Authors

@
Google
Brussels
18
March
2010

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Authors@Google 18 March 2010
Structure of the book
Net Neutrality a Debate about more than Economics
1. Net Neutrality – Content Discrimination
2. Quality of Service: A Policy Primer
3. Positive Discrimination and the ZettaFlood
4. ISP Filtering: NTD and Liability Exceptions
5. European Law and User Rights
6. Institutional Innovation: Co-regulatory Solutions
7. The Mobile Internet and Net Neutrality
8. Conclusion: Towards a Co-regulatory Solution?

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Noam 1994: Common Carriage
 Regretted & predicted end of common carriage
 Information services – Title I Communications Act
1934
 But the debate is much older…
 De Sola Pool (1983) Technologies of Freedom?
 Coase (1950) BBC: A Study in Monopoly
 Kingsbury Commitment (1913) AT&T universal service
 Gladstone (1844) Railways Act UK
 Note: common carriage is FRAND (Fair Reasonable
and Non-Discriminatory) treatment
 It permits apples and oranges charges!
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1999

 Network Neutrality debate began in 1999

 Mergers: cable TV and broadband companies
 AT&T/MediaOne and AOL/TimeWarner
 Lessig and Lemley FCC submission:
 ‘The end of End-to-End’
 Before ‘Code and Other Laws…’
 Fear of closed duopoly model

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Late 1990s debate
 ‘Internet changes everything…’
 But barriers to entry enhanced by tipping effects
 Information Rules, Shapiro/Varian
 The Innovator’s Dilemma, Christensen
 The Sources of Innovation, von Hippel (1988)
 Microsoft trial – bundling Windows with
Explorer/Media Player
 Recognized monopoly problems: Google too?
 Fragile innovation ecosystem with dynamic feed-back
loops

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1990s European debate
 Medium-specific: satellite TV
 Set-top box as computer
 Electronic Programme Guide as browser
 ‘Microsoft’ comparison
 Cowie and Marsden (1998) Convergence…
 Both ‘must carry’ and ‘due prominence’ included in
European regulations
 Strong lobby: public service broadcasters

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What’s new about net neutrality?
 Internet began as an open network
 Telecoms regulated by common carriage
 Rights of way/universal service/encryption
 Any discrimination amounts to interception
 Formidable legal obstacles
 Interoperability
 Interconnection
 Privacy
 Interception

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2000s Debate
 2002 – telecoms competition in US removed by courts,
Republican FCC,
 Lessig and Wu write to Congress 2002: fear cable-TV
business model
 Wu coins term ‘net neutrality’ 2003
 FCC introduces 4 ‘Net Freedoms’ 2005
 Not including enforcement of same!
 Congress fails to legislate 2005-6
 2008 – Obama campaigns w.net neutrality

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 2009 –
FCC, CRTC and
European Commission
introduce vague broad
principles of non-
discrimination
2010 – devil lies in the detail…

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We suddenly have NN ‘lite’
 October decisions: Canada, US, Europe
 ‘Non-discrimination’ presumption
 Subject to:
 national security, law enforcement, public safety
 spam, extreme porn, copyright?
 AND ‘reasonable network management’
 – huh? What’s that?
 We will negotiate NN ‘heavy’
 Higher speed lanes: video, voice, medical etc.
 To allcomers or ‘partners’?
 ‘Special and managed services’

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US Approach: 6 Freedoms
 Policy Statement in 2003, 4 Freedoms to:
 Run a device/application/content, receive services
 FCC added two more in Notice of Proposed Rule Making
(NPRM) 09-191
 120 days for comment and then response
 Expect Rule Making in c.June 2010
 Non-discrimination
 Transparency:
 information concerning network management and other practices as is
reasonably required for users and content, application, and service
providers to enjoy the protections.
 Enforcement: will be carried out on a case-by-case basis
 Includes wireless

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Special and Managed Services
 FCC proposes to exclude Quality of Service
 Private ‘managed’ or ‘specialized’ services
 IPTV, VOIP, emergency calls and telemedicine 
 These use the IP pipe, but a reserved section
 How big is the private pipe? 10% or 90%
 Who gets access? Anyone who pays?
 Or only those ‘preferred partners’ to ISPs?
 Do you only see certain IPTV channels on Videotron?
 Its making part of the pipe back into cable!

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CRTC Ruling Oct’09
1.   With credible consumer complaint, the ISP will be required to:
 Describe the ITMP being employed, need and purpose and effect, and
identify whether ITMP results in discrimination or preference.
If there is any degree of discrimination or preference:
 demonstrate ITMP is designed to address the need and achieve the purpose
and effect in question, and nothing else;
 establish ITMP results in as little discrimination as reasonably possible;
 demonstrate as little harm to a secondary ISP, end-user, or any other person
as reasonably possible; and
 explain why network investment or economic approaches alone would not
reasonably address the need and effectively achieve the same purpose.
2.   There are two key additional considerations
 traffic management that degrades or prefers one application over another
may warrant investigation under section 27(2) of the Act. 
 economic traffic management practices (ie. bit caps) are generally ok.  

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Throttling

For time-sensitive traffic (ie. real-time audio or video)

‘managed’ services?
 where throttling creates noticeable degradation,
 "amounts to controlling the content and influencing the
meaning and purpose of the telecommunications" 
 Prior approval required for such activities. 
Non-sensitive traffic:
 If slowing down de facto amounts to blocking,
 requires prior approval

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CTRC - Disclosure
ISPs to disclose traffic management practices:
 why they are being introduced
 who is affected
 when it will occur
 what Internet traffic is subject to the traffic
management
 how it will affect user's experience, specifically speed
New privacy requirements 
ISP use of information obtained from deep-packet
inspection 
 "not to use for other purposes personal information collected
for the purposes of traffic management and not to disclose
such information."

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CRTC Enforcement
 There is now more guidance and guidelines but it will take
more than just this decision.
 E.g. Bell throttles 4pm-2am – is this peaktime?
 New complaint expected imminently
 CRTC wants a test case ASAP
 Wireless: this applies to all networks, wireless included
 Wholesale:
 where incumbents (Bell) treat independents in the same manner as
their retail customers
 the same complaints-based approach applies. 
 Where the approach is more restrictive
 prior approval is required. 

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Michael Geist’s Take
 “While this decision will undoubtedly leave many
disappointed, a full prohibition on throttling was
never in the cards.” 
 “Many consumer groups and net neutrality advocates
got some of what they asked for
 a test that looks a lot like what they recommended, an
acknowledgement of the problems with application-
 specific measures,
 new disclosure requirements,
 new privacy safeguards, and
 agreement that throttling can violate the law in certain
circumstances.”

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DIRECTIVE 2009/136/EC
New Articles 20 and 22, Recital 26:
 Consumer protection/citizen rights NOT SMP
 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?
uri=OJ:L:2009:337:0011:0036:EN:PDF
 Requirements to notify customers & NRAs
 But will need civil society activists
 To detect discrimination
 To notify higher-end consumers of problems
 Added to interoperability requirements
 Article 5 Interconnection Directive

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Article 22: Quality of service
1. Member States shall ensure that NRAs are
 able to require networks and/or services to publish
 comparable, adequate up-to-date QoS data
2. NRAs may specify QoS parameters measured
 content, form and manner of information published,
 including possible quality certification mechanisms,
 comparable reliable user-friendly information
3. In order to prevent the degradation of service,
 NRAs ensure NRAs can set QoS requirements.

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NRAs shall provide the Commission
 ... with a summary of the grounds for action,
 envisaged requirements and proposed action.
 This information shall be available to BEREC
 The Commission may... make comments or
recommendations...
 NRAs shall take utmost account of
 Commission’s comments or recommendations
 when deciding on the requirements.

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Declaration: Neutrality 2009/140EC
 The Commission attaches high importance to preserving the
open and neutral character of the Internet,
 taking full account of the will of the co-legislators
 now to enshrine net neutrality as a policy objective and
 regulatory principle to be promoted by NRAs
 Article 8(4)(g) Framework Directive
 strengthening of related transparency requirements
 USD Articles 20(1)(b) and 21(3)(c) and (d)
 safeguard NRA powers to prevent service degradation
 hindering or slowing down of traffic over public networks
 USD Article 22(3)
 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:337:
0037:0069:EN:PDF

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Commission will monitor closely
 the implementation of provisions in the Member States,
 introducing a particular focus on how the ‘net freedoms’ of
European citizens are being safeguarded
 in its annual Progress Report to Parliament and Council.
 Commission will monitor the impact of market and
technological developments on ‘net freedoms’
 reporting to Parliament and Council before end-2010
 on whether additional guidance is required, and
 will invoke its existing competition law powers
 to deal with anti-competitive practices that may emerge.

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Justifying Discrimination
Freiden (2006) 
 ‘accepts as necessary and proper many types of price
and QoS discrimination’
 He attempts ‘an identification of best practices in
“good” discrimination that should satisfy most
network neutrality goals ‘
 without creating disincentives that might dissuade
ISPs from building the infrastructure needed.’ 
That should also be our goal, in Europe. 

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Problem: Wholesale backhaul
costs
 ISPs cannot expand due to BT Wholesale.
 EC in February 2008 approved Ofcom deregulation of backhaul
charges for 65% UK
 ISPs assume 24kbps per household/peak
 Analysys expects rise to 700-2000kbps by 2015
 30-90x current backhaul
 Ethernet LAN products
 Next Generation Network interconnect crucial

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Further public policy concerns
 Digital rights management and privacy
 ISPs under seige by record and film companies
 End of anonymity or start of mass encryption
 File sharing and its uses
 Security and serious crime
 Blocking BitTorrent to block viruses and spam
 Filtering content for terrorism/paedos/offence
 New anti-xenophobia requirements?
 Audio Visual Media Services Directive

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Recent legal challenges to openness
 Public
 Prevention of violent/child pornography
 Self-regulation giving way to co-regulation
 Prevention of terrorism/hate speech
 Since 9/11 in particular
 Interception of communications
 Long history clipper chip/key escrow battles c.1990
 Private
 Copyright violation: 3 strikes
 Defamation (note UK)
 Behavioural advertising
 what’s good for Google and Facebook is good for ISPs?

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Framework for Solving Problem
 Consumer and competition harm
 Misleading advertising
 Deceptive trade practices
 Stymying competition in downstream market
 Vertical integration
 Freedom of speech and innovation
 UGC – allowing consumers access for their content
 P2P – future of distribution
 PSBs – distribution of publicly funded and meritorious
content

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Light Touch Effective
Regulation
NN Regulation light as possible, but effective:

1. Information regulation 
 to require service providers to inform consumers
2. Continual monitoring and surveillance
3. Timely evidence-based intervention 
 to correct harmful and unjustified discrimination where
necessary

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Sunshine Regulation
NN enforced via reporting requirements:
1. incentive for market players, and
2. co-regulation or formal regulation
 if insufficiently unanimous cooperation.
 Market actors & self-regulatory bodies in
 dialogue with regulators and consumers.
This is preferable and lighter-touch:
 NOT government regulation
 OR non-regulation.

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Trust But Verify
Regulators ensure that network operators:
 report publicly the levels of QoS
 between themselves and to end-users. 
 Internet experts explain that discrimination likely between
operators NOT in final mile 
 It is very difficult (if not impossible) to monitor the two
network operators themselves, and QoS in this area will require
reporting.

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More regulatory knowledge needed for co-
regulation
 Working out the incumbent’s games is a critical part of
effective co-regulation
 Network neutrality regulation in 2010 MUST be judged
according to this criterion
 It is not a cheap alternative
 It is not an economics-only discussion
 The future of media is concerned – public, private and
user-generated

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Future Directions: Research,
Training, Technology
Rapid change in Internet architecture/content
 regulator research and technological training.
Complex security and Internet-peering issues
 and more traditional telecoms and content issues.
Dominant actors ‘play games’ with regulators
 to increase costs of market entry and
 pass through costs to consumers and innovators.
 especially when ISPs tier and charge for QoS.
Greater regulation develops markets toward
more closed and concentrated structures.

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3 reasons to be careful!
1.      Larger companies are able to bear compliance costs
more easily than SMEs
 important that such entry barriers, where necessary, are minimized.
2.      Larger companies lobbying power to seek to influence
regulation
3.      Large ISPs in a concentrated market may
 offload costs upstream onto content providers and developers or
downstream onto consumers.

The combination makes this a complex

regulatory game.

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Conclusion
Regulators made a start on ‘Net Neutrality Lite’.
To encourage sensible regulation:
 the ability and commitment to ensure ISPs
 keep consumers and innovators informed of
 any Quality of Service restrictions
 both present and future.

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References
 Frieden, Rob (2006) Internet 3.0: Identifying Problems and Solutions to the
Network Neutrality Debate. at 
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962181>http://papers.ss
rn.com/sol3/papers.cfm?abstract_id=962181
 Kiedrowski, Tom (February 2007) Net Neutrality: Ofcom’s view at
http://www.wwww.radioauthority.org.uk/media/speeches/2007/02/net_neutrality
 Lemley and Lessig (2001) The End of End-to-End: Preserving the
Architecture of the Internet in the Broadband Era, UCLA L. REV. 48: 925
 Levinson, D. and Odlyzko, A. (2007) Too expensive to meter: The influence
of transaction costs in transportation and communication at
http://www.dtc.umn.edu/~odlyzko/doc/metering-expensive.pdf
 Marsden, C., et al (2006)Assessing Indirect Impacts of the EC Proposals for
Video Regulation, TR-414 for Ofcom.Santa Monica: RAND
 Marsden, C. (2008) Net Neutrality: The European Debate 12 Journal of
Internet Law 2 pp1, 7-16 (Wolters Kluwer).
 Marsden, C. (2009) Net Neutrality – Towards a Co-Regulatory Solution?
Bloomsbury Academic, forthcoming

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Thank you for your attention

 Questions and Comments?

 cmars@essex.ac.uk

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