><p>
The F.C.C. appears to have made the wrong call. Iliad started
piggybacking on France Telecom’s wires, but soon began laying wires of
its own. In 2002, the United States had the sixth-highest broadband
penetration among all O.E.C.D. countries. Last year it was in <a title="An Excel document." href="http://www.oecd.org/dataoecd/22/12/39574779.xls">15th place</a>. Of 34 industrialized countries, the United States ranks 17th in terms of <a title="An Excel document." href="http://www.oecd.org/dataoecd/10/53/39575086.xls">average download speeds</a>. Among the 31 countries that have very-high-speed broadband access, the United States is <a title="An Excel document." href="http://www.oecd.org/dataoecd/60/49/49839644.xls">more expensive</a>, trailing only Turkey, Israel and Chile. </p>
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And a spate of deals between cable companies and Verizon Wireless to cross-sell one another’s services <a href="http://gigaom.com/broadband/verizons-spectrum-deal-with-cable-is-the-end-of-broadband-competition">does not bode well</a>
for competition and investment in the future. Verizon does not plan to
expand its FiOS network beyond the 18 million homes it set out to reach
six years ago. This suggests a market carve-up is about to take place,
with Verizon focusing on wireless broadband and cable companies on wires
into the home. </p><p>
With fewer competitors in the way, broadband’s gatekeepers will face
less resistance to a strategy of carving special lanes out of the
Internet. </p><p>
Technology, of course, will shape competition and innovation online. Google is <a title="Google’s program." href="http://www.google.com/fiber/kansascity/index.html">wiring Kansas City</a>
with fiber. If it extends that experiment, it could become a formidable
competitor. Next-generation wireless may bring fast broadband to rural
areas where laying fiber is unprofitable. But regulation will be
crucial, too. </p><p>
And right now, regulation <a title="A related article." href="http://www.reuters.com/article/2011/11/10/idUS211494328220111110">appears weak</a>. The F.C.C. has net neutrality rules. But the agency <a title="A related Times article." href="http://www.nytimes.com/2010/04/07/technology/07net.html?pagewanted=all">lost one</a> neutrality case against Comcast in 2010, and <a title="A related article." href="http://news.cnet.com/8301-30686_3-20114142-266/verizon-sues-again-to-block-net-neutrality-rules/">Verizon is challenging</a> the new rules issued in response to the ruling. The rules, moreover, have <a title="A related article." href="http://arstechnica.com/tech-policy/news/2010/12/did-the-fcc-just-bless-a-capped-two-tier-internet.ars">loopholes</a>. For instance, they allow broadband providers to allocate portions of their pipes for special “managed” services. </p>
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Still, the government has a track record of keeping the
telecommunications highway open. It sliced the Ma Bell monopoly into
Babies, and ensured they carried one another’s calls. In the era of
dial-up Internet, it ensured that phone companies allowed rival Internet
service providers to reach their customers. </p><p>
The F.C.C. is under siege in Congress — where the phone and cable
companies have unleashed their lobbying might. In March, the House <a href="http://thehill.com/blogs/floor-action/house/218589-house-votes-to-limit-fcc-on-regulations-merger-authority">passed a bill</a> to limit the agency’s ability to issue new regulations. Members of Congress might remember that government regulation <a href="http://transition.fcc.gov/Bureaus/OPP/working_papers/oppwp34.pdf">was crucial</a> for the development of the Internet we know today. </p>
<p>
Fifty years ago, consumers were allowed to hook up only Bell telephones
to their Bell phone lines. But in the 1960s, the F.C.C. and the courts
forced the Bells to accept any device that didn’t threaten the network.
The decision unleashed a torrent of innovation — including the answering
machine, the fax and the first device that allowed us to explore what
would become the Internet: the modem. </p><p>
Innovation online requires an open playing field, too. </p> <div class="authorIdentification">
<p>E-mail: <a href="mailto:eporter@nytimes.com">eporter@nytimes.com</a></p>
<p>Twitter: @portereduardo</p> </div>